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Texas Capital Bank Objects To DOJ Motion To Halt Discovery In Ginnie Mae Case

Texas Capital Bank (TCB), a warehouse lender that is suing Ginnie Mae over loans made by TCB to now-bankrupt lender Reverse Mortgage Funding (RMF), has objected to a motion by U.S. Department of Justice (DOJ) attorneys seeking to stop the evidence gathering process, saying its requests are reasonable.

Late last month, DOJ attorneys initially filed the motion, contending that TCB’s discovery targets are overly broad and would also be burdensome in terms of gathering documents and information.

Discovery targets are reasonable, TCB says

Since there is a possibility that TCB will seek to schedule formal depositions for both the Federal Housing Administration (FHA) commissioner and the president of Ginnie Mae, government attorneys also contended that such depositions could interfere with these officials’ duties.

But TCB claims its requests for discovery are neither overly broad, nor would they interfere with the official duties of such leaders. That is because the bank is seeking targeted information related to the cancellation of liens stemming from RMF’s portfolio of reverse mortgage-backed securities.

“The parties should proceed to negotiate the scope of the productions,” attorneys for TCB said in a court filing obtained by RMD. “The parties can address the Government’s objections and ensure the scope is reasonable by negotiating custodians, search terms, and date parameters. That process is not burdensome.”

Potential depositions of senior officials

For the officials that could be deposed, namely the FHA commissioner and the Ginnie Mae president, TCB contends that government attorneys are jumping the gun since the plaintiffs have made no formal deposition requests for any high-ranking officials. But even if there were, such requests would not be overly burdensome, they said.

“First, there is no present burden related to depositions as none have been noticed in this case yet,” TCB attorneys wrote. “Second, any discovery sought from such officials will not be unduly burdensome or intrusive.”

TCB attorneys then reiterate why depositions from such officials would be necessary in the first place.

“As set forth in the sworn affidavit of Madison Simm, Ginnie Mae’s President assured TCB in December 2022 that TCB would be repaid for loans it made to RMF via TCB’s lien on certain collateral even if Ginnie Mae were to seize RMF’s mortgage servicing rights,” they state.

“The affidavit further states that FHA’s Commissioner disagreed with Ginnie Mae when Ginnie Mae went back on its assurances and took a new position on March 9, 2023 that TCB could not be repaid via its lien on the collateral.”

While TCB attorneys say that it’s possible these officials will be sought for depositions, their participation in the events are core to the dispute, and TCB would keep their positions and duties in mind when making any requests, the attorneys said.

“[T]he Government does not dispute that they participated directly in the relevant events, and TCB will be respectful of their time and responsibilities including by targeting specific communications during the four-month time period from December 2022 through March 2023,” the filing reads.

Future filing expected soon

“Finally, the Government’s desire to shield officials from admitting a promise was made and subsequently broken in the case of Ginnie Mae’s President and from confirming straightforward statements were made in the case of FHA’s Commissioner is not a basis to grant a stay of discovery,” TCB attorneys state.

They also contend that the government’s aim to have all of the bank’s claims dismissed by a judge is “highly unlikely,” and any other solution granted by the judge would allow the case to move forward into some stage of litigation.

“In all scenarios, the scope of discovery would likely remain the same,” they said in the filing.

TCB plans to directly challenge the government’s motion to dismiss in a filing expected Wednesday. At the time of this report, the bank had not yet filed the objection.

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