New filings
The filing, posted to the court docket on Friday morning, shows the immediate bankruptcy concern of leaders at RMF and the lack of willingness from other reverse mortgage industry participants to assume control of the full loan portfolio.
Leaders appealed to Ginnie Mae, who were initially resistant to providing the relief sought by the company. Ginnie Mae suggested that RMF’s January 2022 purchase of a loan portfolio from American Advisors Group (AAG) may have contributed to its financial instability.
Ginnie Mae understood that “the interest rate environment is not the only driver of the RMF liquidity situation,” then-Ginnie Mae President Alanna McCargo said in a letter to RMF on Nov. 26, 2022. “For example, RMF made the business decision to purchase American Advisors Group’s portfolio and determined, at that time, it was aware of the loan characteristics and capable of managing this type of portfolio.
“RMF agreed that it would handle and meet the obligations for the entire portfolio, not just a subset of it. It is RMF’s responsibility to find an orderly solution to its upcoming purchase obligations. There is no government assistance program that is readily available to step in and take on issuer responsibilities under the current circumstances.”
In early December 2022, Ginnie Mae issued a letter to RMF, saying that its failure to secure bankruptcy authorization to fund borrower draws constituted an event of immediate default, leading RMF to seek to transfer its portfolio to another lender.
Road to seizure
What followed was a back-and-forth between Ginnie Mae, RMF’s creditors (including TCB) and other lenders that ultimately culminated in the seizure by Ginnie Mae in late December 2022. Many of these events were previously reported by HousingWire’s Reverse Mortgage Daily in an extensive story that documented the circumstances leading to the collapse of RMF.
Ginnie Mae ultimately seized the RMF servicing portfolio on or about Dec. 20, 2022. The filing reveals that on that day, HUD and Ginnie Mae sent staffers to RMF’s offices to facilitate the takeover of loans in Ginnie Maes Home Equity Conversion Mortgage (HECM)-backed Securities (HMBS) pools. This marked the first default of a Ginnie Mae-guaranteed HMBS issuer in the program’s history.
Subsequently, Ginnie Mae detailed in its public budget requests that the assumption of the portfolio placed significant strain on its resources. Although it holds a large HMBS portfolio, Ginnie Mae does not issue any HMBS pools.
Borrower draws
Ginnie Mae also submitted a separate administrative record in the case that included the Federal Housing Administration (FHA)’s similar record, which showed that HUD and FHA officials were fielding inbound communications from concerned borrowers whose scheduled and unscheduled reverse mortgage payments had gone unfulfilled.
Ultimately, this matter was settled for borrowers when RMF secured additional financing that went toward funding these outstanding draws. The funds were forwarded to subservicer Celink, who then fulfilled borrower payments. Funds from TCB are at the heart of the dispute between the bank and the government.
TCB would ultimately bring 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.
Extension granted
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.
Earlier this week, government attorneys requested an extension of the deadline to submit discovery materials relevant to the TCB case from mid-June to mid-July, saying that an ongoing audit from the HUD Office of the Inspector General (OIG) and 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.
