Ginnie Mae seeks venue change in Texas Capital Bank reverse mortgage dispute

Attorneys representing Ginnie Mae and the U.S. Department of Housing and Urban Development (HUD) submitted a motion to change the court venue where a case with Texas Capital Bank (TCB) is taking place, arguing that a contract clause has been violated by TCB’s choice to file the case in Amarillo, Texas, as opposed to Dallas.

This is according to court filings reviewed by HousingWire’s Reverse Mortgage Daily (RMD).

The government contends that by filing the case in Amarillo instead of Dallas, TCB has violated a “forum selection clause” in its tail agreement with Reverse Mortgage Funding (RMF), the agreement at the center of the dispute.

The government contends that by executing a tail agreement with RMF, the bank agreed “that Dallas County, Texas, where TCB is headquartered, would be the exclusive venue for ‘any litigation involving [the tail agreement] or any loan document,’” the filing reads.

“TCB’s lawsuit ‘involve[s]’ both the tail agreement and loan documents […]. TCB was thus obligated to file this suit in Dallas County. TCB disregarded this obligation and chose to file in Amarillo, which has no connection to the litigation.”

The U.S. Supreme Court has previously established that forum selection clauses must be enforced. Despite the agreement being between TCB and RMF, the fact that the bank’s dispute with the government has to do with the tail agreement means that the clause is enforceable in this instance, government attorneys argue.

Other precedent has established that “non-signatories” to original agreements can enforce them “where, under the circumstances, the non-signatories enjoyed a sufficiently close nexus to the dispute or to another signatory such that it was foreseeable that they would be bound,” attorneys said in citing prior case law from the Fifth Circuit Court of Appeals.

Ginnie Mae also owns the assets that are at the heart of the agreement, attorneys said, and the original agreement specified “that TCB’s rights and interests related to the Collateral are subject to Ginnie Mae’s rights.”

The government made the filing Saturday, June 15. As of mid-day Monday, TCB has not filed any motion in reply, although the government specified that the bank was opposed to the motion.

TCB brought its suit against Ginnie Mae in October 2023, alleging the government-owned company 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.”

This was after Ginnie Mae allegedly turned to TCB in an effort to avoid “a catastrophic disruption of the HECM program.” In return for lending money to RMF, TCB said it received a first priority lien “on certain HECM collateral,” which the bank described as “critically important” since without it, the only collateral TCB could rely on was a bankrupt company in RMF.

In subsequent filings, Ginnie Mae denied the accusations outside of material facts related to executed agreements between all parties and the regulations governing the HMBS program. While Ginnie Mae sought to have the case dismissed, the presiding judge allowed the bulk of the case to continue and dismissed only small portions of the initial complaint.

Last week, government attorneys requested an extension of the deadline to submit discovery materials relevant to the TCB case from mid-June to mid-July. They said that an ongoing audit from the HUD Office of the Inspector General (OIG), as well as confidentiality concerns, necessitated more time to submit documents to the court record.

The extension request was unopposed and Magistrate Judge Lee Ann Reno approved it on June 13. Late last week, the government filed an extensive collection of documents related to the actions leading up to its seizure of RMF’s servicing operation in December 2022.