FHFA Won't Defend Structure's Constitutionality

The Federal Housing Finance Agency (FHFA) won't defend the constitutionality of its structure, according to a brief filed this week in the U.S. Court of Appeals for the Fifth Circuit.

A three-judge panel for the Fifth Circuit last year determined that the agency "is unconstitutionally structured and violates the separation of powers." However, the full court is now rehearing the case.

Although the supplemental filing indicates that the FHFA believes "it is unnecessary for this Court to reach the constitutionality of the … for-cause removal provision" in this specific case, if the court does determine that the issue must be resolved, "FHFA will not defend the constitutionality of [the] for-cause removal provision and agrees … that the provision infringes on the President's control of executive authority."

Last week, the Supreme Court denied certiorari to a lawsuit challenging the structure of the Consumer Financial Protection Bureau, which is also under a single director, only removable for cause.

The U.S. Court of Appeals for the D.C. Circuit last year upheld the Bureau's constitutionality in another case brought by PHH Corp. However, there continues to be challenges in other courts.  The U.S. Court of Appeals for the Fifth Circuit is tentatively scheduled to hear oral arguments March 11 for a challenge to the CFPB’s constitutionality brought by defendants accused by the Bureau in 2016 of engaging in unfair payday lending conduct, and a federal judge in New York – months after the D.C. Circuit's decision –  ruled the Bureau's structure unconstitutional.