In a decision nearly a year in the making, the United States Supreme Court on Wednesday ruled that the single-director structure of the Federal Housing Finance Agency (FHFA) is unconstitutional, echoing a similar decision the high court made regarding the Consumer Financial Protection Bureau (CFPB) in 2020.
Within hours of the Court’s decision, a White House spokesperson said that President Joe Biden would move quickly in naming a new FHFA Director to give further credence to a new degree of power that the Court has given to the presidency.
In the case Collins v. Yellen, the court ruled 7-2 that the restriction on removal of the FHFA Director by the President of the United States was unconstitutional in light of the similar decision related to the CFPB. The high court also dismissed a lawsuit brought against FHFA by shareholders of the Government Sponsored Enterprises (GSEs), Fannie Mae and Freddie Mac, since the takeover of these firms was an established power of FHFA under the terms of the Housing and Economic Recovery Act of 2008 (HERA).
Justice Samuel Alito wrote the majority opinion for the Court, and was joined by Chief Justice John Roberts and Associate Justices Clarence Thomas, Brett Kavanaugh and Amy Coney Barrett. Four Associate Justices – including Neil Gorsuch, Stephen Breyer, Sonya Sotomayor and Elana Kagan – concurred in part, with a partial dissent authored by Justice Sotomayor for which she was joined by Justice Breyer.
A major component of the Court’s decision appears to be a recent precedent set by the decision in the Seila Law v. CFPB case. In that case decided in June 2020, the Court ruled that the single-director structure of the CFPB — which prevented a sitting President of the United States from firing that director for reasons other than inefficiency, malfeasance or neglect — is a violation of the Constitutional doctrine of the separation of powers.
While keeping the agency itself intact, the Court severed the issue of the director structure from the existence of the agency and deemed the leadership structure unconstitutional.
As noted by RMD at the time, the Court did not address whether other single director government agencies — including the Social Security Administration and FHFA — could have their leadership structures invalidated as a result of the decision. Now, that exact question as it pertains to FHFA has been decided along very similar lines.
The administration of President Joe Biden responded swiftly to the Court’s FHFA ruling on Wednesday, saying within hours of the decision that the president is “moving forward today to replace the current director [of FHFA] with an appointee who reflects the administration’s values,” according to a report at Politico.
Current FHFA Director Dr. Mark A. Calabria was appointed to the role by Former President Donald Trump, and has been serving since April of 2019 after previously working as the chief economist for Former Vice President Mike Pence.
Shortly before President Biden’s inauguration in January, he named Federal Trade Commissioner Rohit Chopra as his nominee to lead the CFPB. On Inauguration Day, then-CFPB Director Kathleen Kraninger resigned from her position reportedly at the request of the new administration, which worked with similar quickness to put the Court’s decision into action as soon as a new president was sworn in.
The FHFA was created by HERA, which was signed into law by President George W. Bush and which was designed to have far greater authority than its predecessor agencies in regulating the GSEs to provide liquidity and stability to the housing market.
While FHFA does not have authority over the lending limits tied to reverse mortgages, the Federal Housing Administration (FHA) has typically aligned its loan limits in the product category with the conforming loan limits on mortgages to be acquired by Fannie Mae and Freddie Mac. Changes in the reverse mortgage lending limits handed down in 2020 marked the fifth consecutive year that the lending limits matched the FHFA limits tied to higher-than-average home values.
Read the published opinion at the U.S. Supreme Court.
