Congresswoman Herrera Beutler Seeks Answers from FDIC on Clark County Foreclosures

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Congresswoman Herrera Beutler Seeks Answers from FDIC on Clark County Foreclosures

Congresswoman Herrera Beutler Seeks Answers from FDIC on Clark County Foreclosures

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.
[…]
“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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2 Responses to “Congresswoman Herrera Beutler Seeks Answers from FDIC on Clark County Foreclosures”

  1. Virginia says:

    THE ANSWER IS: There is not enough money in the banking system to fund our nation’s housing stock.

    This is exactly what I have been saying. If 500,000 mortgages = $80 Billion (source: Taylor Bean complaint)… what do 67 million MERS mortgages equal? Is anybody doing the math in Washington, DC?

    http://us1.irabankratings.com/pub/IRAMain.asp

    In testimony before the House Financial Services Committee in February 2010, Michael A.J. Farrell, Chairman, CEO, Annaly Capital Management, provided an excellent overview of the current market for RMBS. People involved in the discussions about housing market reform should read Farrell’s testimony carefully. He notes that of $7.5 trillion in RMBS funded by private investors, $5.5 trillion is held by rate sensitive investors in Agency MBS, with about $2 trillion in credit sensitive private label MBS. He also stated that:

    “The balance, or about $2.5 trillion, is held in raw loan form, primarily on bank balance sheets. Since our country’s banks have about $12 trillion in total assets, there is not enough money in the banking system to fund our nation’s housing stock, at least not at current levels. It is thus axiomatic that without a healthy securitization market our housing finance system would have to undergo a radical transformation.”

    And this is why the states should takeover the loans from 2003-2008. The banks HAVE to foreclose. They cannot hold all the mortgages. They wrote more than they can hold.

    By using MERS and other special purpose vehicles to hold mortgages rather than keep them on the banks’ books, the banks lived in a fantasyland. They insured their risk which was a double edge sword; however, they took no responsibility for the volume of loans they wrote.

    It’s akin to taking the pill, having numerous partners and thinking you can’t get VD. Only the banks weren’t naive – they were greedy and irresponsible.

    It’s only a matter of time before the fact that these banks collected insurance and TARP on these loans and then continued to try and collect from the borrowers starts to come to light – and that would appear to be insurance fraud… probably the main reason for the foreclosures in the first place.

  2. Chuck Glisson says:

    Jaime Herrera Beutler does NOT care about ANYTHING, unless she gets orders OTHERWISE form her CORPORATE OVERLORDS.

    Jaime is ALREADY a DISGRACE to the 3RD District.

    In the SHORT time that Ridgefield Barbie has been in Congress, she has blamed The Senate, and the President, for failure to agree on a Federal Budget, even though there WAS a tentative agreement between the House and Senate until FILTHY AND STUPID freshman Republican members of Congress like her BACKED OUT of the agreement.

    And SHE has SOME NERVE sponsoring a bill that tries to implement the CONGRESSIONAL budget proposal until a deal is reached.

    Someone needs to clue “MS. SUGAR BRITCHES” into the fact that Congress does NOT RUN this country on IT’S OWN, and if SHE can’t get THAT FACT through that THICK AND EMPTY HEAD of hers, then SHE needs to find ANOTHER line of work, like running the COFFEE MESS back in OLYMPIA!

    I NEVER believed that SHE had the EXPERIENCE, SINCERITY or INTELLIGENCE for the job of Congressperson, and in the short time that SHE has been at Congress, she has proven herself to be a RECKLESS and STUPID LEMMING.

    It is TRULY PATHETIC that WE as residents of the 3rd District have to be represented by a piece of WORK like Jaime Herrera Beutler.

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