HUD claimed appraisal companies — including Rocket Mortgage — issued a biased appraisal against a Denver-area homeowner because she was Black.
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Rocket Mortgage, the nation’s largest retail mortgage lender, has filed a lawsuit against the federal government seeking dismissal of a claim that the lender allegedly discriminated against a Black woman by undervaluing her home based on race.
The lawsuit, filed against the U.S. Department of Housing and Urban Development (HUD), is asking a federal court to “correct conflicts” between government-created regulations that require appraiser independence and enforcement actions that hold lenders responsible for those appraisers’ conduct, Rocket Mortgage said in a statement Thursday.
In July, the HUD alleged that multiple appraisal companies — including Rocket Mortgage — had issued a biased appraisal against a Denver-area homeowner because she was Black, according to a statement at the time. The HUD claimed that the appraisal companies provided an “insupportably low appraisal” of a duplex in a predominantly white area of Denver.
“Other recent appraisals of the same property had steadily increased in value, yet this appraisal resulted in a dramatic drop, despite the Denver market experiencing substantial growth in home values at that time,” the HUD said.
The U.S. Department of Justice filed its lawsuit in October against the same appraisal companies, saying it was part of the department’s “ongoing efforts to bring an end to appraisal bias” among Black communities and other consumers of color. The Department of Justice also alleged that Rocket Mortgage retaliated against the woman, identified as Francesca Cheroutes, after she complained to the HUD about her home being undervalued because of her race.
Cheroutes said in the complaint that Rocket Mortgage canceled her loan application when she reported that the appraisal was discriminatory. The HUD referred the complaint to the Department of Justice after determining there was “reasonable cause” concluding the appraisal companies violated the Fair Housing Act.
The Detroit-based lender said Thursday that it had also filed a motion to dismiss the Department of Justice’s lawsuit. Bill Emerson, president of Rocket Companies, said it was “unreasonable” for the department to sue Rocket Mortgage for the actions of an independent appraiser.
“We will not stand idly by while the courts are used as venues to leverage our company’s name to publicize the case instead of pursuing justice against those who may have committed wrongdoing,” Emerson said in a statement Thursday. “Today’s filings highlight the conflict between HUD’s regulations and the DOJ’s enforcement positions.”
Rocket Mortgage claims DOJ ‘dragged’ company into lawsuit
The Department of Justice’s allegations stemmed from a January 2021 appraisal of Cheroutes’ duplex when she sought to refinance her loan from Rocket Mortgage. The lender contracted with an appraisal management company, Solidifi US Inc., which then retained the Maverick Appraisal Group to appraise the home, according to federal prosecutors.
The federal complaint alleged that a Maverick appraiser valued the property at $640,00, about $220,000 lower than an appraisal Cheroutes received in 2020. In addition, the complaint alleged that the appraiser used sales from Black neighborhoods further away from Cheroutes’ home.
“In fact, the complaint alleges Mykhailyna failed to consider data from sales of homes less than a mile from the complainant’s property in an adjoining neighborhood, even though a few months earlier he had used sales of homes in that same neighborhood to support an appraisal of a home with a white owner in the complainant’s neighborhood,” the Department of Justice said.
After receiving the appraisal, Cheroutes notified Rocket Mortgage about the home’s value and her belief it was motivated by racial discrimination. The lender then canceled her refinance application in response, according to the complaint.
Rocket Mortgage argued that the accusation of discrimination is against the independent appraiser, not the company. The company alleged that the Department of Justice “dragged” it into a lawsuit based on the assertion that it had the power to correct the appraisal, but failed to do so.
“This is 100% false,” the company said. “Rocket Mortgage had no ‘authority to correct’ the appraisal as a matter of law and the claims against the company should be immediately dismissed.”
Contributing: Krystal Nurse, USA TODAY
