Opinion ID: 4541112
Heading Depth: 3
Heading Rank: 3

Heading: FMC’s Default and Termination

Text: In early 2015, Ginnie Mae “learned of certain actions by [FMC] that constitute[d] events of immediate default under the terms of the Guaranty Agreements,” and, in March 2015, “undertook a compliance review . . . of [FMC’s] Ginnie Mae portfolio.” J.A. 367 (Notice of Violation); see J.A. 37. In May 2015, Ginnie Mae served FMC with a Notice of Violation, stating that, during the compliance review, Ginnie Mae had “observed numerous instances where borrower payments were not moved to Ginnie Mae custodial accounts within [forty-eight] hours of receipt” and had found that FMC had “submitted false reports to Ginnie Mae” claiming that “[mortgages] were [ninety] days or more delinquent” when FMC “repurchased [them] from a pool,” when, in fact, the “loans were not properly delinquent,” both in breach of the Guaranty Agreements. J.A. 367. Ginnie Mae explained that FMC was, accordingly, in default, and that “Ginnie Mae [was] entitled to terminate [FMC’s] authority to act as a Ginnie Mae issuer” and to terminate and extinguish “any redemption, equitable, legal or other right, title[,] and interest of [FMC] in [Ginnie Maebacked] mortgage pools[.]” J.A. 367; see J.A. 37. Rather than immediately terminate FMC from the MBS program, Ginnie Mae stated it would “forebear from immediately effectuating the termination and extinguishment” provided that FMC responded with a timely written response to the Notice of Violation, providing additional information and affirming FMC’s “intent to comply with the conditions” as set by Ginnie Mae. J.A. 367; see J.A. 37–38. Ginnie Mae reserved the right to “tak[e] . . . further remedial action against [FMC and its corporate officers],” “including, but not limited to, termination” of FMC from the MBS program. J.A. 369. FMC timely responded. J.A. 371–76 (FMC Response); see J.A. 41–42. FMC expressed its intent to “fully Case: 19-1798 Document: 42 Page: 7 Filed: 06/12/2020 FIRST MORTGAGE CORPORATION v. UNITED STATES 7 remediate the issues the Notice [of Violation] describe[d]” and “to comply fully with [Ginnie Mae’s] conditions . . . in the Notice [of Violation]” and Guaranty Agreements. J.A. 371. With the assistance of external counsel, FMC undertook an internal investigation and provided the results to Ginnie Mae. J.A. 372. FMC noted that it was also “complying with requests from the [U.S.] Securities and Exchange Commission [(‘SEC’)] with respect to the SEC’s investigation” into the same conduct. J.A. 372. In June 2015, Ginnie Mae terminated FMC from its MBS program. J.A. 378–80 (Extinguishment Letter); see J.A. 42. Ginnie Mae explained that, “[s]ince [its Notice of Violation], [it] ha[d] engaged in further analysis of the events described in [the Notice of Violation], and ha[d] concluded it [would] complete the extinguishment of any redemption, equitable, legal or other right, title and interest of [FMC] in the mortgages pooled under each and every Guaranty Agreement,” pursuant to 12 U.S.C. § 1721(g) “and Sections 10.04 and 10.05 of each Guaranty Agreement.” J.A. 378.