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When the Federal Deposit Insurance Corporation officially seized Southwest Washington-based Bank of Clark County in early 2009, local builder Lynn Wiley never thought the action would lead to foreclosure on his 45-lot subdivision.

Wiley isn’t the only one. Approximately 30 local builders and developers believe their properties are being unfairly foreclosed upon by , a national real estate investment management company that bought most of the bank’s construction loans through an FDIC auction last year.

Now, politicians are calling for the FDIC to explain why it chose to sell loans to Rialto rather than work with builders.

Wiley and business partner Warren Edgley had a short-term development loan for the proposed Hawthorne Acres subdivision in Vancouver, Wash. After parcels were laid out and public services were connected, Wiley and Edgley had worked out a deal with the bank for the loan to be split into two so that each one could build out their portion of the development. Then, a few months before their loan expired, the FDIC took over the bank.

鈥淯p to that point our loan was completely current, but the problem was that with the recession an appraisal showed the property wasn’t worth as much as the loan when the bank was taken over,鈥� Wiley said. 鈥淲e immediately went to the FDIC and explained our agreement that we had worked out, but they weren’t willing to extend our loan.鈥�

Wiley and Edgley realized that their loan would not be extended, so they offered the FDIC the deed in lieu of foreclosure as well as the possibility of a short sale. According to Wiley, a short sale would have netted the FDIC 65 cents on every dollar they owed, a slightly better deal than the one the FDIC worked out with Rialto.

鈥淲e tried to let them know that if they worked with us like the bank was going to, we could have not only given them as much money, but kept local people working as well,鈥� he said. 鈥淚t just seemed like they had no intentions of working with us.鈥�

The FDIC instead bundled and auctioned most of the bank’s short-term loans to Rialto, allowing the company to keep 40 percent of the money it collects; the remaining amount goes back to the FDIC. As part of the deal, Rialto was allowed to work out new loan terms, accept loan payoffs or foreclose upon the properties.

Wiley and Edgley tried to work out a deal with Rialto, and even traveled to New York to talk to company representatives. But the property was foreclosed upon and auctioned off in early March. It was sold for $1 million, about $3 million less than what was owed on the loan.

鈥淏asically, this is ruining me and putting me out of business,鈥� said Wiley, who owns 鈥淲e just thought that there was a better solution than this out there.鈥�

The development partners later learned of about 30 other builders and developers who were experiencing similar issues since the closure of Bank of Clark County. The group has started meeting routinely.

Bruce Wood, principal with Portland-based development firm Foundation Real Estate Development, had an $8.1 million loan with the Bank of Clark County. Wood said he thought he had worked out a deal with the FDIC to pay it off for $5.6 million, but Rialto now is asking for $9.4 million 鈥� the original loan amount, plus interest.

鈥淭hey’re foreclosing on the assets and suing everyone for the default interest,鈥� Wood said. 鈥淚t’s frustrating, to say the least.鈥�

Wood and Wiley have been working with U.S. Rep. Jaime Herrera Beutler, R-Camas, and U.S. Sen. Maria Cantwell, D-Edmonds; the politicians have asked the FDIC to answer questions concerning the closure of the Bank of Clark County.

In a letter sent to the FDIC by Herrera Beutler, she stated, 鈥淚 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.鈥�

According to Casey Bowman, a spokesman for Herrera Beutler, the letter sparked a meeting between the congresswoman and the FDIC last week. The conversation was productive, he said, and the FDIC said it planned to review Rialto’s actions.

Lennar Corporation, which owns Rialto Capital Management, failed to return an inquiry by press time.