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Monday Morning Cup of Coffee: With Kavanaugh confirmed, will Supreme Court take aim at the CFPB?

New swing justice previously declared bureau unconstitutional

Monday Morning Cup of Coffee takes a look at news across the HousingWire news desk, with more coverage to come on larger issues.

In case you’ve been living under a rock for the last few days (and if you have, good for you…but how’d you get out from under there???), the Supreme Court has a new justice and balance of power of the nation’s highest court just swung decidedly to the right.

After a considerable amount of consternation and a fight that soured both sides, Judge Brett Kavanaugh of the U.S. Court of Appeals for the District of Columbia Circuit is now Supreme Court Justice Brett Kavanaugh.

Kavanaugh was sworn in on Saturday as the replacement for Justice Anthony Kennedy, who stepped down from the court earlier this year.

Earlier in the day, the Senate voted to approve Kavanaugh’s nomination by a 50-48 margin. There was some thought that Kavanaugh may not be confirmed by the Senate after a highly charged confirmation process, rife with sexual assault allegations against President Donald Trump’s nominee.

During Kavanaugh’s confirmation process, several women came forward to accuse him of various forms of sexual assault. Those allegations culminated with Dr. Christine Blasey Ford, a psychology professor, testifying before the Senate that Kavanaugh sexually assaulted her in the 1980’s.

Kavanaugh denied these claims, and in the end, it appears that the key senators who could have sunk Kavanagh’s nomination chose to believe him over Ford.

The key vote was Sen. Susan Collins, R-Maine, who is considered a moderate Republican. There was some thought that Collins could vote against Kavanaugh, but that speculation died a slow death on Friday when Collins addressed the Senate for 45 minutes to explain her decision to support Kavanaugh’s nomination.

Collins later told CNN that she did not believe Ford’s claim that Kavanaugh assaulted her. From CNN:

"I do not believe that Brett Kavanaugh was her assailant," the Maine Republican told CNN's Dana Bash on "State of the Union" in an interview slated to air on Sunday. "I do believe that she was assaulted. I don't know by whom. I'm not certain when."

With Collins vote secured, moderate Democrat Joe Manchin, D-West Virginia, quickly came out and said he’d support Kavanaugh as well.

And with that, it was done. Kavanaugh was then officially confirmed on Saturday afternoon and then sworn in shortly thereafter.

With Kavanaugh on board, the court is expected lean heavily to the right, despite Kavanaugh’s claim that he is an “independent, impartial judge.”

White House Press Secretary Sarah Huckabee Sanders, on the other hand, revealed just how the administration feels about Kavanaugh’s impact on the Court.

So Sanders gives us a pretty big hint as to how Kavanaugh will vote on issues (not that we needed it), but one issue that Kavanaugh is clear on is the Consumer Financial Protection Bureau.

Kavanaugh believes the CFPB, as it is currently structured, is unconstitutional.

And he’s written as much.

Back in 2016, Kavanaugh authored the Court of Appeals decision that declared the CFPB unconstitutional due to its leadership structure. The case that led to the CFPB being declared unconstitutional, which was brought by PHH, dealt with how much power the agency’s director held.

In Kavanaugh’s mind, the director of the CFPB is the “single most powerful official in the entire U.S. Government, other than the President,” in terms of unilateral power.

“As an independent agency with just a single Director, the CFPB represents a sharp break from historical practice, lacks the critical internal check on arbitrary decision making, and poses a far greater threat to individual liberty than does a multi-member independent agency,” Kavanaugh wrote in his decision. “All of that raises grave constitutional doubts about the CFPB’s single-Director structure.”

He continued. “By ‘unilateral power,’ we mean power that is not checked by the President or by other colleagues,” Kavanaugh wrote. “Indeed, other than the President, the Director of the CFPB is the single most powerful official in the entire United States Government, at least when measured in terms of unilateral power. That is not an overstatement.”

