Funding for Consumer Financial Protection Bureau has Consequences for Housing

In a case that could have significant repercussions for the housing industry, the U.S. Supreme Court on Oct. 3 heard oral arguments in Consumer Financial Protection Bureau (CFPB) v. Community Financial Services Association of America.

The case centers on whether the way the CFPB receives its funding is a violation of the Appropriations Clause of the U.S. Constitution. Congress allows the CFPB to be funded through the Federal Reserve, rather than the annual appropriations process that determines the federal budget.

NAHB joined the Mortgage Bankers Association and the National Association of Realtors to file an amicus brief warning the Supreme Court that the “housing market could descend into chaos” if the high court unwittingly rejected numerous mortgage rules that NAHB’s members rely on to ensure people can purchase homes.

Our coalition’s brief focused on the remedy if the Supreme Court found against CFPB and did not make any arguments concerning the constitutionality of the funding scheme.

The attorneys for both parties received strong questioning from the justices concerning CFPB’s funding and how it could craft a remedy if it found the CFPB’s funding is unconstitutional. Solicitor General Elizabeth Prelogar specifically mentioned NAHB’s brief when she suggested that the Supreme Court could address only the funding — and not the rules — that the CFPB has developed.

Moreover, Justice Sonia Sotomayor stated her concern about the market disruption that would occur if the Supreme Court jettisoned the rules that the mortgage market relies on. The attorney for the Community Financial Services Association (CFSA) suggested that the Supreme Court could stay its decision and send the case to Congress so it could develop a different way to fund the CFPB.

In the end, both liberal and conservative justices seemed to have trouble understanding the CFSA’s argument that the CFPB funding scheme violated the Appropriations Clause. Justice Clarence Thomas specifically commented that it was not enough to argue that Congress has never funded an agency in this manner; there must be a reason why that violates the Constitution.

NAHB expects a decision by early 2024.