Supreme Court Hearing: CFPB Funding Case and Its Impact on the Housing Industry

In an article posted by the NAHB on October 3, 2023, the U.S. Supreme Court heard oral arguments in the case of "Consumer Financial Protection Bureau (CFPB) v. Community Financial Services Association of America." The case's central issue revolves around the funding mechanism of the CFPB and whether it violates the Appropriations Clause of the U.S. Constitution. Unlike the traditional annual appropriations process that determines the federal budget, Congress allows the CFPB to be funded through the Federal Reserve.

The NAHB, in collaboration with the Mortgage Bankers Association and the National Association of Realtors, filed an amicus brief cautioning the Supreme Court about the potential consequences for the housing market. The brief emphasized that rejecting existing mortgage rules, which NAHB's members rely on to facilitate home purchases, could lead to chaos in the housing market.

The focus of the coalition's brief was on potential remedies if the Supreme Court ruled against the CFPB, rather than the constitutionality of the funding scheme itself. During the oral arguments, the justices posed questions about CFPB's funding and discussed possible remedies if they found it unconstitutional. Solicitor General Elizabeth Prelogar referenced NAHB's brief and suggested that the Supreme Court could address the funding issue without necessarily overturning the rules developed by the CFPB.

Justice Sonia Sotomayor expressed concerns about potential market disruption if the Supreme Court invalidated the rules relied upon by the mortgage market. The attorney for the Community Financial Services Association (CFSA) suggested that the Supreme Court could delay its decision and refer the case to Congress for alternative funding solutions.

Overall, both liberal and conservative justices appeared to have difficulty understanding the argument that the CFPB's funding scheme violated the Appropriations Clause. Justice Clarence Thomas noted the importance of demonstrating why this funding mechanism would be unconstitutional rather than merely pointing out its novelty. A decision on this case is expected by early 2024.

Read the full article here.