North Las Vegas became the latest city to reject a controversial eminent domain plan that would have allowed the municipality to utilize the power of eminent domain to refinance underwater mortgages.
The plan was brought down by a unanimous five-to-zero city council vote, an indicator that the plan was never fully “accepted” in the first place.
Following the meeting of the North Las Vegas City Council, Timothy Cameron, managing director and head of SIFMA’s Asset Management Group, expressed his support of the council’s decision to reject eminent domain in North Las Vegas.
"SIFMA believes that this use of eminent domain is unconstitutional and harmful to American savers, and could hamper the housing market recovery both in North Las Vegas and around the country," said Cameron.
"Specifically, this misuse of eminent domain would harm the savings of everyday Americans who have money invested in mortgage-backed securities through their retirement funds and other investments."
Cameron noted that the acceptance of eminent domain would also introduce significant new risks into mortgage lending, which could raise borrowing costs and restrict credit availability at a time when our nation needs private capital to return to the housing markets.
John Lee, the mayor of North Las Vegas, told HousingWire that the only reason the proposal was even brought into consideration was because the city’s former mayor put it on the agenda prior to Lee’s time as mayor.
"This was thrust onto us," said Lee, who added that the city’s recovery is fragile right now and as soon as he heard of all the potential risks tied to approving eminent domain, he was immediately deterred from the idea. "The cure does not need to become worse than the disease," he added.
"If we passed it here, they would continue to go through all the communities to get more and more people involved in it," the mayor noted. Lee felt it was more important to focus his efforts and energy on new opportunities for the entire community. "Everything is financial and then after that is the wish list of where you want your town to go," Lee told HousingWire.
Lee added that approving eminent domain would force the city to perform many labor-intensive tasks. "This is a huge undertaking and it would not have started out slow; it would have started out immediately," Lee explained.
Mortgage Resolution Partners, who proposed the eminent domain plan, said they would take the financial burdens involved with the plan. However, the mayor said this was just not the case. "Ultimately we were totally responsible," he claimed.
For a number of reasons, the mayor felt now was not the right time to introduce eminent domain to the city of North Las Vegas. "We weren’t prepared," he said.
However, Lee firmly believes his city is back on the right track after facing some hardships during the housing crisis. "We will be back leading the nation again," the new mayor said. "It’s exciting and we’re coming back."
What's unknown is if this concept of using eminent domain is coming back to another city nearby, or somewhere in the country. As of today, Richmond, Calif., remains a hot bed of litigation with the mortgage industry, banks and securitization associations trying to shut down the city's eminent domain initiative.
While there's plenty of pushback in the market -- from the housing agencies and lenders -- it's unknown if or when the concept will spread again.