Texas Capital Bank (TCB), a warehouse lender involved in a lawsuit against Ginnie Mae regarding loans to now-bankrupt lender Reverse Mortgage Funding (RMF), objected to the government's attempt to dismiss the case.
The February 21 filing argues that Ginnie Mae did not have the authority to interfere with TCB's mortgage servicing rights. Additionally, the filing reads "TCB repeatedly reached out to the Government in an effort to resolve the foregoing issues without the need for litigation, but the Government summarily rejected all of those efforts and refused even to schedule a meeting to discuss them."
TCB's attorneys write that "the claim that Ginnie Mae lacked statutory authority to extinguish TCB’s interest in its collateral, which was not only separate from the servicing rights but also subject to no contract between TCB and Ginnie Mae."
The sentiment addresses the claim that the government stated that Ginnie Mae had the authority to extinguish RMF’s mortgage-servicing rights according to Ginnie Mae’s contract with RMF. TCB's attorneys argue this is not the case, commenting, "The question is instead whether Ginnie Mae had authority to extinguish TCB’s rights in the tails....The governing statute authorizes Ginnie Mae to extinguish the rights of mortgage “issuers,” but TCB is not an issuer. The statute authorizes Ginnie Mae to extinguish interests in “mortgages,” but this case is specifically about tails, which are not mortgages."
On Tuesday, TCB filed an objection to a motion by U.S. Department of Justice (DOJ) aiming to stop the evidence-gathering process, arguing that its requests are reasonable.
Late last month, DOJ attorneys first submitted the motion, arguing that TCB's discovery requests are excessively broad and would impose significant burdens regarding document and information collection. TCB alleges in the objection that it only requested 11 documents and does not seek "burdensome discovery."
Due to the possibility that TCB could seek to schedule formal depositions for both the Federal Housing Administration (FHA) commissioner and the president of Ginnie Mae, government attorneys argued that the broad depositions could interfere with these officials’ duties. TCB denied the contention, arguing that there is no present burden since no depositions have been filed. But even if there were, such requests would not be overly burdensome, TCB attorneys said.
While TCB attorneys say that these officials may be sought for depositions, TCB would keep their positions and duties in mind when making any requests, the attorneys said.
“[T]he Government does not dispute that they participated directly in the relevant events, and TCB will be respectful of their time and responsibilities including by targeting specific communications during the four-month time period from December 2022 through March 2023,” the filing read.
Background
RMF filed for Chapter 11 bankruptcy on November 30, 2022, just eight days after halting all origination activities. Ginnie Mae accordingly requested that TCB lend money to RMF. TCB expressed hesitancy to lend money to a bankrupt company. Specifically, TCB was concerned that if Ginnie Mae seized RMF’s mortgage-servicing rights (MSRs), TCB would face delays in being repaid.
Before TCB’s lending to the bankrupt company, TCB provided financing as early as 2015 to RMF to enable RMF to fund and operate its business — including funding for RMF’s operations involving tails. Per court documents, Ginnie Mae was involved in and consented to various transactions between TCB and RMF.
A motion filed Wednesday by TCB reads that “TCB’s protection for those loans was a lien on certain collateral, and Ginnie Mae — up to and including Ginnie Mae President Alanna McCargo — assured TCB that the collateral would be a source for repayment. Days after TCB funded the loans, Ginnie Mae extinguished RMF’s mortgage servicing rights as the operative statute allows.”
As a result, TCB filed a civil action against Ginnie Mae and the United States Department of Housing and Urban Development (HUD) on October 4, 2023.
The most recent opposition filed on Wednesday also stated that at the time Ginnie Mae extinguished TCB's servicing rights, it said nothing about any impact on TCB’s collateral. But months later, Ginnie Mae took the step of announcing that its extinguishment of RMF’s servicing rights had also purportedly extinguished TCB’s lien – what the lawsuit describes as “a striking collateral grab unsupported by the statute and contrary to Ginnie Mae’s prior dealings.”
After having provided RMF with more than $28 million at Ginnie Mae’s request and based on Ginnie Mae’s assurance of protection, the government’s position was that “TCB had been left with nothing.”
