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real estate eminent domain a life raft for underwater homeowners? By Conor Shine���staff writer A company with a unique but controversial approach to help underwater homeowners refinance their mortgages using eminent domain hopes to start doing business in the Las Vegas Valley. Company officials have been pitching their plan to local municipal officials, most recently the North Las Vegas City Council. Mortgage Resolution Partners has spent the past year meeting with local governments in The number states hit hardest by of underwater the housing crash to homeowners in present its plan to use North Las Vegas, private money to buy 38 percent distressed mortgages of whom are delinquent on and help homeowners their mortgages, reduce the amount of would qualify for principal owed while the Mortgage staying in their housResolution���s es. refinancing plan, officials said. The municipal government 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 trouble. Such use of eminent domain has riled bankers nationwide, who say lending would be discouraged anyplace where eminent domain was used in this manner. Using eminent domain in such a way has never been tried or stood up to a legal challenge, but Mortgage Resolution officials said company lawyers believe such a use would be legal. ���This would be a taking of property 4,700 sam morris drowning: Foreclosed homes dot the landscape in the Las Vegas Valley, but one company thinks it has a solution to help homeowners stay in their houses, using municipal eminent domain law. rights of investors in the mortgage,��� said Bill Uffelman, president of the Nevada Bankers Association. ���If I was writing mortgages that somebody could take away from me at some point in the future, I���d be very concerned.��� Mortgage Resolution Partners emphasizes that the process would be ���voluntary and consensual,��� and that eminent domain would be a last resort to acquire any property. North Las Vegas council members had plenty of questions about the plan. ���A lot of times when government gets involved, you try to help with one problem and you create four or five more,��� Councilman Wade Wagner said. Wagner and other council members agreed action needs to be taken to address the rash of foreclosures and underwater mortgages that have af- flicted North Las Vegas since the housing crash, but they were reluctant to endorse Mortgage Resolution Partners��� plan, which has not been tested yet elsewhere in the country. Nevada representatives for Mortgage Resolution Partners ��� which include prominent Las Vegas attorney Byron Georgiou, developer Michael Saltman and Daniel Greenspun, a member of the family that owns VEGAS INC and the Las Vegas Sun ��� argue the benefits are more than monetary. The program would help stabilize housing markets, prevent blight and keep homeowners in their houses with affordable mortgage payments. ���If you reduce principal, you reduce defaults, you reduce foreclosures. You save money for everybody,��� said John Vlahoplus, founder and chief strategy officer for Mortgage Resolution Partners. ���This is to try and make something happen where nothing���s happening right now.��� The plan targets a specific subset of loans held by trusts through mortgagebacked securities, which are especially prone to going into foreclosure, Georgiou said. As an example, Georgiou said a house carrying a $300,000 mortgage with a market value of only $200,000 would be bought by the city using private funding for less than its market value, in this case $150,000. The below-market value payment would provide cash to any previous mortgage owners and save them any potential losses from the property going into foreclosure. The city-owned mortgage would then be refinanced with a higher loan, in this case $190,000, leaving the homeowner with a lower principal owed and some equity in the house. The $40,000 spread between the purchase price and the new loan price would be used to cover costs and pay back the city and investors. The city would receive a fee of about 5 percent of the new loan value, and Mortgage Resolution investors would receive a return on their investment. Additionally, Mortgage Resolution Partners would receive a flat fee of $4,500 per transaction. Property devaluations and foreclosures have hammered North Las Vegas, City Manager Tim Hacker said, and potential ways to improve the situation need to be investigated. ���I think we need to evaluate any and all programs that appear to strengthen our communities by ... keeping people see underwater, page 12 For the Health of Your Business Maria Nutile, esq. Susan M. Pitz, esq. Kelly S. McIntosh, esq. Lyn E. Beggs, esq. 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