A lawsuit over rights to reverse mortgage-backed collateral stemming from the collapse of a major industry lender has been brought to an end with a summary judgment, but the plaintiffs in the case have vowed to appeal the decision.
The suit was filed к Техас Кэпитал Банк (TCB) против Джинни Мэй in late 2023. The bank alleged that Ginnie Mae 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.”
Dispute and decision
TCB contended this occurred after Ginnie Mae turned to TCB to avoid “a catastrophic disruption of the HECM program.” In return for lending money to Обратное ипотечное финансирование (RMF), TCB said it received a first priority lien “on certain HECM collateral.” The bank described it as “critically important” since without it, the only collateral TCB could rely on was a bankrupt company.
At the core of the dispute was collateral stemming from HECM-backed Securities (HMBS) “tails” — the issuance of additional securities backed by the remaining unpaid principal balance of a HECM loan after it has been securitized into an HMBS pool.
“Tail HMBS issuances are HMBS pools consisting of subsequent participations,” Новые советники по просмотру consistently notes when describing monthly HMBS issuance totals. “Tails are not from new loans, but they do represent new amounts lent.”
By eliminating RMF from the HMBS Issuer program and seizing its servicing portfolio, the bank argued that Ginnie Mae eliminated any interest that the bank had in the tails. It sought to explain why the tails were not part of the HMBS collateral governed by the original agreement to engage with RMF, but presiding Judge Matthew Kacsmaryk disagreed, according to court documents reviewed by ЖильеПроволока''s Reverse Mortgage Daily (RMD).
«Конгресс granted extinguishment power over mortgages,” he wrote. “It did not write ‘participations that constitute the trust or pool.’ Nor did it write ‘property that constitutes the trust or pool.’ It chose mortgages. And so that is the relevant unit GNMA holds extinguishment power over.”
He added that the relevant part of the statute at issue is “mortgages constituting the HMBS trust or pool. So the Court interprets GNMA’s extinguishment power to extend to such mortgages and declines to divvy up those mortgages into smaller units if Congress did not,” he said.
Ginnie Mae filed its original motion for summary judgment in January after the judge rejected a similar motion from the bank in October 2024.
HUD satisfied with ruling, TCB vows appeal
A spokesperson for the Министерство жилищного строительства и городского развития США (HUD) reacted favorably to the ruling when reached by RMD.
“Ginnie Mae is pleased to confirm that the court ruled it acted within its statutory authority when extinguishing an issuer, and that the case is now closed,” the spokesperson said.
RMD reached out to representatives of TCB and received the following response.
“Texas Capital disagrees with the judge’s ruling and will appeal,” the bank said. “The entire industry should be alarmed at this ruling and the government’s unlawful seizure of collateral. The victims of Ginnie Mae’s unlawful action will be the seniors who rely on the reverse mortgage program to pay basic expenses.”
The bank went on to say that there will be major consequences for the wider reverse mortgage industry if the decision remains unchallenged.
“Should Ginnie Mae’s egregious actions be allowed to stand, it will have consequences far beyond this case, most seriously, the chilling effect on the industry, including the ability and willingness of Texas Capital and others to participate in programs like this one,” the bank explained.
Kacsmaryk’s decision was filed “with prejudice,” meaning that the bank cannot bring the same case again in the same court — in this case, the Окружной суд США Северного округа Техаса. But the bank has recourse through the appellate court system.
Примечание редактора: This story has been updated with a statement from HUD.
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