The order by the public corporation's board of directors could complicate the bank's effort to develop the proposed Fairhaven Highlands project, which would include 739 homes in Bellingham's South neighborhood. The project includes a mix of single-family houses and multi-family buildings.

The order, issued in May 1994, said the bank can continue doing real estate development, but one of the conditions is that "activities be limited to the development of real estate intended for single-family residential use."

In a letter from FDIC attorney James Miller to Bob Gibb, a Bellingham resident opposed to Fairhaven Highlands, Miller confirmed that the order is still in effect and hasn't been modified. The bank also hasn't violated any of the order's conditions, he wrote.

The project, located generally east and southeast of Fairhaven Park, is a joint partnership of Bellingham-based Horizon Bank and developer David Edelstein. A subsidiary owned by the bank is essentially a 50 percent partner in the project, Miller wrote.

"The FDIC will continue to closely monitor the progress of the proposal through the continuing communication with the Bank in order to ensure that the units that may be ultimately approved by the city of Bellingham for construction on the site are, in fact, intended for single-family residential use," Miller wrote to Gibb.

A call to Miller, in San Francisco, was returned by an FDIC spokeswoman in Washington, D.C., who declined to comment. It's still unclear exactly what the condition's wording means, and when and how the FDIC might take action.

Horizon Bank CEO Rich Jacobson said he wasn't currently able to discuss the order.

On Oct. 26 The Bellingham Herald filed a Freedom of Information Act request with the FDIC seeking copies of all correspondence between FDIC officials and the bank regarding the condition in the order. The FDIC hasn't yet denied the records, but an agency official said Monday, Nov. 2, that the records may be exempt from disclosure but didn't specify why. If the records are withheld, the agency must provide the legal exemption for doing so.

Gibb, who has had multiple phone conversations with Miller, said his impression is the FDIC is waiting for a permit to be issued before taking action.

The project is still undergoing environmental review. The city recently held a hearing to gather public input on a draft environmental impact statement, which studies the project's potential impacts. The final statement is due out next spring.

The bank is already in trouble with the FDIC, which in March issued a cease-and-desist order, restricting lending practices for land development and ordering it to get bad loans off its books to improve its financial health. Some of the changes have already been made, but other important ones are due by the end of November.