It was a meeting nobody expected to happen, least of all the participants.
But chance turned what was supposed to have been a protest on the Newport Beach, Calif., doorstep of Pacific Investment Management Co. (PIMCO) into an apparently amicable sitdown between two of its executives and housing advocates.
The demonstration was canceled for logistical reasons. And the meeting happened after Bruce Marks, chief executive of Neighborhood Assistance Corp. of America, heard through the grapevine that PIMCO, a huge bond investor, was claiming to share his views on loan modifications. (Full disclosure: the grapevine in this case was a reporter seeking comment from the two sides in the dispute.)
"If anything, we are on the same page as Naca," said Scott Simon, a managing director at PIMCO and the head of its MBS team.
He and Mohamed El-Erian, PIMCO's CEO and co-chief investment officer, sat down with Marks in the company's headquarters Wednesday afternoon. The next day, the two sides claimed to have a working partnership.
"It's going to be an important relationship in holding the servicers accountable," Marks said.
The largest servicers have repeatedly blamed securitization for the slow pace of loan modifications, claiming that the agreements restrict them from rewriting loan terms and that bondholders have also resisted such changes.
But fixed-income investors, including PIMCO, counter that the servicers are the ones obstructing mods. In many cases the servicer is the same company that holds a borrower's second mortgage and refuses to accept a discounted payoff on that loan, investors say.
"We're all concerned about the conflicts of interest that the big banks have," Marks said. "They're the largest holders of second mortgages, of credit card debt, and they're also trustees, the largest servicers and the biggest mortgage lenders."
The meeting could be a turning point in the debate about how to reduce foreclosures, he said.
"The servicers have been telling us investors like Pimco are holding up the process, and PIMCO is saying, 'Absolutely not, they aren't holding it up; they are pushing for modifications,' " he said.
On Monday Naca, which is based in Boston, wrapped up a five-day loan modification event in the Los Angeles Convention Center. Marks said the event drew nearly 50,000 people, some of whom camped out overnight to make sure they would get assistance.
Marks said he had been trying to arrange a meeting with PIMCO while he was in the area and left his business cards at the company's offices on Tuesday. He said he did not hear back and so turned to his time-honored methods.
The next morning, Naca announced to the press it was going to bus "more than 500" people to Pimco's building that afternoon to press the company to support loan mods. American Banker contacted Simon, who said he was unaware of any scheduled protest but that Pimco already favored "responsible" modifications, including principal reductions.
Later that day, Marks said he had called off the demonstration. Naca had to bus 250 of its counselors to Phoenix for another loan-mod event like the one in Los Angeles, and they were running too late for everyone to stbaop in Newport Beach. But after a reporter relayed Simon's comments, Marks called PIMCO and reached Simon, who told him to come right over.