Another regulator has sued Rocket Mortgage for allegedly discriminating against a Black homeowner by undervaluing her home during an appraisal in Colorado three years ago. And the Detroit-based lender believes it’s a “massive overreach.”
On Monday, the U.S. Department of Justice—following a move made by the U.S. Department of Housing and Urban Development (HUD) in July—filed a lawsuit against the lender, appraiser Maksym Mykhailyna and his company, Maverick Appraisal Group, and the appraisal management company Solidifi U.S. Inc..
The document states that the plaintiffs undervalued a homeowner’s property based on her race in an appraisal made in 2021 in Denver. In addition, Rocket is accused of retaliating against the homeowner by canceling her refinance application when she reported the discrimination.
“Under federal law, mortgage lenders are required to work at arm’s length during the appraisal process, partnering with independent appraisal management companies who assign the work to state-licensed professional appraisers,” a spokesperson for Rocket told HousingWire. “The law’s intent is to determine the home’s value without any input or bias from the lender or any other party with interest in the transaction.”
The spokesperson continued: “It is clear the government isn’t interested in their own rules, or facts, and are simply including us in this case to score headlines based on our strong brand and prominent position in the industry. We look forward to exposing the government’s massive overreach in this matter.”
The DOJ lawsuit was filed in the U.S. District Court for the District of Colorado.
“This lawsuit is part of our ongoing efforts to bring an end to appraisal bias which prevent Black communities and other consumers of color from accessing credit and benefitting from homeownership,” Assistant Attorney General Kristen Clarke of the DOJ’s civil rights division, said in a statement.
The homeowner applied for a mortgage refinance at Rocket in January 2021.
According to the complaint, during the appraisal process, Mykhailyna used sales from properties in further away neighborhoods with large Black populations and discarded sales of homes less than a mile from the homeowner’s property.
It resulted in an appraisal of more than $200,000 lower than one made at the same property less than a year before, despite home prices surging 25% in Denver during the same period. After she complained to Rocket Mortgage, the company canceled her refinance application.
The homeowner submitted a complaint to the HUD, which concluded that the defendants violated the Fair Housing Act, and referred the matter to the DOJ.
This is the second appraisal bias case involving a top-10 lender and a powerful regulator. loanDepot in March settled a civil case in which a Black Maryland couple alleged they were low-balled on the appraisal by the local appraiser and subsequently discriminated against by the lender. The DOJ and CFPB filed a statement of interest in the case.
loanDepot ultimately admitted no fault and the settlement contained an overhaul to its appraisal policies and procedures.
The changes include communicating to applicants that they have the right to request a reconsideration of value (ROV); explaining why an ROV is denied or the valuation is unchanged; and training its credit, valuation and customer service staff on the topic. The document states that loanDepot “should not utilize appraisers who have previously been found to have discriminated in an appraisal by a regulatory body of court of law.”
This is overstepping by regulatory agencies and the DOJ. The appraiaser and the appraisal company shoudl be the only ones penalized. The AMC and the Lender had no bearing in this. As a matter of fact – there’s so much regulation to where if the lender and AMC did something they would be under the lense of influencing value – so the lender and AMC can’t win – they are under scrutiny no matter what they did. Less regulation – simply fine and stamp out the bad players.