Fifth Circuit rules Ginnie Mae can extinguish Texas Capital Bank lien

The United States Court of Appeals for the Fifth Circuit ruled last week that Ginnie Mae can extinguish Texas Capital Bank's first priority lien on reverse mortgage tails. HousingWire, National Mortgage News, and Law360 all reported on the decision. The legal dispute involves tail-pool balances linked to Home Equity Conversion Mortgages that Ginnie Mae acquired following the 2022 bankruptcy of Reverse Mortgage Funding. [1][2][3]

According to HousingWire, the litigation originated in October 2023 when Texas Capital Bank filed a lawsuit against the federal government agency. The bank alleged that Ginnie Mae extinguished its first priority lien on tens of millions of dollars without providing any consideration. [1]

Texas Capital Bank is a Dallas, Texas based bank operating under its parent holding company, Texas Capital Bancshares. Ginnie Mae is a government owned corporation inside the Department of Housing and Urban Development that guarantees mortgage backed securities to facilitate housing loans. [4][5]

HousingWire reported that the ruling signals to warehouse and debtor in possession lenders that financing structures secured by mortgage backed securities tails may face vulnerability if Ginnie Mae exercises its extinguishment remedies. [1]