Wednesday, June 19, 2013 | 2 a.m.
Months of public meetings, behind-the-scenes lobbying and fierce attack ads will reach a culmination Wednesday night when the North Las Vegas City Council considers whether to move forward with a plan that would use eminent domain to help underwater homeowners refinance their mortgages.
If the city council votes down the proposal, it will effectively end a yearlong courtship between the city and Mortgage Resolution Partners, the private company backing the plan.
But if the council agrees to become the sixth and largest city to partner with MRP, scrutiny will likely only intensify in the coming months.
MRP’s Nevada representatives— including Las Vegas attorney Byron Georgiou, developer Michael Saltman and Daniel Greenspun, a member of the family that owns the Las Vegas Sun — have described the plan as a novel new way to help underwater homeowners and prevent costly blight in neighborhoods.
It would target a specific subset of loans held in mortgage-backed securities, of which there are about 4,700 in North Las Vegas.
The mortgages would be bought at market value significantly below their initial value and then refinanced back to the original homeowner with a lower principal.
Financing for the transaction would be provided by MRP’s private investors while North Las Vegas would serve as the middleman in the process, using its power of eminent domain to seize the mortgages from trusts that own the mortgage-backed securities. Once the mortgage is refinanced and sold again, the city would receive a fee of several thousand dollars for its troubles.
Investors in Mortgage Resolution Partners would see a return on their investment whenever a home is refinanced, and the company itself would receive a flat $4,500-per-transaction fee.
If the council approves an agreement with MRP Wednesday night, it would give the company permission to begin surveying the North Las Vegas housing market and identifying potential candidate mortgages. A second affirmative vote would be needed from the council before any mortgages were actually acquired.
Although the program has garnered some support from homeowners who have voiced their opinions at one of the several public meetings the city has had to discuss the issue, representatives from a variety industries including banking, real estate and appraising have sounded the alarm that adopting the plan could have disastrous consequences for the city.
At the heart of the controversy is what role eminent domain would play in the process.
Although MRP representatives have assured council members the program would be entirely consensual, opponents said the using eminent domain this way would be an illegal taking of property.
The heated war of words between the two sides has been stoked largely by the Greater Las Vegas Association of Realtors, which is behind a series of foreboding mailers and TV and radio advertisements that make pointed claims about MRP.
The advertisements have compared the company to vultures, describing the plan as a “speculative real estate scheme” that would use “eminent domain to seize homes that are current on their mortgages.”
Georgiou, one of the MRP representatives, called the advertisements deliberately untruthful and said that the GLVAR has become “paid assassins” of Wall Street firms that want to stop his company.
If the North Las Vegas City Council approves an agreement, Georgiou said MRP will pledge that no homeowners will be foreclosed upon and that no one would be forced to participate.
“We’ve taken a pledge to do no harm. No one will be in a worse position than they are today,” he said.
But for Sean Fellows, who has been lobbying on the issue on behalf of the GLVAR, the assurances of MRP representatives don’t hold up because the plan has never been tested.
Fellows warns of a litany of potential consequences if the program passes, including destabilizing the housing market and making it harder to get a mortgage for homes in North Las Vegas.
“The point is there are other options that currently exist that help homeowners in different situations,” he said. “Whether it’s a decrease in income or they’re underwater, not a single one of them requires use of eminent domain power to take someone’s note away.