A group of real estate trade organizations has come together for a joint amicus brief that urges the U.S. Supreme Court to be prudent, thoughtful and deliberate in considering an upcoming ruling on the constitutionality of the Consumer Financial Protection Bureau (CFPB).
The Mortgage Bankers Association (MBA), the National Association of Home Builders (NAHB) and the National Association of Realtors (NAR) filed the brief — in which interested parties that aren’t directly involved in a case offer relevant expertise — in Community Financial Services Association of America v. Consumer Financial Protection Bureau. In that case, which the court will consider in its fall term, a payday lending trade group challenged a CFPB ruling that restricts some of the industry’s lending practices. The rule was upheld, but an appeals court eventually found the CFPB’s funding mechanism to be unconstitutional, leading the CFPB to petition the Supreme Court to review the appeals court’s finding.
The amicus brief’s statement of interest noted that all three undersigned groups have “a strong interest in maintaining the stability of the mortgage and real estate markets” and “safeguard[ing] the legal rights and business interests of their members.”
The real estate groups don’t take a side on whether or not the CFPB is actually constitutional, but they assert that the guidance that the bureau has provided since its establishment in 2010 is too fundamental to the health of the residential mortgage industry (and the economy as a whole) to throw into limbo. If the Supreme Court upholds the ruling of the appeals court and deems the CFPB unconstitutional with too broad a brush, it would potentially erase years of regulatory structure and plunge many financial markets, including real estate, into uncertainty. In the case of the mortgage industry, for example, it would mean suddenly leaving lenders and servicers in the dark about how to issue and service loans in full compliance with federal law.
The brief warns that if the Supreme Court rules for the payday lending group, “it must be careful to issue a circumscribed ruling that does not call into question other crucial regulations issued by the CFPB over the past years.” The groups reminded the court that, in a previous case ruling that the CFPB’s single-director format violated the separation of powers, it acknowledged that “undoing the CFPB’s actions across the board ‘would trigger a major regulatory disruption’ and do ‘appreciable damage to Congress’ work in the consumer finance arena.’”
Therefore, the brief stated, any ruling provided by the high court must take care not to call current CFPB regulations into question or risk “immediate and intense disruption to the housing market, harming both consumers and the broader economy.”
Notably, Community Financial Services Association of America v. Consumer Financial Protection Bureau has several amicus briefs attached, many of which are in defense of the CFPB. One in particular, filed by 90 state and local nonprofit organizations, notes that many state agencies nationwide mirror the CFPB in their funding structure. Since state courts follow the appropriations jurisprudence of the Supreme Court, that brief stated, a ruling that disapproves the CFPB’s own funding structure could “hobble agencies throughout the states.”
