North Las Vegas eminent domain proposal faces pushback from homeowner

A controversial eminent domain proposal rolled out in North Las Vegas, N.V., to help underwater homeowners with their mortgages is facing pushback from an unlikely party—a homeowner living in the city.  

Gregory Smith, a local taxpayer, sued North Las Vegas, claiming an eminent domain strategy proposed locally with the help of consultancy firm Mortgage Resolution Partners (MRP) violates several portions of the U.S. and Nevada State Constitution.

The plan follows a similar pattern that MRP has proposed in other jurisdictions — namely that homeowners who are underwater in the city can be helped by giving local governments the power of eminent domain to seize property rights, thereby allowing officials to grant upside-down borrowers a principal reduction after taking over their loans.

In his lawsuit, Smith suggests this type of intervention into investor property rights violates the Fifth and Fourteenth Amendments of the Constitution, along with various sections of the Nevada Constitution.

Furthermore, Smith claims the proposal disrupts contractual rights granted to all U.S. citizens through the Constitution, along with the Commerce Clause, which governs interstate commerce.

If such a plan were to stick and make it into law, Smith says roughly 5,000 local mortgages would qualify, with MRP targeting loans that are current, underwater and owned by private securitization trusts.

As a taxpayer, Smith said he’s concerned such a plan would prove overwhelming for North Las Vegas and its taxpayers.

“Seizing all 5,000 or so of the estimated numbers of mortgage loans targeted by the city, at $150,000 each, would require the city to borrow more than $750 million,” he claims in the suit.

This is not the first time MRP has managed to stir up debate in local municipalities.

San Bernardino County, Calif., previously debated the strategy before killing off the idea.

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