NEW YORK ( TheStreet) -- President Obama in his State of the Union address on Tuesday proposed a plan that would allow every "responsible homeowner" a chance to save $3,000 a year on their mortgage by refinancing at historically low interest rates. The President did not elaborate on the details of the plan except to say that a "small fee" on the largest financial institutions will help fund the plan and "give banks that were rescued by taxpayers a chance to repay a deficit of trust." According to a New York Times report, the new plan will be directed at borrowers whose mortgage exceeds the value of their homes . The report quotes a senior administration official who says the program could benefit 2 to 3 million homeowners with mortgages not guaranteed by the government and will cost no more than $10 billion.
"This sounds an awful lot like the FHA short-refi program announced in 2010 that is 1,499,500 short of its 1.5mm goal," tweeted Neil Barofsky, former inspector general for TARP and a senior fellow at NYU School of Law. Analysts reacting to the announcement are also calling the plan "dead on arrival." FBR Capital analyst Edward Mills said in a note Wednesday morning that the plan was unlikely to get congressional approval, "as Congressional Republicans are opposed to additional intervention in the mortgage market and are philosophically opposed to a bank tax." KBW analysts believe the plan might look something like an extension of the current HARP plan to include private mortgages. Still, they too seem to doubt the likelihood of the plan getting approval and called the proposal to pay for refinancing package with a bank tax a "poison pill." Meanwhile, the analysts seemed more concerned about the creation of a mortgage investigation unit in the Justice Department as the more significant development for banks. The announcement comes at a time when banks and states are working towards a settlement on faulty foreclosure practices. Banks have been seeking a broad release from future claims from states in exchange for making reductions to principals on loans. But New York Attorney General Eric Schniderman and California AG Kamal Harris are among those who have insisted that they have the flexibility to continue investigating claims against banks mortgage practices.