Congresswoman Jaime Herrera Beutler today sent a letter to the Federal Deposit Insurance Corporation (FDIC) seeking answers regarding a troubling pattern of Clark County foreclosures resulting from the failure of the Bank of Clark County.
What has been particularly troublesome to Congresswoman Herrera Beutler is what she learned from several Bank of Clark County borrowers: they made all of their scheduled payments on time, in full. Why Rialto Capital has chosen to foreclose on borrowers who have honored their loan agreements remains unclear.
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“I’m deeply concerned by what I’ve learned so far about FDIC’s deal with Rialto Capital,” said Herrera Beutler. “If borrowers who have lived up to the terms of their original loans are facing foreclosure, I want to know why. It certainly seems like the FDIC has a responsibility and moral obligation to ensure entities like Rialto act in a decent and ethical manner.
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“The FDIC has not been completely forthright about its decision-making process, even after multiple requests for information by my office. While Southwest Washington families and businesses suffer the consequences of its decisions, the FDIC may have made it possible for real estate investor Rialto to end up with large tracts of Clark County land at a bargain price by breaking contracts. That doesn’t seem right.
“I am going to remain vigilant with FDIC and with Rialto until we get answers.”
The text of Congresswoman Herrera Beutler’s letter to the FDIC is below, and attached:
Chairman Sheila C. Bair
Federal Deposit Insurance Corporation
3501 N. Fairfax Dr.
Arlington, VA 22226
Chairman Bair,
In recent weeks I have been contacted by a number of my constituents with concerns about the closing of the Bank of Clark County in Vancouver, Washington. More specifically, the concern is with the FDIC’s decision to sell many of the bank’s outstanding loans to Rialto Capital Management LLC and the management of those loans by Rialto and the FDIC.
Since the closing of the Bank of Clark County a large number of construction properties have been forced into foreclosure. Many of these foreclosures are due to Rialto Capital’s refusal to work with builders in honoring the existing loan agreement, even when the builders are current in their loan payments. Instead, Rialto moves to simply collect on collateral.
In order to understand the FDIC’s role in these procedures I respectfully request that you answer the following questions:
• To my knowledge when the FDIC sells a loan package it retains a certain percentage of the package in order to ensure a return on investment. What oversight does the FDIC perform on Rialto Capitol and its management of the loans?
• Numerous builders with whom my office has spoken had not missed a single payment on their loans when Rialto Capital took over. What consideration, if any, is given to the lendee’s payment record when deciding to terminate loans?
• As a holder of a percentage of the loan package, does the FDIC require Rialto to honor the conditions of previous contracts made and carried out in good faith? What steps has the FDIC taken to ensure that any ensuing foreclosures are not directly attributable to changes in contract conditions made without the consent of the customer by Rialto?
• How many construction loans did Rialto Capitol take over from the Bank of Clark County? Of those contracts how many have Rialto and the FDIC continued to honor?
• Rialto Capitol calls itself a real estate investment management company. It is my understanding that typically other banks buy these loans. Why is the FDIC selling bank loans to non-banks?
I realize the FDIC closed the Bank of Clark County due to poor performance and bad loan approvals played a role in that. However, many of the people Rialto and the FDIC have decided to foreclose on made sound loan decisions, made their payments on time, and through no fault of their own still lost their loans. In some cases those loans were worth millions of dollars, and in many cases the loss of loans cost people their livelihood.
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. Surely the FDIC did not close the Bank of Clark County in order to give real estate investors the opportunity to obtain land for pennies on the dollar by breaking contracts signed and honored by local builders.
The FDIC has a responsibility and moral obligation to ensure the companies that obtain loans as the result of a bank closure act in an ethical and decent manner toward their customers. I strongly urge you to take a hand in this matter and review with great diligence the actions of Rialto Capital.
I appreciate your attention to this matter and look forward to a response. Please contact Chad Ramey in my Washington, D.C. office at (202) 225-3536 for further detail or clarifications.
Sincerely,
Jaime Herrera Beutler
Member of Congress
Source: http://herrerabeutler.house.gov
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