Las Vegas Sun

October 1, 2014

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City Council:

North Las Vegas set to decide on controversial mortgage-seizure plan

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Steve Marcus

A the front door of a vacant home is shown in North Las Vegas April 2, 2013. A neighbor said it has been vacant for about six months. (1513 Splinter Rock, North Las Vegas)

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.

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  1. In past reports they have five other cities signed up but no homes had been taken. Why is that?

    If they do this I hope the city is prepared to spend years in court rooms defending their actions in taking of these notes. No one in that area will be able to finance a home once they pass this. No bank in their right mind would take the chance of the city taking the notes away from them.

  2. No homeowner in their right mind would want to be forceably pushed out of their current mortgage agreement by the city through eminent domain, to have a company they do not get a say in choosing take their property from them, the property owner gets no say, and will likely be kicked out - where does this leave the homeowner?? No where. This is an awful idea and an abuse of eminent domain.

    If the city of North Las Vegas wants to do right by their homeowners who are underwater they would help support those people in utilizing programs that already exist and making sure those programs work with the home owners in a timely manner. But to bring in a private sector business that requires use of eminent domain - no, just no.

    If NLV falls for this they're going to end up so far in the red with legal issues they'll need to fire every city employee except judges and give it up to a city manager. Yes, NLV will become the next Detroit. This is ridiculous.

    If this 'company' is so great, why aren't they functioning anywhere else? If it sounds too good to be true, it is. Just say no!

  3. The opposition to this,including the GLVAR, is really not interested in the plight of NLV homeowners. They are obsessed with their own self serving interests. I have read carefully the material authored by Cornell Law Professor,Robert Hockett,who is the brainpower behind this unique use of eminent domain. Would it work? That all depends on the legal skill of those who implement the plan--in this case Mortgage Resolution Partners.
    I would be uninterested in jumping on the bandwagon of GLVAR,led by the attack ads distributed by Sean Fellows and his "Occupy Eminent Domain" fanatics. What is needed in this matter is cool minded judgement. Since Eminent Domain has never been used in this exact manner,there is no legal precedent to anchor the process in the courts. What is needed(unless already obtained) are two indepeendent legal opinions from law firms or attorneys that have deep experience in eminent domain legal analysis and cases,and get their opinions on the legal challenges that would likely be expected,the probabilty that they could be overcome,and an estimate of the potential liigation costs
    Personally I think that there is little doubt that City would find itself in court. That should not be the decider of whether the plan has merit or should go forward. On the other hand I doubt that lenders would shy away from lending in NLV in the future. This is more of a scare tactic being raised by GLVAR and the banks who are theatened by anyone who might get into their turf. The main concern should be for improving the stability of NLV neighborhoods,and improving the community's well being and amenities,and aiding underwater homeowners to stay in their homes. Existing banks and agencies tasked with providing assistance to homeowners,from all accounts,are not getting the job done,notwithstanding their claims to the contrary.

  4. The city is just playing with fire with this poorly thought out idea. Lawsuits will be brought, the city will have to defend itself, spending what little money it has left. That may be why no home has been taken in the other cities as noted by "VEGASLEE", the chance of lawsuits has been too great.

    The city should just show them the door. At least one council member has commented that this is a poor idea. Hopefully he continues to stick to his view point and bring a few other members along during the vote.

  5. Houstonjac, this would definitely make lenders more weary about NLV and any other city that participated in this program. How does this effect lenders on properties seized? Where do they end up at the end of the day? I dont believe this will work for the current lender or the current homeowner.

    This also doesn't address the homes which are in stalemate because of Bill 284, where banks wont push the foreclosure, but the homeowner has walked away, leading to 'zombie foreclosures'. We have vacant homes and a turbulent market in NLV and the valley for a lot of reasons.

    Before we bring in this mess of an idea using eminent domain, a governmental power, which shouldn't be abused. Perhaps the city could re-evaluate issues that it's already addressing and make those bills and systems more efficient for the end user.

    Bill 284 didn't outline a time frame for banks to act, causing a big bottle neck in the foreclosure market. I'm predicting another bubble.

  6. I'm leery of any program that expands the strictest interpretation of eminent domain. Taking something that belongs to another against their will even if compensated for just doesn't sit well, especially when a for profit motive is involved.

    This would likely result in court challenges with unpredictable outcomes. Legal expenses and potentially significant risk -- snakes in the water -- doesn't seem like a good hole to swim in.

    How will mortgage guarantors like FHA and VA be accounted for? I would think they won't be considered. A program structured to be very low risk to taxpayers and the city is mandatory. No unintended disasters can be tolerated. Clarification is needed.

  7. THIS IS B@#$%IT. Why are hardworking, responsible citizens like myself left out in the cold? I'm not in the red, even though I bought my house in 2005. Where is the incentive for being RESPONSIBLE!

    How long do they have to stay in their home before they sell? So let's say that they stay in their home for X amount of years, then sell the home at a higher price. Do they get to keep the profit or does it go back into the city slush fund?

    I SWEAR TO GOD THAT I WILL MOVE OUT OF NORTH LAS VEGAS IF THEY APPROVE THIS.

  8. Another genius move by the Democrat lead city of North Las Vegas.