Underwater city: North Las Vegas looks at how to deal with upsidedown houses
It’s the best of times and the worst of times for house hunters in North Las Vegas.
Those looking to sell near Cheyenne Avenue and Interstate 15 saw median home prices surge by a Las Vegas Valley-leading 21.1 percent between 2011 and 2012, according to housing research firm SalesTraq.
Meanwhile, those hoping to buy in the northernmost reaches of the city’s master-planned Aliante community watched prices plummet by a valley-worst 3.5 percent.
In those neighborhoods and six other North Las Vegas ZIP codes — where single-family home prices range from a low of $19,000 to a high of $575,000 — there remains one big damper: underwater mortgages.
An estimated 4,700 North Las Vegas homeowners owe more on their mortgage than their home is worth, and most owe more than 200 percent of their home’s value.
That’s left many upside-down borrowers with two bad options: Keep paying a mortgage that might never be in the black, or walk away and contribute to the ever-worsening tally of “zombie foreclosures” — homes abandoned by their owners in the middle of the foreclosure process.
San Francisco-based Mortgage Resolution Partners thinks it has found a third way, one that looks to keep homeowners in their homes through a controversial use of the city’s power of eminent domain.
Under the plan, city officials would pay mortgage investors less than face value to take on a troubled home loan while representatives from Mortgage Resolution Partners restructure the homeowners’ debts into a new mortgage backed by the Federal Housing Administration.
The company would charge the city a fee of $4,500 per loan advisory fee and take a cut on the difference between the original bad mortgage and its current market value.
Company representatives estimate that the proposal, presented to North Las Vegas City Council members at a meeting March 6, could help nearly 2,000 qualified delinquent homeowners or 38 percent of the city’s underwater mortgage total.
City Council members plan to revisit the effort this month.
“At this point, it’s still in the vetting process,” City Councilwoman Anita Wood said. “We’re discussing it with stakeholders and hearing out Realtors’ objections because this is a huge issue, one that has a huge effect on us as a community.
“But we could really use something,” the recently re-elected Ward 3 representative added.
Noah Herrera, an agent with Platinum Real Estate Professionals, isn’t so sure.
He, like a lot of Realtors in the area, fears that the benefits of the plan come at too steep a cost to borrowers.
“In reality, it only helps a select few investors,” Herrera said of the plan. “What if the (underwater borrower) can’t refinance? There are a lot of variables we just don’t know about yet.”
Herrera suggested short sales as a better way forward for those looking to get out from under a weighty mortgage payment.
“The reality is this, they (Mortgage Resolution Partners) don’t want short sales,” he said. “That would help the regular homeowners.”
The company’s plan, already in place in four California municipalities, recently lost footing in San Bernardino County, where two cities joined in county commissioners’ concerns over a lack of public support.
Undaunted, company officials hope to make North Las Vegas a mere jumping-off point for the proposal’s introduction to the rest of Clark County.
“We are talking about a start,” company investor Byron Georgiou told the Las Vegas Review-Journal this month. “It doesn’t solve the whole problem, but you have to start somewhere. What we are doing now is essentially nothing.”
Contact Centennial and North Las Vegas View reporter James DeHaven at jdehaven@viewnews.com or 702-477-3839.
