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Appeals court rules net worth sweeps illegal, finds FHFA structure unconstitutional
The U.S. Court of Appeals for the Fifth Circuit, sitting en banc, ruled that the Federal Housing Finance Agency's (FHFA) single-director structure is unconstitutional – a departure from the decisions of five other courts that have considered the agency's structure. The court last year determined the same, citing arguments used in a lawsuit against the CFPB.
The court also found that the net worth sweep is illegal, ruling that the government-sponsored enterprises (GSEs) should no longer be sending their profits – with the exception of the $3 billion capital buffer – to the Treasury and that shareholders should be repaid money owed to them from the financial crisis.
The court cited an opinion from former Fifth Circuit Judge Kavanagh's dissent in PHH Corp v. CFPB, which stated "the CFPB's 'single-Director structure departs from settled historical practice, threatens individual liberty, and diminishes the President's Article II authority to exercise the executive power.'"
NAFCU is supportive of legislation to reform the bureau's governance structure to a bipartisan commission, as well as other reforms pursued by Congress.