SAN FRANCISCO—The Ninth Circuit Court of Appeals recently ruled in favor of the Federal Housing Finance Agency (FHFA), upholding its authority and funding structure over Fannie Mae and Freddie Mac, rejecting constitutional challenges based on the Appropriations Clause and nondelegation doctrine.
In its decision, the Ninth Circuit rejected a challenge to the way FHFA funds itself — through assessments on Fannie Mae and Freddie Mac rather than congressional appropriations. The ruling in Daisey Trust v. Federal Housing Finance Agency affirms that this funding structure, established by the Housing and Economic Recovery Act of 2008, passes constitutional muster.
The bassis for the case is similar to challenges that have been made to the funding of the CFPB, which is funded through the Federal Reserve and which the Supreme Court has ultimately upheld.
According to Mortgage Professionals of America, the case has its roots in Nevada real estate. Three plaintiffs — Daisey Trust, Cape Jasmine Court Trust, and Saticoy Bay LLC, Series 10007 Liberty View — purchased properties between 2012 and 2013 that came with existing liens held by Fannie Mae or Freddie Mac. When their attempts to wipe out those liens in state court failed, the properties eventually went to foreclosure between 2022 and 2024, MPA reported.
Taking Aim at FHFA
“Rather than challenge the foreclosures directly, the plaintiffs took aim at FHFA itself. Their argument was creative, if ultimately unsuccessful: because the Recovery Act sets no hard cap on how much FHFA can collect from the entities it regulates, they claimed Congress had handed over too much power without proper guardrails,” the MPA explained. “They raised two constitutional objections — one under the Appropriations Clause, another under the nondelegation doctrine.”
The Ninth Circuit, however, was not persuaded.
The MPA’s analysis noted that on the appropriations question, the court leaned heavily on the Supreme Court’s 2024 decision in Consumer Financial Protection Bureau v. Community Financial Services Association of America, Ltd.. That ruling established a straightforward test: Congress just needs to identify where the money comes from and what it can be spent on. FHFA’s setup checks both boxes — assessments from Fannie and Freddie, used for reasonable agency costs and expenses.
Wide Latitude on Funding
As for the lack of a spending cap, the MPA said the court pointed out that Congress has wide latitude in how it structures funding, and further noted the open-ended arrangements are nothing new, as the Customs Service and the Post Office operated under similar models back in the founding era.
“The nondelegation argument fared no better. The court found that limiting FHFA to collecting amounts “sufficient to provide for reasonable costs” gives the agency enough direction to satisfy constitutional requirements,” the MPA said of the decision. “That language, the court noted, is no vaguer than standards the Supreme Court has approved many times before.”
