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NEW YORK (TheStreet) --PIMCO, one of the world's largest asset managers, has joined a growing chorus of critics of legislation proposed by Sens. Tim Johnson (D, SD) and Mike Crapo (R., ID) which is widely seen as President Obama's favorite plan to reform the U.S. housing market by winding down Fannie Mae (FNMA) and Freddie Mac (FMCC)

In an essay published over the weekend in Barron's, newly-appointed PIMCO CEO Douglas Hodge pointed to what he described as a "significant oversight" in the legislation: the lack of protections for investors such as PIMCO who play a critical role in financing the mortgage market, even though it is largely invisible to most homebuyers.

These investors buy mortgage backed securities (MBS) - bonds backed by pools of mortgage obligations. While a little more than half of all MBS were backed by Fannie and Freddie in the pre-crisis environment of 2005, today 99% are backed by these government sponsored entities (GSEs), according to Hodge. Since President Obama wants to wind down Fannie and Freddie, this is a problem.

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According to Hodge PIMCO has no "appetite" for MBS that don't have GSE guarantees, because the protections offered to investors in non-GSE backed MBS, known as "private label" securities, proved to have no teeth.

If PIMCO and other investors won't buy private label MBS and the Johnson Crapo bill winds down Fannie and Freddie, the vast majority of the mortgage market would go away, making it far more difficult for most Americans to buy homes.

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With his Barron's essay, PIMCO's Hodge becomes the latest critic of the Johnson Crapo bill, which has drawn opposition for a variety of reasons from both the political right and left. Consumer advocate Ralph Nader argues Fannie and Freddie should be kept alive and heavily regulated much like public utilities. Nader also takes issue with the fact that the legislation does not recognize the claim of existing private shareholders in Fannie and Freddie, a complaint echoed by Tea Party-affiliated groups with names like the Center for Individual Freedom and the 60 Plus Association.

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What is puzzling about Hodge's complaint is that PIMCO was among several large financial institutions that agreed in 2011 to accept 8 cents on the dollar from Bank of America (BAC) - Get Bank of America Corp Report in one of the largest legal disputes over MBS. Other investors, most notably AIG (AIG) - Get American International Group, Inc. Report, have held out for larger settlements, and the case has been tied up in the courts ever since.

E-mail messages to spokespeople for Senators Crapo and Johnson, as well as to a PIMCO spokesman, weren't immediately returned on Tuesday.

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