If that is the plan, then a lot of people will be duped into refinancing once and not being able to refinance again.
It is foolhardy to refinance in such a fashion.
If the rates ever drop below what they are now or the borrower(s) with poor credit improves their situation (borrowers with worse credit would see higher rates than those with good credit), then they miss out on that opportunity.
The article you linked states the plan then was to get Fannie and Freddie backed mortgages (90% of all mortgages) refinanced at the low rate of 5.25 (at the time the article was written 5.25% was historically low). If all of those people refinanced then, they wouldn’t be able to take advantage of the low 4 and high 3% loans available now.
Pretty sneaky!