Texas Capital Bank (TCB), a warehouse lender for failed reverse mortgage industry lender Reverse Mortgage Funding (RMF), secured a portion of the $28.6 million debtor-in-possession financing it provided to RMF’s parent company in a recent proceeding stemming from RMF’s bankruptcy.
This is according to original reporting at Law360 and court documents obtained by RMD.
Mary Walrath, the U.S. bankruptcy judge from the District of Delaware overseeing the case involving Reverse Mortgage Investment Trust (RMIT), ordered the bankruptcy plan administrator to “release the TCB DIP Collateral from the DIP Collateral Proceeds Account” to satisfy a portion of TCB’s claims.
Another lender, Leadenhall Capital Partners, had objected to TCB’s motion, but Walrath sided with TCB during a hearing earlier this month.
“In negotiating a previously entered DIP order, Leadenhall had agreed to terms under which the collateral could be released to TCB, Walrath said,” according to Law360.
TCB will now receive a portion of its funds back in line with its DIP claims, but must return any excess funds to the plan administrator, Walrath ruled.
The reverse mortgage industry at large is still reckoning with the impact of RMF’s bankruptcy, which took place in November 2022.
In response to the bankruptcy and the volatility it introduced into the Home Equity Conversion Mortgage (HECM)-backed Securities (HMBS) program managed by Ginnie Mae, the government company seized RMF’s servicing portfolio. It has had issues managing it ever since.
Last month, TCB filed a lawsuit against Ginnie Mae, alleging it “extinguished, in return for no consideration, TCB’s first priority lien on tens of millions of dollars in collateral” stemming from the Federal Housing Administration (FHA)-sponsored HECM program.
Last week, the U.S. Department of Housing and Urban Development (HUD) Office of the Inspector General (OIG) announced that it is opening an inquiry into Ginnie Mae’s management of RMF, The OIG is also looking into Ginnie Mae’s extinguishment of the failed lender from the HMBS program.