It’s no secret that the mortgage industry – after hearing from its customers – is clamoring for a HARP 3.0 refi solution for underwater loans that are not guaranteed by Fannie Mae and Freddie Mac. But how do we get there? That’s a good question and we’re open to suggestions (so send them) but one thing seems certain: a HARP solution for loans residing in PLS bonds cannot rely on taxpayer money. The GOP – especially the Tea Party faction – won’t go for it and that’s their prerogative. And that takes us back to the bondholders. What exactly would MBS investors gain from a PLS HARP 3.0 product? Answer: lower yields. Then again, this might be a game of chicken on the part of bondholders who assume that underwater mortgagors might just keep paying their loans no matter what, especially if the U.S. economy keeps improving. And maybe that’s a safe bet. And maybe when you go to Vegas you’ll be a winner. We shall see.
