The U.S. Court of Appeals for the Ninth Circuit affirmed a district court's dismissal with prejudice of constitutional challenges to the Federal Housing Finance Agency's funding mechanism, rejecting claims that the structure violates the Appropriations Clause and nondelegation doctrine.
The case, *Daisey Trust v. Federal Housing Finance Agency* (9th Cir. 2026), involved three plaintiffs: Daisey Trust, Cape Jasmine CT. Trust, and Saticoy Bay LLC, Series 10007 Liberty View, all represented by trustee Eddie Haddad. The trusts filed suit against the FHFA and its Director William J. Pulte in his official capacity.
According to the opinion filed Jan. 2, 2026, the plaintiffs purchased properties in Nevada that were encumbered by deeds of trust owned by either the Federal National Mortgage Association (Fannie Mae) or the Federal Home Loan Mortgage Corporation (Freddie Mac). The trusts sought to prevent foreclosure of their properties by challenging the constitutional authority of the agency overseeing these government-sponsored enterprises.
The case centers on the Housing and Economic Recovery Act of 2008, which Congress enacted in response to concerns that Fannie Mae and Freddie Mac's deteriorating financial condition could destabilize the national economy. The Recovery Act created the FHFA as an independent agency tasked with regulating these critical housing finance institutions.
The plaintiffs' amended complaint alleged that the FHFA's funding mechanism, as established by the Recovery Act, violates two fundamental constitutional principles. First, they argued the funding structure breaches the Appropriations Clause, which requires that federal agencies receive funding through congressional appropriations. Second, they claimed the Act violates the nondelegation doctrine by granting excessive regulatory authority to the agency without sufficient congressional guidance.
The U.S. District Court for the District of Nevada, presided over by Chief District Judge Andrew P. Gordon, initially dismissed the case. The plaintiffs appealed to the Ninth Circuit, which heard oral arguments Oct. 8, 2025, in Las Vegas.
The three-judge panel consisting of Circuit Judges Mark J. Bennett, Gabriel P. Sanchez, and Holly A. Thomas unanimously affirmed the lower court's dismissal. Judge Holly A. Thomas authored the opinion for the court.
The Appropriations Clause challenge represents a common avenue of attack against federal agencies. This constitutional provision, found in Article I, Section 9, mandates that "No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law." Critics of various federal agencies have used this clause to challenge funding mechanisms they view as circumventing congressional oversight.
The nondelegation doctrine challenge invokes another constitutional principle limiting how much lawmaking authority Congress can delegate to executive agencies. This doctrine requires that when Congress delegates power to agencies, it must provide an "intelligible principle" to guide the agency's discretion.
The FHFA's creation followed the 2008 financial crisis, when concerns mounted about the stability of Fannie Mae and Freddie Mac. These government-sponsored enterprises play crucial roles in the mortgage market by purchasing loans from lenders and either holding them in portfolio or packaging them into mortgage-backed securities for sale to investors.
Congress designed the Recovery Act to provide enhanced oversight of these institutions while maintaining their mission to support homeownership and rental housing. The Act established the FHFA with broad supervisory and regulatory authority over not only Fannie Mae and Freddie Mac but also the Federal Home Loan Bank System.
The case illustrates ongoing tensions between property owners facing foreclosure and the federal agencies overseeing mortgage markets. By challenging the constitutional foundation of the FHFA, the plaintiffs sought to undermine the agency's authority to oversee foreclosure proceedings involving properties encumbered by government-sponsored enterprise mortgages.
The Ninth Circuit's affirmation of the dismissal strengthens the legal foundation supporting the FHFA's operations. The decision joins other federal court rulings that have generally upheld the agency's structure and authority against various constitutional challenges.
The opinion's publication indicates the Ninth Circuit views the decision as establishing important precedent for future cases involving similar constitutional challenges to federal housing finance oversight.
This ruling affects property owners throughout the Ninth Circuit's jurisdiction, which includes Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon, and Washington. Property owners in these states who face foreclosure proceedings involving Fannie Mae or Freddie Mac mortgages cannot rely on constitutional challenges to the FHFA's funding mechanism as a defense strategy.
The decision also provides clarity for the FHFA and the broader housing finance industry about the agency's constitutional standing. This certainty allows the agency to continue its oversight functions without the cloud of fundamental constitutional questions about its authority.
The case number 24-6433 corresponds to the district court case 2:23-cv-00978-APG-EJY, indicating the lawsuit was filed in 2023 and appealed in 2024. The substitution of William J. Pulte as the defendant director reflects changes in agency leadership during the litigation process, as provided under Federal Rule of Appellate Procedure 43(c).