There is no expectation on the part of the builder or the bank that this loan will be paid off in full when it is set to expire; the agreement is that it will then be rolled over and extended into a longer-term loan for the purpose of building the houses. That is how these types of loans are set up, and this was the agreement that was in place between the loanholder and the Bank of Clark County.

So when the first-phase development loan expired and the FDIC declared it a toxic asset and refused to roll over the loan, they were breaking the bank’s end of the deal. They froze the loan and declared it a toxic asset before it even expired, even though it was a performing loan with all payments being made in full and on time.

The developer would have paid off the full amount of the loan if the bank had held up their end of the bargain. They were willing to work with the FDIC and then Rialto/Multibank to pay off the loan over time, give them the deed to the property, find a buyer to pay more than what the loan had sold for in a short sale, buy the loan with the help of an investor for more than what Rialto/Multibank/Lennar paid for it, etc. But the FDIC and Rialto refused all their offers and would not provide any terms or counter-offers in writing to try to work it out. They did not try to work with loanholders at all.

It would be similar to if you had a mortgage on your house and had been making all your payments faithfully, but your bank suddenly told you that you must pay it off in full (plus exorbitant interest far above the amount originally arranged) immediately instead of being able to make regular payments to pay it off over time. The only companies who could actually do this are the ones so big they didn’t need to take out a loan in the first place.

There are a lot of loanholders in this situation nationwide. The FDIC’s handling of these loans is killing the small businesses and handing much of the nation’s land and assets to mega-businesses at pennies on the dollar with an interest-free loan and guaranteed astronomical profits.

You can read a few of the stories at

This tragedy doesn’t just hurt the small builders. The economy would have taken less of a hit, many jobs would have been saved, and the American people could have recovered much more of the money and benefited local communities much more by the FDIC and the Multibanks working with the loanholders instead of foreclosing on them.

Rialto could have recovered far more than the amount brought in by the “auction” if they had worked with the builder.

Rialto/Lennar turned down offers in the range of 1.75 million and then turned around and “sold” the land to themselves for 1 million. This creates an artificially inflated deficit and allows them to get the land at a price far below even the current market value, and also potentially go after the loanholder for more money to make up the full amount of the original loan plus exorbitant interest–in addition to taking the property.

If they pursue him for the deficit and win, they can take all business and personal assets, including the home he and his family live in, and leave him with nothing but the bare minimum allowed by Washington State after a bankruptcy ($125,000 worth of house and $100 cash, and a few other things: )

Even if they recover the full amount of the loan (which isn’t going to happen since the builder doesn’t have that much in assets), the FDIC ends up with only 60% of the original loan amount, while Rialto ends up with the property and 40% of the loan amount with almost no investment (since the FDIC gave them an interest-free loan to buy the loan at pennies on the dollar with a guaranteed return) and the builder is ruined, as well as causing lost jobs for many down the line.

If they had worked with the builder in the first place and accepted the offer they brought to buy the loan at 65% with the help of an investor (or, better yet, honored the bank’s agreement and let the builder finish the project and pay off the loan in full over time) the FDIC would have recovered more money at less taxpayer expense, without ruining the small business, killing jobs, and further driving down land values in the process.

How is this serving the American people?

The only entity that benefits from the way things are being done is Rialto/Multibank.

The executives of the Bank of Clark County need to go directly to jail for a long time to think about the impact on their good customers. Kudos to Herrera for calling the FDIC to task.

I pray and hope that justice will be served on the failed bank execs and the FDIC for their underhanded activities.

Who represents the good builders in this mess? People who have taken out loans in good faith have their solvent business RUINED through no fault of their own. When the full weight of the FDIC (the FEDS) and with the tax payers’ money behind them, who can stand up against them?

Maybe with the full weight of this congress levied on the FDIC, the FDIC management will feel the squeeze.

How cozy are the decision makers in the FDIC with these shark companies? An in depth investigation needs to take place.

I am ashamed of the local bank, the FDIC and the company Lennar Corporation, which owns Rialto Capital Management. I cannot say enough bad things about each one of them.

But hey, it’s just business. Would you shake hands with any of them?