TCB’s appeal against Ginnie Mae over reverse-backed collateral will proceed

Following its vow to appeal the initial decision in a case brought against Ginnie Mae over rights to reverse mortgage-backed collateral stemming from the collapse of a major industry lender, filings by Texas Capital Bank (TCB) have been docketed and assigned a case number in the Fifth Circuit Court of Appeals.

The suit will begin moving through the Fifth Circuit, but its merits have yet to be reviewed by a judge. The next steps will involve appearances by representatives for both the bank and the government, with a possibility of oral argument to follow, according to court documents reviewed by HousingWire’s Reverse Mortgage Daily (RMD).

But an oral argument is not guaranteed, and neither party has yet to make any official motions to be ruled upon.

TCB initially brought the case against Ginnie Mae and the U.S. Department of Housing and Urban Development (HUD) in late 2023. It alleged 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.

The case unfolded over the next 16 months. Presiding Judge Matthew Kacsmaryk of the U.S. District Court for the Northern District of Texas — an appointee of President Donald Trump during his first term — ultimately ruled in favor of the government on the grounds that the dispute over HECM-backed Securities (HMBS) “tails” at issue did not override Ginnie Mae’s authority over mortgages.

“Congress granted extinguishment power over mortgages,” Kacsmaryk wrote in his April summary judgment. “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.”

HUD expressed satisfaction over the ruling, telling RMD in April that “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.”

But TCB immediately vowed to file an appeal, which it followed through on last month.

“Texas Capital disagrees with the judge’s ruling and is now appealing,” the bank said in a statement submitted to RMD at the time. “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 added that if Ginnie Mae’s actions are 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.”