Why Ginnie Mae wants Texas Capital Bank case moved to Dallas

Ginnie Mae's legal representation has called upon a federal district court to shift a bank lender's high-profile lawsuit against the mortgage securitization guarantor to a different division in Texas.

The United States, on behalf of the federal agency and the Department of Housing and Urban Development, argues that agreements around certain reverse-mortgage assets and loan documents call for the case to be filed in the Northern District of Texas' dallas division.

If the court filing from Saturday is successful, the lawsuit Texas Capital Bank filed over its alleged right to certain assets would move away from its current location in the Amarillo division to one more convenient for direct-flight air travel by the Washington-based Ginnie Mae contingent.

To be successful, Ginnie's legal representation would likely have to not only convince the court to enforce a clause in agreements TCB is said to be a party to but also of the agency's relevance to the agreement. Ginnie acknowledges it is not a direct signatory to the contract.

Its filing references wording regarding the venue in an agreement between the bank and Reverse Mortgage Funding, a Ginnie mortgage-backed securities issuer for which TCB provided financing. The lawsuit involves some assets that Ginnie seized amid RMF's bankruptcy.

Ginnie guarantees securitizations of mortgages that other government agencies back at the loan level and may act to seize a bankrupt issuer in order to ensure that payments and cash-flows related to the bonds continue to be administered properly for MBS investors.

The June 16 filing argues that a 5th U.S. Circuit Court of Appeals ruling in the case Franlink Inc. v. Bace Services  "concluded that non-signatories may enforce a forum-selection clause," so long as they are "closely related to the agreement or one of its parties."

The agreement between the bank and RMF cited in the filing is related to reverse mortgage "tails" and other "loan documents." Tails are homeowner equity draws subsequent to the first one made or certain other fees associated with those loans. 

The bank alleged in court documents that before it agreed to provide debtor-in-possession financing, it made a point of ensuring Ginnie agreed that in the event RMF's mortgage servicing rights were seized, the financial institution "would be timely reimbursed for outstanding tails." 

The Dallas-based TCB had not responded to a request for comment on the new filing and an inquiry about why the case was filed in Amarillo at deadline. 

The mortgage industry is watching the case closely because TCB's allegations that Ginnie officially broke agreements about its right to collateral spotlights broader tension that's historically existed in this area between the agency and private companies.

Industry concerns that agreements involving the agency don't typically do enough for private companies have persisted even though some of Ginnie's former presidents, such as Ted Tozer, have attempted to make revisions that address these concerns.

A final ruling in the case may not emerge until next year given the timeline set for factual discovery.

Ginnie's handling of the reverse mortgage company's bankruptcy has not only been subject to court scrutiny, but also has been under investigation by HUD's inspector general.


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