Texas Capital Bank appeals case against Ginnie Mae over reverse mortgage collateral

After lawsuit challenging the government’s authority to extinguish stakes in securitized Federal Housing Administration (FHA)-backed Home Equity Conversion Mortgages (HECMs) was recently decided in favor of Ginnie Mae, the plaintiff in the case has made good on its promise to appeal the decision.

Texas Capital Bank (TCB) — which initially filed the lawsuit against Ginnie Mae in 2023 — has officially appealed last month’s summary judgment in the government’s favor to the U.S. Court of Appeals for the Fifth Circuit. This is according to court filings reviewed by HousingWire’s Reverse Mortgage Daily (RMD) and confirmation from TCB representatives.

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.”

Ginnie Mae sought a summary judgment through a filing in January. It said that the court had “ruled on the merits that GNMA acted within its lawful authority when it extinguished the mortgage interests of Reverse Mortgage Funding (RMF).”

Because of that, Ginnie Mae argued that TCB “no longer has any remaining rights or interests in the property at issue in this case.” This stemmed from an October 2024 decision by Judge Matthew Kacsmaryk in which TCB alleged that Ginnie Mae violated the Administrative Procedures Act (APA) by extinguishing its first-priority liens over certain reverse mortgage collateral.

Kacsmaryk disagreed, saying then that Ginnie Mae “was within its rights to extinguish and terminate RMF and take absolute ownership of [the] mortgage portfolio.”

In April, the judge ruled summarily in favor of the government. He wrote that Congress had granted “extinguishment power over mortgages” and that 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.”

Following the decision, TCB vowed to appeal. When reached on Tuesday, representatives for the bank reaffirmed their original stance after filing the appeal on Monday.

“Texas Capital disagrees with the judge’s ruling and is now appealing,” the bank said in a statement submitted to RMD. “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 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.”