LV businessman takes foreclosure plan to D.C.

He doesn’t think the government should throw any more money at banks until they’re willing to work with homeowners facing foreclosure and investors ready to take thousands of distressed properties off the market.

McKenzie, owner of Macro Global Concepts in Las Vegas, is voicing public backlash from a $350 billion government bailout of the banking industry that has average American citizens asking where the money went. Nobody seems to have seen any of it.

That money has done nothing to keep people in their homes and avoid foreclosure, he said.

“They’re not really doing too much,” said McKenzie, who specializes in buying property in the United States for foreign clients. “They don’t need to. The government gives them money. If you had a business and ran out of money, you’d have to close … not if the government bails you out.”

The solution is two-fold, McKenzie said. One is for banks to do lease-options on foreclosed properties and the other is for banks to sell the properties at minimum prices, from 20 cents to 50 cents on the dollar.

McKenzie said he tries to buy distressed property every day and the reality is the banks don’t want to do any deals. He has a contract with one of the largest real estate companies in the nation to buy 20,000 foreclosed properties a month. Four or five of these companies could comfortably take 100,000 homes off the market, McKenzie said.

He was invited to Washington by Rep. Dina Titus, D-Nev., after a radio interview with the freshman congresswoman. He’s attending a “Welcome to Washington” breakfast hosted by Sen. Harry Reid, D-Nev., and Sen. John Ensign, R-Nev., for Nevada constituents visiting Washington every Thursday while Congress is in session.

“What we get told (by the government) and what’s really happening are two different things,” the Australian native said. “I don’t know if I’m going to do any good over the next couple days, but at least I’ll have my say. It’s basic common sense that will save people a lot of grief.”

News reports from Washington would have you believe that banks are your best friend, said John Turner, a Las Vegas real estate attorney who has McKenzie as one of his clients. Just pick up the phone and call your local bank president and everything will get worked out.

“That’s certainly not the case,” Turner said. “It is a battle. Good or bad, what we do all day is call the bank and we’re getting a different story every time they call back. We certainly have a high level of frustration.”

Some attorneys are suing lenders to nullify loan contracts, but lawsuits can be expensive and time-consuming, Turner said. Most people just want an adjustment to their mortgage so they can hang on to their home and get through the storm, he said.

“What I’d love to see is banks being more cooperative with some kind of principal reduction on these loans. You know what a foreclosure does to the neighborhood. Why aren’t banks more cooperative? I don’t know if banks realize how bad things are right now,” Turner said.

McKenzie believes the housing and financial crises will lead to more crime, particularly homicides, suicides and vandalism. He’s seen it in other countries.

“Think about it. You lose your job, you come home to your wife, there’s a letter from the sheriff, they want to take your house,” he said.

Bob Mann, a real estate investor from Tuscon, Ariz., said two loan modification proposals being discussed by Congress — loan amount reduction and interest rate reduction — have potentially disastrous side effects.

Owners who are current on their payments would be encouraged to stop making payments so they can get their loan modified. Reducing loan amounts would further drive down housing prices in the market and lenders would be forced to absorb the losses.

Under Mann’s plan, the total balance owed on the property is modified in two parts. The first mortgage is based on a percentage of the borrower’s income and set at a competitive fixed rate.

The balance is then assigned to a second mortgage with a slightly higher fixed rate. This loan is a balloon loan with no interest on principal until the balloon is due in seven to 10 years.

“There are only three possible alternatives: do nothing, buy up the mortgages or have the lenders and homeowners renegotiate the terms of the mortgages,” Mann said.

“Since doing nothing will have some serious ramifications for homeowners and both the financial and real estate sectors, it really is not a good option. Purchasing the toxic loans is also a bad idea as it puts taxpayers on the hook for problems they did not create. That leaves modifying the loans.”

Contact reporter Hubble Smith at hsmith@reviewjournal.com or 702-383-0491.