Ginnie Mae denies majority of complaint in Texas Capital Bank lawsuit

Ginnie Mae has filed a point-by-point response to the initial complaint of the case brought against it by Texas Capital Bank (TCB), which alleges that the government-owned company “extinguished, in return for no consideration, TCB’s first priority lien on tens of millions of dollars in collateral” stemming from the Federal Housing Administration (FHA)-sponsored Home Equity Conversion Mortgage (HECM) program.

Attorneys for the U.S. Department of Housing and Urban Development (HUD) and Ginnie Mae largely deny any allegations made against the company in the original complaint. They have admitted only to material facts of policy, procedure and, in some instance, the standing of each entity’s participation in the HECM and HECM-backed Securities (HMBS) programs. This is according to court documents reviewed by RMD.

Government attorneys deny that TCB “is entitled to any of the relief sought in the complaint,” adding that they deny “[e]ach and every allegation, as well as all inferences, arguments, and legal conclusions based on them.”

Ginnie Mae also includes a series of additional defenses based on the claims in the complaint, particularly related to TCB’s claims that Ginnie Mae violated the Administrative Procedures Act (APA), as well as assertions that the court in which the case is filed “lacks subject-matter jurisdiction” over the allegations that the government committed a wrongful act or infringed on the rights of TCB.

Ginnie Mae also claims that TCB has not exhausted all available “administrative remedies,” that the bank lacks standing “because the claimed injury is not redressable by the powers” of the court, and that the “extinguishment of the collateral is committed to agency discretion.”

Government attorneys also claim that TCB “consented to its lien being subject to [Ginnie Mae’s] power to extinguish the collateral,” assumed the risk that Ginnie Mae would exercise its authority to do so, and that its recoverable damages are limited “by [TCB’s] failure to mitigate damages.”

Ultimately, Ginnie Mae is again seeking to have the bulk of the claims made by the bank dismissed, but presiding Judge Matthew Kacsmaryk of the U.S. District Court for the Northern District of Texas previously considered — and largely denied — prior motions to dismiss the complaint in its entirety.

TCB attorneys claim that Ginnie Mae’s positions are not supported by previously approved agreements, nor are they supported by law. On top of this, TCB claims that in March 2023, “the FHA’s current Commissioner, who also holds the title of Assistant Secretary of Housing and Federal Housing Commissioner at HUD, stated that FHA disagrees with Ginnie Mae’s position.”

Ginnie Mae originally sought to have the case dismissed in January, saying then that TCB lacks standing and discounts the authority the government has to extinguish a lender from its reverse mortgage-backed securities program. The judge largely disagreed.

Pretrial deadlines were set in January by a magistrate judge, but with deadlines extending into 2025, government officials currently in leadership positions at Ginnie Mae and HUD may not be in office should the suit progress to trial sometime next year.

Recent resignations, including those of HUD Secretary Marcia Fudge last month and Ginnie Mae President Alanna McCargo on Friday, are changing the scope of HUD and Ginnie Mae leadership before the expiration of President Joe Biden’s term in office in January.