Wednesday, May 1, 2013 | 2 a.m.
The North Las Vegas City Council will decide in June whether to endorse a controversial and complex plan to use its powers of eminent domain to help refinance underwater home mortgages after receiving more information on the proposal during a workshop Tuesday night.
For the second time in as many months, the city council heard a presentation from representatives of Mortgage Resolution Partners, a company with a unique plan to prevent foreclosures in a housing market still reeling from the recession.
The plan calls for the use of private dollars to purchase underwater mortgages and then refinance them at a lower principal amount to the original homeowner. Doing so would require the city to lend its power of eminent domain, a prospect that has raised questions among local officials and drawn protests from bankers and real estate professionals.
Tuesday’s three-hour workshop provided a chance for city council members to ask Nevada representatives of Mortgage Resolution Partners — which include Las Vegas attorney Byron Georgiou, developer Michael Saltman and Daniel Greenspun, a member of the family that owns the Las Vegas Sun — questions about the proposal, which was first presented at a March meeting.
The council decided to hold another workshop in June that will include a panel of representatives from various industries, including banking and real estate, as well as community housing advocates, who all have differing views on the proposal. They will then vote June 19 on whether to formally engage Mortgage Resolution Partners’ services.
The council’s decision to hold a vote on the proposal is a victory for Mortgage Resolution Partners, which has had little success so far pitching its plan to other local governments in the valley, none of which have formally considered it.
“I think it was a great meeting … we’re heartened by the directive to put this up for action in June,” Georgiou said. “The housing market is a problem that isn’t going away for anyone in North Las Vegas.”
If the deal is approved by the city council, it would give the company permission to begin inventorying homes in North Las Vegas that might be eligible for the program and to begin negotiating with mortgage owners.
So far, five California cities have entered into similar agreements with Mortgage Resolution Partners.
The plan targets a specific subset of underwater home mortgages that are held in mortgage-backed securities that are especially prone to foreclosure, of which there are about 4,700 in North Las Vegas.
Further action would be needed by the city council before any mortgages were actually bought using its powers of eminent domain.
On Tuesday, council members raised a variety of concerns about the proposal, including how it would affect property values, what it would cost the city and who would be responsible for legal fees in case of a lawsuit.
Georgiou said the company’s services would be covered by a per transaction fee and that they would cover all legal fees in case of litigation. Representatives said the program would benefit both the homeowner and the broader community by stabilizing the housing market and that it would not have any effect on home values.
The company stands to earn $4,500 for every mortgage that is refinanced and sold again, and its investors who put up the initial capital to purchase the distressed mortgage will also receive a return.
Many members in the audience of about 40 people were skeptical of the proposal, calling it “unproven” and “untested.”
“Quite frankly I don’t know where to start … there’s so many things that were said here tonight that I disagree with,” said Tim Cameron, who described himself as a representative for asset managers who own the loans targeted by Mortgage Resolution Partners’ program.
Mayor Shari Buck said after hours of presentations on the proposal that she’s still interested and wants to learn more. But before she votes to approve any deal with Mortgage Resolution Partners, she wants to make sure there’s no way it could possibly come back to harm homeowners or the city.
“How exactly does it work? What’s the city’s responsibility?” she said. “And what are the potential downsides?”