Rep. Jaime Herrera Beutler is asking the Federal Deposit Insurance Corp. to explain its handling of development loans it inherited from the failed Bank of Clark County, saying she's concerned that borrowers are being forced into foreclosure even if they met the terms of their Bank of Clark County loans.
"If borrowers who have lived up to the terns of their original loans are facing foreclosure, I want to know why," said Herrera Beutler, R-Camas, in a news release Monday. She did not provide any examples of borrowers who had met that description.
The loans in question have a long, tortured history. When the Bank of Clark County failed in January 2009, the FDIC seized control of the bank's loan portfolio, selling some loans to lenders and keeping others under its own control. Last spring, it auctioned the remaining loans to Rialto Capital Management, a subsidiary of the Lennar Inc. housing development firm. FDIC retains 60 percent ownership under terms of its profit-sharing partnership with Rialto.
Herrera Beutler posed five questions, all tied to FDIC's selection and oversight of Rialto, in her letter to FDIC chairman Sheila C. Bair. "I do not know what Rialto ultimately intends to do with the large tracts of land it would hold as a result of these foreclosures, but it is clear the company purchased these loans with no intention of working with the citizens of Southwest Washington," she wrote.
Herrera Beutler does not know how many former Bank of Clark County borrowers face foreclosure, said Casey Bowman, a spokesman for the congresswoman. An FDIC official said Monday afternoon that the agency was reviewing Herrera Beutler's letter.
Lennar did not respond to an e-mail request for comment. Earlier this month, it foreclosed on an unfinished Vancouver subdivision owned in part by developer Lynn Wiley. The company issued a statement that it enters into foreclosure when borrowers fail to meet the terms of their original loan with Bank of Clark County.
Wiley said he was pleased that Herrera Beutler was pressing FDIC for answers.
"I'm delighted with anything our senators or congresspeople do to get information out of (FDIC)," he said.
Wiley said he had remained current on his short-term development loan until it expired. At that point, the loan needed to be renewed or its balance paid off. He said the FDIC refused to negotiate on new terms or a payout. He and his development partner also tried without success to negotiate with Rialto, even traveling to New York to meet with company representatives.
In another development, the American Land Rights Association is in the process of sending an email to some 220,000 individuals and organizations on its mailing list, informing them about the foreclosures facing former Bank of Clark County customers. The mass email is intended to drum up more examples nationally in order to challenge the FDIC's handling of such loans, said Chuck Cushman, director of the Battle Ground-based association. "This is a scandal that's going to blow up eventually," he said.
Over 30 local builders have banded together to press for action about the FDIC's handling of the former Bank of Clark County loans, and many are working actively to connect with thousands of other borrowers nationwide whose loans from other failed banks were auctioned to Rialto, Wiley said.
Jared Leopold, spokesman for Sen. Maria Cantwell, D. Wash., said his office has also requested more information from FDIC about the Bank of Clark County loans and is working with property owners to get answers to their questions and concerns.
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