Editor's note: This post has been updated to reflect the latest news related to replacing the Director of the Federal Housing Finance Agency.
FHFA spokesperson Raffi Williams confirmed to reporters at Politico [1] that Mark Calabria, the agency's director, has been dismissed.
A senior White House official, who requested to remain unnamed, has told Bloomberg [2] that President Joe Biden plans to replace Calabria after the Supreme Court issued a ruling stating that he has the authority to do so. According to the news outlet, "Biden would start the process of inserting an FHFA director who supports the administration’s priorities on housing policy."
The United States Supreme Court ruled that the leadership structure of the Federal Housing Finance Agency (FHFA) is unconstitutional. That means President Joe Biden can remove FHFA Director Mark Calabria, a 2019 Donald Trump appointee, at will rather than having to wait until 2024 for Calabria's five-year term to end.
The Court last December took up the Collins v. Yellen [3] case (then, Collins v. Mnuchin), and in Wednesday's split decision it held that a provision the Recovery Act preventing the Director from being fired for reasons other than misconduct or neglect violated the separation of powers between the legislative and executive branches, and the justices concluded that the appropriate remedy for the constitutional violation was to sever the removal restriction from the rest of the Act.
Calabria in a statement said he respects the Court's decision and the authority of the President to remove him from the post.
"During my tenure, FHFA has fulfilled its mission as the economy fluctuated from record-low unemployment and a strong housing market, to a pandemic-triggered recession that spared house prices but contracted supply," he said. "Through this cycle, FHFA has acted quickly and effectively to provide relief to homeowners and renters impacted by the COVID-19 pandemic, and to ensure Fannie Mae, Freddie Mac, and the Federal Home Loan Bank System operate in a safe and sound manner, all while supporting historic growth in homeownership, especially among minority households."
He added that "much work remains."
"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."
Ed Delgado, Managing Director, Mortgage Policy Advisors & Chairman, Five Star Global (the parent company of DS News) reacted to the decision.
"The National Mortgage Servicing Association (NMSA) acknowledges and respects the decision of the U.S. Supreme Court in the matter of Collins v. Yellen with respect to President Biden having the authority to replace the leadership at FHFA," Delgado said. "We look forward to working with the expected new leadership at FHFA toward the betterment of the mortgage industry."
Fannie Mae and Freddie Mac were placed into government conservatorship in September 2008 after losing billions in the run-up to the Great Recession. FHFA formed in 2008 to serve as the regulator for these government-sponsored enterprises. As is the rule for such agencies, Congress created a leadership position to run the outfit—once nominated by the President and confirmed by the Senate, the Director, (Calabria, with whom DS News is well acquainted) [4], had a fixed term and could be dismissed only for cause by the sitting President.
As former Freddie Mac CEO Don Layton, Senior Industry Fellow for Harvard University's Joint Center for Housing Studies puts [5] it, "this one individual was given unprecedented and almost unaccountable power over the GSEs and, through them, over the country’s housing finance system."
Layton has published a paper [6] outlining the way he believes the Biden administration should respond to this outcome, which he had correctly predicted based on precedent from a similar case concerning the same issue inside the Consumer Financial Protection Bureau—there the Court ruled that it was indeed unconstitutional for a single director to have the protection of independence in that manner. Layton noted that this decision will mean "a Biden administration will have more ability to control GSE reform, under any scenario it chooses."
Earlier this year, when asked about the Collins case, Ron Haynie, SVP Housing Finance Policy, Independent Community Bankers of America told DS News that regardless of what happens, "the GSEs continue along the path of recapitalization that has begun under Director Calabria."