In its ongoing lawsuit against Ginnie Mae over $28 million in collateral from loans tied to a bankrupt reverse mortgage lender, Texas Capital Bank (TCB) recently submitted what it called an “expert report” from a former reverse mortgage industry executive, who offered his thoughts on Home Equity Conversion Mortgage (HECM)-backed Securities (HMBS).
TCB said the former executive, Robert Conway, “was intimately involved in the financing and the pooling and securitization of [HECM] assets, mainly in securing financing for HECM assets before the assets were pooled and securitized,” according to court filings reviewed by HousingWire’s Reverse Mortgage Daily (RMD).
The bank cited Conway’s past work for Finance of America (FOA), where he oversaw funding facilities, cash management and securitizations.
But Judge Matthew Kacsmaryk, the presiding judge for the case in the U.S. District Court for the Northern District of Texas, said that the filing did not include any indication of the government’s position on Conway’s included testimony. Kacsmaryk ordered the bank to offer proof of conference with government attorneys on the matter, in accordance with Texas civil rules.
The bank said that Conway “explains in detail the relevant industry background to this dispute, including reverse mortgages, the HECM program, and HMBS.” He offers a conclusion that’s favorable to the bank’s position.
“‘Unsecuritized tails,’ like those at issue here, ‘are distinct from pooled mortgages and not derivative of pooled mortgage participations,’” the bank says of Conway’s report. “He also discusses how TCB’s tail funding resulted directly in payments to HECM borrowers and the damages TCB has suffered from Ginnie Mae’s purported extinguishment of TCB’s property interest in the tails.”
The bank argued that the report should be considered by the court prior to a ruling on the government’s pending summary judgment motion, which TCB recently challenged in a separate filing.
“The Court should therefore permit supplementation of the administrative record with expert opinion regarding the nature and structure of HECM loans and the HMBS program to enable the court to properly analyze whether Ginnie Mae acted within the scope of its authority under [the law] when it purported to extinguish TCB’s interest in the tails,” the bank explained in its filing.
But Kacsmaryk said that under Texas civil rules, supplementation of expert testimony requires “an attorney for the moving party [to] confer with an attorney for each party affected by the requested relief to determine whether the motion is opposed.”
The filing that includes Conway’s report does not indicate whether a conference was held with government attorneys, the judge said, nor does it include “a certificate of conference or explaining why it was not possible to confer.”
“Thus, the court does not know [the government’s] position on the motion,” he said. The judge ordered the bank to comply with the rule “within seven days of the date of this order or risk denial of the motion.” The current deadline is March 5.
Conway served as treasurer at FOA from July 2015 until his retirement in April 2024, according to his report. He explained in the court filing that he compiled the report in December and was compensated for doing so.
His 34-page report goes into extensive detail on his understanding of the HMBS program, the specific collateral at issue, the nature of the reverse mortgage industry and the government’s involvement in it. He also offers opinions on potential alternate courses of action that Ginnie Mae could have taken.
In their own filing last month, government attorneys responded to Kacsmaryk’s October 2024 ruling. They argue that Ginnie Mae “was within its rights to extinguish and terminate RMF and take absolute ownership of [the] mortgage portfolio.” The government attorneys also contend that TCB “no longer has any remaining rights or interests in the property at issue in this case.”
The October ruling proves “fatal to TCB’s two remaining counts” and entitles Ginnie Mae to summary judgment, the government argued. The summary judgment motion remains outstanding.
