Today’s 11 a.m. hearing on the FDIC before the U.S. House Financial Oversight and Investigations Subcommittee can be watched live on the House Financial Services website.
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The U.S. House Financial Oversight and Investigations Subcommittee will hear testimony today from a Clark County business owner who had received loans from the now defunct Bank of Clark County.
The hearing on the Federal Deposit Insurance Corp.’s sale of loans from failed banks to Miami-based Rialto Capital Management was requested in February by U.S. Rep. Jaime Herrera Beutler, R-Camas, and fellow Republican Rep. Lynn Westmoreland of Georgia.
“We have to better understand how the FDIC’s practices allowed an out-of-state conglomerate like Rialto to profit at the expense of hardworking folks in communities like Clark County,” Herrera Beutler said in a statement released Monday. “If we find out that federal policies are unfairly leaving small business borrowers vulnerable to this kind of devastation, those policies will need to change.”
The expected testimony of the Clark County business owner, Ed Fogg of Fogg Construction and the Fogg Mortgage Co., was made available online prior to today’s hearing.
In his planned testimony, Fogg said he upheld a perfect payment history on the Bank of Clark
County loans, but his credit was still destroyed. “Fogg Construction was forced to file Chapter 11 bankruptcy (on) May 3, 2012,” he said in the seven-page written testimony. “The Mortgage Company and us personally will follow shortly. Unfortunately, I have come to learn it is my only viable option.
“After three and a half years of trying to be proactive, keep my business and financial life solvent by communicating and working with banks and the FDIC, I have found that there are no other options for those of us who attempted to do what our government has asked us to do in this very difficult recession; to do our fair share and pay our monthly obligations.”
The Bank of Clark County was shut down more than three years ago by banking regulators. Later, the FDIC packaged some Bank of Clark County loans with loans from other failed banks and auctioned them as a package. Rialto, a subsidiary of homebuilding giant Lennar Corp., was the highest bidder for those loans. Some borrowers in Clark County and other communities have criticized Rialto’s management of the loan portfolio, saying the company is unwilling to work with them on renegotiated payments or financial settlements.
Fogg said that before the Bank of Clark County was shut down, bank officials approached him with a deal. The bank would provide Fogg with loans so Fogg could revitalize some distressed property held by the bank.
When the bank was seized, Fogg received $570,000 for several properties but did not receive $650,000 of the loan money he was expecting. He started construction with the loan money and his own funds. When the bank failed, he was still required to pay back what he had borrowed to the FDIC.
“I held up my end of the bargain,” Fogg said. “Paid and completed the entire project in record time with every penny we could scrape up, beg for and borrow at higher rates. … The loss of liquidity due to self-funding this construction project and the inability to work out a solution with the FDIC and Rialto caused us to lose a HUD (U.S. Department of Housing and Urban Development) project that was in its last stages of approval.”
The HUD project to build 65 rental homes would have brought 200 jobs to Clark County during a two-year period, Fogg said.
Rialto paid $243 million in the FDIC auction two years ago for a 40 percent interest in a pool of loans from 22 failed financial institutions, including the Bank of Clark County. The FDIC held the remaining 60 percent stake in those loans, which had an unpaid principal balance of about $3 billion. Money recovered from payments on those loans or property sales are divided between Rialto and FDIC.
The FDIC told The Columbian in mid-January that 137 former Bank of Clark County loans, with an unpaid balance of nearly $100 million, were bundled into the deal.
The Financial Oversight and Investigations Subcommittee hearing begins at 11 a.m. today and includes four other witnesses besides Fogg: Bret Edwards of the FDIC; FDIC Inspector General Jon Rymer; Scott Leventhal, a real estate investor and developer based in Atlanta; and Stuart Miller, CEO of Lennar Corp., Rialto’s parent company.
