Mortgage Refinancing: Why Borrowers Aren't Playing HARP

It's not every day that a successful investor takes the national stage to suggest that he should lose billions of dollars for the greater good. But that's what Bill Gross of the bond giant PIMCO did last week at the Treasury and HUD conference on the future of the housing finance system.

Gross unleashed a bold proposal to turn Fannie and Freddie back into one big government agency, which is what they had been until the 1970s. In the meantime, Gross added, they should "quickly re-engineer a refinancing opportunity for all mortgagees that are current on payments" and are part of Fannie or Freddie investment pools.

Gross described this plan as a stimulus program that wouldn't add to the deficit. It would clearly help consumers, by lowering their monthly payments or even reducing principal. Investors in Fannie and Freddie securities, though – including PIMCO and its clients – could stand to take a big financial hit. As Gross told the Huffington Post's Shahien Nasiripour, "I'm here as a public advocate, not as a private [investor]."