Court extensions granted for Texas Capital Bank and Ginnie Mae

Extensions granted

Lee Ann Reno, a magistrate judge in the U.S. District Court for the Northern District of Texas, has approved both requests.

TCB is seeking a partial summary judgment on the first count of its original court complaint, which alleges that Ginnie Mae violated the Administrative Procedures Act (APA) by extinguishing its first-priority liens over certain reverse mortgage collateral.

Ginnie Mae is seeking to move the case to a court in Dallas and away from its current Amarillo venue, contending that TCB violated a “forum selection clause” in its tail agreement with Reverse Mortgage Funding (RMF), the agreement at the center of the dispute.

The previous deadline for TCB to respond to the forum change motion was July 8, while Ginnie Mae was required to respond to the partial summary judgment ruling by July 18. In a previous filing, both sides contended that they did not have enough time to sufficiently respond to the claims of each, and Reno agreed.

“The parties assert that they request this extension ‘to ensure adequate time to review and respond to the motions and do not submit this request for an improper purpose or delay,’” the filing reads in part. “The parties further state that they ‘have conferred and neither party opposes this request.’”

The motion to transfer venues now has a deadline of July 22, while the motion for partial summary judgment was moved to Aug. 1. Any substantive additional progress in this case is unlikely to take place prior to the August deadline.

The case so far

TCB initially brought its suit against Ginnie Mae in October 2023, alleging the government-owned company that oversaw its mortgage-backed securities (MBS) program had “extinguished, in return for no consideration, TCB’s first priority lien on tens of millions of dollars in collateral stemming from the [FHA]-sponsored [HECM] program.”

This was after Ginnie Mae allegedly turned to TCB in an effort to avoid “a catastrophic disruption of the HECM program.” In return for lending money to RMF, TCB said it received a first priority lien “on certain HECM collateral.” The bank described this collateral as “critically important” since without it, the only collateral TCB could rely on was a bankrupt company in RMF.

In subsequent filings, Ginnie Mae denied the accusations beyond the material facts related to executed agreements between all parties and the regulations governing the HMBS program. While Ginnie Mae sought to have the case dismissed, the presiding judge allowed the bulk of the case to continue and dismissed only small portions of the initial complaint.

This is yet another component of the fallout from the collapse of RMF, which was the fifth-largest reverse mortgage lender in the U.S. at the time of its 2022 bankruptcy. The company’s failure ultimately required Ginnie Mae to step in and assume control over its servicing portfolio, which led to the dispute with TCB.

Resources needed as scrutiny mounts

Ginnie Mae, by its own admission, said that it requires additional resources to fully and adequately manage its portfolio of reverse mortgages. Data compiled by New View Advisors shows that while Finance of America’s HMBS portfolio recently surpassed the size of the former RMF portfolio, it still represents a sizable share of the total HMBS market despite not acting as an issuer in the program.

Recently, the Mortgage Bankers Association (MBA) and the National Reverse Mortgage Lenders Association (NRMLA) submitted a letter to congressional leaders urging them to endorse full funding for Ginnie Mae in order to ensure maximum liquidity for the government-backed corporation’s mortgage-backed securities issuers.

“Liquidity strains and balance sheet distortions present unique challenges to NRMLA’s HMBS issuer members,” Steve Irwin, president of NRMLA, said in a statement to HousingWire’s Reverse Mortgage Daily.

“With its limited resources, GNMA has been able to focus on these issues and has already provided significant relief to the HMBS Issuers. There are additional opportunities for GNMA to continue its strong work in the HMBS area, and they should be provided the requisite resources to ensure the further stabilization of the FHA-insured reverse mortgage marketplace.”

But Ginnie Mae is also under additional scrutiny for its handling of RMF. The U.S. Department of Housing and Urban Development (HUD) Office of the Inspector General (OIG) opened an inquiry into the handling of the RMF situation, and it also gained attention from an Indiana senator, who requested additional information from the company over the move.