This post was updated on June 23.
President Biden moved quickly to replace Federal Housing Finance Agency (FHFA) Director Mark Calabria after the U.S. Supreme Court ruled today that the FHFA director can be removed at will. This evening he named Sandra L. Thompson as Acting Director of FHFA.
Thompson has served as deputy director of FHFA’s Division of Housing Mission and Goals since 2013.
Since the U.S. Supreme Court heard oral arguments in December 2020 on Collins v. Mnuchin (now Collins v. Yellen), the housing finance industry has been waiting for the court to issue an opinion on two important questions pertaining to the FHFA.
The first is whether the FHFA’s single director leadership structure created by the Housing and Economic Recovery Act of 2008, under which the president appoints a director for a five-year term who cannot be let go without cause, is constitutional. The second question is whether the 2012 amendments to the Preferred Stock Purchase Agreements (PSPAs) that required Fannie Mae and Freddie Mac (the Enterprises) to turn over their net worth to Treasury on a quarterly basis exceeded FHFA’s powers to the detriment of the Enterprises and shareholders.
Today the U.S. Supreme Court ruled that FHFA’s structure is unconstitutional and the director may be removed at will by the president. The White House has indicated it could replace Calabria before the end of the day but it is still unclear who will succeed him.
The ruling was similar to the Supreme Court’s opinion last year when the Consumer Financial Protection Bureau’s (CFPB’s) structure was challenged in Seila Law v. Consumer Financial Protection Bureau. The majority opinion in Collins v. Yellen, written by Justice Samuel Alito, held that any differences between the CFPB and FHFA do not compel a different result on the constitutionality question.
As with Seila Law, only the “for cause” provision is invalidated and the remaining provisions concerning the FHFA’s 2012 amendments to the PSPAs remain intact.
A variety of concurrences and partial dissents accompany the majority opinion, and most deal with the other issues present in the case, principally whether the petitioners, shareholders of Fannie Mae and Freddie Mac, can pursue a monetary remedy against the FHFA.
On the question of FHFA’s constitutionality, Justice Elena Kagan agreed with the majority only to the judgment and not the majority’s reasoning; and Justices Sonia Sotomayor and Stephen Breyer dissented from the majority’s ruling, finding that Seila Law applies to the FHFA structure.
Acting Director Thompson is likely to pursue the priorities of the Biden administration, such as improving racial equity and addressing climate-related risks.
NAHB views this ruling as another reason comprehensive housing finance system reform legislation is necessary. The ability of the president to replace the director of FHFA at will prevents certainty and consistency of critical policies governing the most significant participants of the housing finance system.