Bloomberg reports Newport Beach-based Pacific Investment Management Co., the biggest manager of bond funds, is seeking as much as $5 billion to buy mortgage-backed debt that has plunged in value since the mortgage meltdown began last year.

The new fund, dubbed Distressed Senior Credit Opportunities Fund, will invest in “senior” and “super-senior” securities backed by commercial and residential mortgages, said two investors with knowledge of the matter, according to Bloomberg. The sources asked not to be identified because the fund is private and not available to average investors. Senior debt is first to be paid off in a default.

The move is an increase from last year, when Pimco raised almost $3 billion to invest in distressed mortgage assets, the investors told Bloomberg.

Others are getting into the distressed debt market, including Stanford Kurland, the former No. 2 at Countrywide. He’s been raising more than $1 billion to buy such debt. Other money managers in the game are BlackRock Inc. and TCW Group Inc., which have opened funds to buy securities they consider cheap based on the underlying value of the assets or the borrower’s ability to repay the debt.

Geoff Bobroff, a mutual-fund consultant in East Greenwich, R. I., told Bloomberg, “There’s a handful of firms out there, Pimco being one of them, that are well-positioned to deal with this credit crisis and the fire sales going on in mortgage-backed securities.”

Pimco, a unit of Munich-based insurer Allianz SE, oversees $830 billion, including the $129.5 billion Pimco Total Return Fund, the largest bond mutual fund.

Mohamed El-Erian, Pimco’s co-chief executive officer, declined to comment to Bloomberg. El-Erian shares the position of co-chief investment officer with Bill Gross, while Bill Thompson is the co-CEO.

And in related mortgage news…

• Another mortgage-broker bill heads to the governor
• Bill to regulate mortgage brokers passes state Senate
• O.C. foreclosures soar to record in July
• The man who caused 10 foreclosures
• Banks offer 28% discount to O.C. foreclosure shoppers
• O.C. bank-owned properties rise 37%
• Homebuilder warns foreclosure shoppers
• O.C. early foreclosure notices drop for second month
• Anaheim company sues Ed McMahon over mortgage

And in other O.C. business news…

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• Demand to buy O.C. homes doubles in a year
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• SoCal leading indicator slides below 2004 level

Find out more about: MORTGAGE ANSWERS | MORTGAGE RATES | FORECLOSURES | HOME PRICES | INVENTORY | RENTS | FED |

Posted in: Defaults & Foreclosures • Distressed sales • Pimco |

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