The city of North Las Vegas is desperate to fix its vast foreclosure problem and it approved a plan to use its power of eminent domain to refinance underwater mortgages. Eminent domain — or compulsory purchase of property by a government agency — is usually a way of taking over buildings in the way of city, state or federal construction projects.
The North Las Vegas city council passed a plan to use the services of a private group called Mortgage Resolution Partners, a San Francisco-based firm and author of the controversial program that refinances underwater home loans seized through eminent domain.
“Our program is to acquire the mortgages out of the trusts, and then assist the homeowner in obtaining a new mortgage,” said Byron Georgiou, of MRS, told KLAS-TV in Las Vegas.
Georgiou convinced the North Las Vegas city council to go along with MRP’s plan to use eminent domain to refinance mortgages.
Opponents of the plan include the Greater Las Vegas Association of Realtors. They say having cities using their eminent domain powers violates the original mortgage contracts that scare away future buyers and investors.
Despite winning approval from the North Las Vegas city council, MRP faces two considerable obstacles: First, they must convince the mortgage trusts to sign on. Second, they will face lawsuits challenging the constitutionality of cities using eminent domain.
Ultimately, what MRP is proposing comes down to two words: principle reduction. Mortgage Resolution Partners is a for-profit company which plans to charge a $4,500 fee for each mortgage it refinances.
On June 19, the North Las Vegas city council approved the plan to hire MRP. But a lawsuit was filed on June 28, in federal district court to stop the plan. It was filed by North Las Vegas homeowner Gregory D. Smith against the city of North Las Vegas.
What are your thoughts? Does reducing the risk of foreclosures justify seizing loans? Is it fair to use eminent domain laws to generate profits for one group of private investors (and local governments) at the apparent expense of another group of investors and borrowers who are playing by the rules and paying their mortgage?
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