One of the biggest economic stories this year has been the recovery in U.S. home prices. But for the more than 11 million homeowners stuck with a mortgage that’s worth more than the value of their home, it has felt more like being Bill Murray in the movie Groundhog Day.
The housing crisis may be over for Blackstone, Colony, American Homes 4 Rent and other deep-pocketed investment firms snapping up foreclosed homes with cheap money courtesy of the Federal Reserve, but for many Americans they are still living with it some five years later.
So maybe that’s why a controversial idea of using the government’s power of condemnation to seize and restructure distressed mortgages in order to provide debt relief to struggling homeowners just won’t go away, even though many think it’s unconstitutional and bond investors have rallied to savage the proposal.
On Wednesday, the city of North Las Vegas, a community with one of the highest percentage of underwater mortgages in the U.S., became the latest community to move a step closer to using eminent domain to condemn troubled mortgages that are packaged into mortgage-backed bonds issued by Wall Street firms before the financial crisis. By a 4-1 vote, the City Council agreed to enter into an advisory agreement with Mortgage Resolution Partners, the San Francisco-based investment firm that has been peddling the eminent domain for more than a year and stands to make money off of each home loan that gets seized and restructured.
North Las Vegas, a community of 219,020, located less than 10 miles from the glitz and glamour of the Vegas strip, is one of those places that was particularly hard hit by the financial crisis and the housing bust. In some neighborhoods in North Las Vegas, 70 percent of homeowners not in foreclosure were under water on their mortgages, according to RealtyTrac.