The legal conflict involves TCB's reliance on a first priority lien for HECM collateral after it provided funds to Reverse Mortgage Funding (RMF) to stabilize the program. The crux of the case lies in interpretation of HMBS tails—new security issuances supported by unpaid HECM loan balances. Judge Kacsmaryk ruled against TCB, asserting that Ginnie Mae's authority extends to the entirety of mortgages in the HMBS pool, dismissing TCB's argument about separate participations and collateral concerns.
Judge Matthew Kacsmaryk ruled that Ginnie Mae's extinguishment power over mortgages extends to HECM-backed Securities, rejecting TCB's claims regarding collateral interests in tails.
TCB emphasized the critical importance of its first priority lien on HECM collateral, arguing that without it, their reliance on collateral from a bankrupt firm was jeopardized.
The dispute centers on HECM-backed Securities (HMBS) tails, which represent additional security issuance backed by unpaid principal balances of prior HECM loans after securitization.
Judge Kacsmaryk clarified that Congress granted extinguishment power over mortgages but did not differentiate participations in the way TCB argued concerning HMBS.
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