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Supreme Court Upholds CFPB’s Oversight of Mortgages

The verdict might have ended the consumer-protection bureau altogether, but, backed by NAR, it only changed the president’s ability to hire/fire CFPB’s head at will.

WASHINGTON – The U.S. Supreme Court ruled Monday that the single-director structure of the Consumer Financial Protection Bureau (CFPB) is unconstitutional – but the CFPB itself is not. Prior to the ruling, the president could remove CFPB’s director only “for cause,” which is the part the Supreme Court found unconstitutional. As a result, the president can now remove the director at will.

The CFPB oversees a wide range of consumer financial services, but for real estate, its goal to promote fairness and transparency with mortgages and credit cards is most important.

CFPB was created by the Dodd-Frank Act of 2010, which stemmed from the financial crisis and Great Recession. Dodd-Frank’s goal was to change the structure of financial regulation in the U.S., in part to avoid some of the problems identified as causes of the recession.

The real estate industry, for example, was hit hard by a spike in foreclosures caused, in part, by homeowners who had mortgages they could no longer afford. As a result, a number of mortgage rules were tightened.

“For Realtors®, the most notable outcome is that the decision does not invalidate the CFPB as a whole and ensures the bureau will operate with a director who serves at the will of the president moving forward,” the National Association of Realtors (NAR) said in a release.

Late last year, NAR submitted an amicus curiae brief, along with the National Association of Home Builders and the Mortgage Bankers Association, calling for the Supreme Court to cause “the least possible disruption to the nation’s housing and real estate markets with this ruling.”

NAR says the final ruling “is in line with NAR’s advocacy and should result in minimal disruption to the role of the CFPB and its past and future actions.”

“Today’s Supreme Court decision finally brings certainty to the operations of the bureau,” CFPB Director Kathy Kraninger said on Twitter. “We will continue with our important mission of protecting consumers with no question that we are fully accountable to the president. Consumers and market participants should understand that the same rules continue to govern the consumer financial marketplace.”

The Supreme Court heard oral arguments in the case, Seila Law v. CFPB, on March 3, or about two weeks before the COVID-19 pandemic suspended all oral arguments.

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