PT - JOURNAL ARTICLE AU - Laurie S. Goodman AU - Lidan Yang AU - Roger Ashworth AU - Brian Landy TI - Government Programs to Refinance (or Modify) Performing Borrowers in Private Label Securitizations: <em>Implications for Investors</em> AID - 10.3905/jsf.2013.19.1.039 DP - 2013 Apr 30 TA - The Journal of Structured Finance PG - 39--56 VI - 19 IP - 1 4099 - https://pm-research.com/content/19/1/39.short 4100 - https://pm-research.com/content/19/1/39.full AB - With the success of the HARP program for agency borrowers, the authors expect to see a push on the part of the Obama Administration to offer performing borrowers who fall outside of the agency purview a way to lower the payments on their mortgages, either through refinancing or modification. This article examines the various legislative proposals discussed to create a refinance vehicle for these borrowers. It also takes a close look at actions that could be taken by the U.S. Treasury, without legislation, using the HAMP framework to lower the coupons on the mortgages, with some compensation to the lenders/investors. The article explores the impact on private-label security (PLS) investors of the Merkley Refinancing Plan and the Treasury proposal to modify mortgages. Under the refinancing proposals, the loans are removed from the PLS trust; whereas, under the modification proposal, the loans remain in the trust. The cost/benefit methodology for PLS investors is very similar: The benefit of the lower default rate must be weighed against the cost of the forgone coupons on the mortgages that would not have defaulted. The authors find, under plausible assumptions, both programs are modestly net-present-value negative to investors; that can be corrected with some redesign.TOPICS: MBS and residential mortgage loans, legal/regulatory/public policy