WASHINGTON–The Biden Administration has moved quickly to name a new acting head of the Federal Housing Finance Agency, naming the replacement shortly after the Supreme Court ruled in a 7-2 vote the president has the authority to remove the head of the FHFA.
And the outgoing director, Dr. Mark Calabria, also wasted little time in issuing a statement predicting potential trouble ahead for Fannie Mae and Freddie Mac, both of which continue to operate under federal conservatorship.
In a ruling similar to that it handed down in a case (Collins v. Yellen) involving the CFPB, the court found the FHFA’s structure is unconstitutional under the separation of powers doctrine because the agency’s lone director is insufficiently accountable to the president.
The New Director
The White House has appointed Sandra L. Thompson as the acting director. Since 2013 Thompson has served as deputy director of the Division of Housing Mission and Goals (DHMG), where she oversaw FHFA’s housing and regulatory policy, capital policy, financial analysis, fair lending and all mission activities for Fannie Mae, Freddie Mac and the Federal Home Loan Banks. She has served in this position since March of 2013. Prior to joining FHFA, Thompson worked at the FDIC.
“I am honored that President Biden has designated me to be acting director of the Federal Housing Finance Agency until a permanent director is confirmed,” Thompson said. “I look forward to serving in this role at this crucial time. As a longtime regulator, I am committed to making sure our nation’s housing finance systems and our regulated entities operate in a safe and sound manner. We can accomplish this, and at the same time have a laser focus on mission and community investment. 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.”
Statement from Calabria
On the day he was removed from office, Dr. Mark Calabria issued a statement saying he respected the Supreme Court's decision and the authority of the president to remove the Federal Housing Finance Agency director.
After praising the agency and its staff for the work done during the pandemic, Calabria added, “However, much work remains. When the housing markets experience a significant downturn, Fannie Mae and Freddie Mac will fail at their current capital levels. 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.”
Other Rulings
The Supreme Court did nix separate claims brought by shareholders of Fannie Mae and Freddie Mac, unanimously faulting a lower court for allowing the shareholders to pursue separate litigation challenging a 2012 agreement between the FHFA and the Treasury Department arising from the government’s rescue of the mortgage finance firms following the 2008 housing crisis.
The ruling led to a selloff in Fannie Mae and Freddie Mac in the hours that followed. The 37% drop in Freddie Mac shares was the largest since 2017 while the 39% plunge in Fannie Mae’s stock was the largest since 2013.
The FHFA is led by a single director who until the ruling could be removed by the president only “for cause.”
The Supreme Court ruling gives President Biden and future presidents the authority to remove the head of the agency at any time.
CUNA Expresses Disappointment
Prior to the naming of the replacement, both CU trade groups issued statements:
“We’re disappointed in today’s decision as it removes political independence from an entity that affects the entire financial services marketplace,” said CUNA President/CEO Jim Nussle. “Stability at the FHFA is vital to the stability of the entire secondary mortgage market.”
NAFCU: ‘Questions Unanswered’
“The Supreme Court's decision to rule the FHFA's structure unconstitutional leaves many unanswered questions for the housing market amid the COVID-19 economic recovery and remaining uncertainties," said NAFCU President and CEO Dan Berger. "During this period of uncertainty, NAFCU will continue to advocate for policymakers to ensure credit unions retain uninterrupted access to the secondary mortgage market as well as for the GSE Patch to be extended over the long-term."