On June 23, 2021, the U.S. Supreme Court issued a 7-2 decision in Collins v. Yellen, which held that the structure of the Federal Housing Finance Agency (FHFA) was unconstitutional in that Congress overstepped its authority by placing a single director in charge of the agency that could only be removed for cause.
Under the Housing and Economic Recovery Act of 2008, Congress placed Fannie Mae and Freddie Mac into conservatorship overseen by a new federal agency, the FHFA. The agency was created with a single director, who is appointed by the president and confirmed by the Senate to serve a five-year term. Once appointed, the head of the agency could only be removed by a president for cause, which the decision states is not the same as “at will.” The Supreme Court ruled that the restriction on the president’s ability to remove the agency director violates the Constitution’s basic principle of separation of powers.
Writing for the majority, Justice Samuel Alito states that the agency’s leadership structure “clashes with constitutional structure” by “concentrating power in a unilateral actor insulated from Presidential control.” Justice Alito also referred to the Supreme Court decision in the last term which struck down similar restrictions on the president’s ability to remove the head of the Consumer Financial Protection Bureau (CFPB), stating that “the Constitution prohibits even ‘modest restrictions’ on the President’s power to remove the head of an agency with a single top officer.”
The Supreme Court decision also ruled against a group of shareholders on a statutory claim that the FHFA exceeded its authority by agreeing to a new variable dividend formula referred to as the “net worth sweep.” The court is allowing the shareholders to go back to the lower courts to agree whether the unconstitutional restriction on removal of the director led to compensable harm.
Following the decision, the White House released a statement advising that the Biden administration would replace FHFA Director Mark Calabria, a Trump appointee, with a director “who reflects the Administration’s values.” Calabria announced his resignation, and within hours, Sandra L. Thompson was appointed as Acting Director, effective immediately. Thompson has been at the FHFA since 2013, serving as the Deputy Director of the Division of Housing Mission Goals, and overseeing housing and regulatory policy, capital policy, financial analysis, and fair lending activities. Prior to the FHFA, Thompson worked for the Federal Deposit Insurance Corporation for 23 years in various leadership roles. In a statement released by the FHFA, Thompson said, “There is a widespread lack of affordable housing and access to credit, especially in communities of color. It is FHFA’s duty through our regulated entities to ensure that all Americans have equal access to safe, decent, and affordable housing.
DocMagic will continue to monitor agency announcements for any further developments.