But the CFPB fought back against the ruling, bringing it to the full Court of Appeals to rehear the case. When former CFPB Director Richard Cordray left the bureau, Acting Director Mick Mulvaney changed the bureau’s tune, asking the court to declare his own agency’s structure unconstitutional.

But, earlier this year, the full Court of Appeals handed down its ruling, declaring the CFPB to be constitutionally structured and that the director is removable only for cause.

PHH could have taken challenge to the CFPB structure to the Supreme Court, but chose not to, after the Court of Appeals vacated the $100+ million fine against the lender.

The CFPB, under Mulvaney, gave up its pursuit of the matter, and thus endeth that affair.

But with Kavanaugh in tow, could other challenges to the CFPB be coming? They already are.

Back in June, U.S. District Judge Loretta Preska of the New York Southern District declared the CFPB to be unconstitutionally structured for different reasons.

Could that case end up working its way all the way up to the Supreme Court? It’s certainly possible, considering that Preska’s decision goes directly against a decision of a higher court.

So, could this case (or another one like it) lead to the CFPB having to argue for its structure or very existence before the Supreme Court? It’s certainly much more possible than it was one week ago. And if that does happen, Justice Kavanaugh will likely vote to kneecap the bureau (or worse).

It won’t help that the CFPB certainly won’t be vociferous in its own defense anymore, considering who’s running the place now.

Add that all up and you have a bad mix for the CFPB.

That sound you hear? That’s the death clock on the CFPB moving a little bit closer to midnight.

In other news, there’s a new real estate investment firm on the block that boasts a unique business model: buying model homes from homebuilders and leasing those homes back to the builders to be used as sales offices.

The company is Guardian Residential, which was founded over the summer by real estate veteran Dennis Cisterna. Cisterna was previously the chief revenue officer of Investability Real Estate and RentRange Data Services, where he was named a HousingWire Magazine 2017 Rising Star.

Earlier in his career, Cisterna was managing director of FirstKey Lending, a portfolio company of Cerberus Capital Management. While at FirstKey, Cisterna oversaw the first multi-borrower securitization completed in the single-family rental sector.

Now, Cisterna is moving forward with Guardian Residential, where he plans to build a business by buying and building single-family rentals and through sales-leaseback deals with homebuilders.

The company’s first sales-leaseback deal is an $11.5 million acquisition from Dream Finders Homes. Under the deal, Guardian bought 23 model homes across 7 states from Dream Finders. As part of the deal, Guardian then simultaneously entered into lease agreements that will the builder to use the model homes as sales offices for up to three years.

“We are excited to partner with Dennis and Guardian on this model home sale-leaseback transaction,” Patrick Zalupski, CEO of Dream Finders Homes, said. “The portfolio includes some of our best constructed and well-designed homes across our national footprint. The transaction allows us to re-deploy our capital into new communities and continue our growth trajectory.”

In addition to completing its first deal, Guardian also secured equity commitments from several firms in the SFR sector, including the founders of Dominion Group, LandCap Partners, Pintar Investments, and Kinloch Partners.

“We’re excited to invest alongside Guardian because of Dennis’s reputation and long history of success in the single-family sector. Guardian’s platform is complementary to our business of investing in high-quality new construction,” said Bruce McNeilage, founder of Kinloch.

According to Guardian, the company has a goal of laying out $250 million on residential investment opportunities over the next 18 months.

“I couldn’t think of a better partner to close our first deal. Dream Finders is a top-flight builder, and Patrick’s firm is a great example of the caliber of builder we look to work with to grow our investment profile,” Cisterna said.

“In this transaction, Guardian was able to obtain a portfolio of high-quality homes in strong markets with guaranteed revenue that will provide a strong return for our investors,” Cisterna added. “Between our sale-leaseback and SFR build-to-rent platforms, we offer a unique opportunity to homebuilders and investors as we continue to expand our portfolio of residential real estate assets.”

And with that, have a great week everyone!

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