The Federal Housing Authority reneged on its promise of financial assistance after convincing Texas Capital Bancshares Inc. to help the failed reverse mortgage company go out of business, the Dallas-based bank said Wednesday. revealed in a lawsuit.
According to the complaint, the government-run National Mortgage Association, known as Ginnie Mae, canceled liens on tens of millions of dollars in collateral after the bank agreed to lend to Reverse Mortgage Funding LLC. The loan was intended to support customers of a bankrupt company that was one of the largest providers of government-backed reverse mortgages.
The bank's Texas Capital Bank unit provided the funds “on an urgent basis to protect thousands of elderly mortgage customers,” the bank said in the complaint. “Just a few weeks later, Ginnie Mae reversed course and claimed to be leaving TCB empty-handed.”
The roots of the controversy go back to last year's bankruptcy of Reverse Mortgage Funding. Like many companies in the industry, the company was under pressure from soaring interest rates and regulatory pressures. Texas Capital alleges in the lawsuit that Ginnie Mae persuaded it to provide debtor financing after reverse mortgage funding failed.
According to a lawsuit filed in federal court, Ginnie Mae “induced tens of millions of dollars in loans to TCB to bail out RMF, thousands of retirees, and the politically sensitive Home Equity Conversion Mortgage Program.” After that, the bank's priority lien was invalidated.'' Amarillo courtroom. “Ginnie Mae is seeking to declare in fiat that TCB’s only recourse is an RMF, a bankruptcy entity with few, if any, assets.”
Ginnie Mae's actions could force Texas Capital to stop lending to the reverse mortgage industry altogether, adding to pressure on an already weakened sector. said.
“If approved, Ginnie Mae's position is that lenders (including TCB) are reluctant to extend the loans needed to finance retirement for millions of current and future seniors. “This would likely threaten the viability of the HECM program,” the company said. stated in the complaint.
Ginnie Mae did not respond to requests for comment on the lawsuit.
The HECM program, administered by the U.S. Department of Housing and Urban Development, allows older homeowners to use the equity accumulated in their property to pay for home improvements and general living expenses. Loans made under this program represent a small portion of the overall mortgage industry. For the year ended September 30, 2022, the bank disbursed 64,489 of his HECM loans. In the study that ended last month, that number had dropped to 27,397 cases. Large banks typically do not operate in this corner of the mortgage market.
Reverse mortgages have had a somewhat checkered past, with a reputation for being complicated loans for seniors. But as researchers at the Urban Institute noted in a recent report, it could also work as a cash solution for people who may have significant equity in their homes.
Texas Capital is the 64th largest financial institution in the United States, with approximately $29 billion in assets as of June 30. Over the past two and a half years, the bank has transformed its strategy under new leadership with a focus on becoming a complete financial institution. Services financial services company. The company expanded into investment banking, treasury, and wealth management services after recovering from a period of instability following the termination of its merger deal in 2020.
In July, the bank launched its first exchange-traded fund (ETF), offering investors exposure to Texas-based companies as a bet on the state's economic growth.
Paige Smith, Shelley Hagan, Madeline Mekelberg, Bloomberg
