High court decision affords power move by the Biden Administration in housing to carry out racial and social justice economics.
This week, the U.S. Supreme Court ruled that it is unconstitutional for the director of the Federal Housing Finance Agency remains protected from being removed at will by the POTUS.
Shortly after the ruling, the Biden Administration prepared to fire the FHFA director, Mark Calabria, but the Trump appointee resigned.
“When the housing markets experience a significant downturn, Fannie Mae and Freddie Mac will fail at their current capital levels,” Calabria wrote in a statement. “I wish my successor all the best in fixing the remaining flaws of the housing finance system in order to preserve homeownership opportunities for all Americans.”
The White House quickly appointed FHFA deputy director, Sandra L. Thompson, as as acting director of the housing finance industry regulator.
“There is a widespread lack of affordable housing and access to credit, especially in communities of color,” Thompson said. “It is FHFA’s duty through our regulated entities to ensure that all Americans have equal access to safe, decent, and affordable housing.”
The decision was part of a lawsuit by private shareholders of Fannie Mae and Freddie Mac, two federally backed home mortgage companies created by the U.S. Congress. Since 2012, they have been under the conservatorship of the government after claims that they monopolized the markets.
The investors allege in the suit that the government’s “net worth sweep,” which was an agreement between the FHFA and U.S. Treasury Department was illegal. Under his directorship, Calabria pushed for Fannie Mae and Freddie Mac’s exit of conservatorship, but was not able to do so during the Trump Administration.
Currently, the mortgage companies back almost half of the $11 trillion of U.S. mortgages. While in the conservatorship, they have already paid the government $200 billion in dividends. However, investors say that the government drained the mortgage industry with this move.
While the Justices did not agree to lift the conservatorship, they did rule on a provision in the Recovery Act that investors said was a violation. The provision shields the FHFA director from being removed by the president except “for cause.”
“Although the statute unconstitutionally limited the president’s authority to remove the confirmed directors, there was no constitutional defect in the statutorily prescribed method of appointment to that office. As a result, there is no reason to regard any of the actions taken by the FHFA in relation to the third amendment as void,” Justice Samuel Alito wrote for the court.
Now with Calabria out, the Biden Administration must replace the director. According to Law360, Melissa Stegman who is senior policy counsel at the Center for Responsible Lending, urged the White House to appoint a director “‘who will fulfill the administration’s pledges for racial and economic justice.’”
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