Las Vegas Sun

April 14, 2024

Council hears downside of plan to rescue underwater NLV homes

Las Vegas Housing

Steve Marcus

A sign is posted outside a vacant HUD home in North Las Vegas April 2, 2013. A neighbor said that it has been vacant for a bout two years. (1524 Gaber Court, North Las Vegas)

It started with heartfelt testimonials from homeowners struggling with underwater mortgages and ended with warnings of disaster from representatives of the banking and real estate industries.

In between, North Las Vegas City Council members discussed how to address the city’s housing crisis — specifically whether to allow a novel process that uses eminent domain to seize and refinance mortgages — during a special meeting Tuesday night.

It’s the third public meeting the city has held to discuss Mortgage Resolution Partners’ plan to use private dollars to help homeowners refinance their mortgages and reduce the principal owed, staving off costly foreclosures that can wreak havoc on neighborhoods.

While the first two meetings have mostly entailed a panel of MRP’s Nevada representatives explaining the complicated process, which targets a specific subset of home mortgages held in mortgage-backed securities, Tuesday night’s meeting featured a panel of experts from the title insurance, appraisal, mortgage banking and nonprofit sectors.

The focus of the evening was to learn more about other already existing programs that can help distressed homeowners and whether MRP’s plan would meet a need that is currently going unfilled.

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 argued that because of their complex nature, the private label security mortgages targeted through their program are often not eligible for traditional programs to modify loans or reduce interest rates.

Their plan calls for the company’s private investors to purchase underwater home mortgages held in mortgage-backed securities at a market value significantly below their initial, pre-recession value and then refinance the mortgage back to the original homeowner with a lower principal.

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 small fee 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.

Upwards of a dozen state and federal programs already exist to help distressed homeowners, many of which help the same people as MRP would, said Michele Johnson, a panelist and president of the nonprofit Financial Guidance Center.

Although the network of programs exist to help homeowners in a variety of situations, it can be difficult for the average person to navigate the system alone and figure out where to get help, said Johnson, who encouraged struggling homeowners to contact one of the state’s many free housing resources, such as Home Again.

Johnson’s observations were echoed in the personal stories shared by many of the residents in attendance at Tuesday’s meeting.

Margarita Ramos told of a struggle that began in 2009 to get her underwater mortgage adjusted that still has not been resolved. The part-time casino banquet server said she’s dealt with 15 to 20 people at her bank and has had to continuously re-file paperwork in hopes of getting her loan modified.

“It’s really hard for me to deal with every single day wondering, ‘Next month, am I going to be in my home?’” she said.

Although residents expressed their support for any program that could potentially help them, including MRP’s, representatives from banking, real estate and finance groups sounded the alarm over using eminent domain to seize mortgages, warning of lawsuits and unintended negative effects on lending practices and home prices.

The city has publicly debated MRP’s proposal since March and could vote next Tuesday to become the sixth city to sign an advisory agreement with the company, joining five other California cities.

When the vote will take place depends on whether an item is placed for action on next week’s council meeting agenda, which is released Thursday. Items are placed on the agenda at the city manager’s discretion or when requested by at least two council members.

If the vote is delayed into July, the council will have a new look after John Lee and Isaac Barron replace outgoing Mayor Shari Buck and Councilman Robert Eliason, respectively.

If the city approves an agreement with MRP, it would allow the company to begin surveying the market for eligible mortgages and begin negotiating with involved parties. Further action by the council would be needed before any mortgages were acquired using eminent domain.

With only a week until a potential vote, council members agree that something needs to be done to help North Las Vegas homeowners but still seem hesitant to fully endorse using eminent domain as a means to that end.

“The biggest fear certainly right now is legal. I think you saw so many business groups that are against this that you know somebody’s going to try to file a lawsuit,” Councilwoman Anita Wood said.

MRP representatives have assured the city that the company would cover any legal costs associated with the program.

Still, she said it’s obvious from driving around North Las Vegas and talking to residents that whatever programs are already in place aren’t going far enough and that MRP is worth considering.

“I think it’s an option. I think it’s certainly something we need to consider,” she said. “The banks got bailed out by the federal government … the banks got all the bailout money but how is it reaching the people? It’s the people who are hurting.”

Councilman Wade Wagner said the city should take advantage of the already existing programs and work to help connect residents with the right resources.

“They call their bank and their bank says, ‘There is nothing we can do,’” he said. “(Homeowners) need to call Home Again … If you get a no, you can’t just stop there because there are other programs.”

Wagner said he’s skeptical about using eminent domain to seize individual mortgages and isn’t sure whether it qualifies as a true “public use” as required by state law.

“Eminent domain is a sacred trust that we have,” he said. “The use of eminent domain in something like this is something I’m probably not willing to do.”

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