The Department of Justice has launched a lawsuit over alleged discriminatory practices related to the appraisal of a Black homeowner’s property and the cancellation of her mortgage refinance application.
Filed Monday, Oct. 21, in U.S. District Court in Colorado, the lawsuit accuses Rocket Mortgage, Solidifi U.S. Inc., Maverick Appraisal Group Inc., and Maksym Mykhailyna of actions that violate the federal Fair Housing Act.
“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 Justice Department’s Civil Rights Division said in a statement.
“Appraisal bias exacerbates the racial wealth gap, and runs contrary to the principles of fairness, transparency and equity that we need in our housing market today,” she added. “The Justice Department will continue to hold appraisers, lenders and others who discriminate against loan applicants accountable for their actions. No one should have to suffer the indignity and financial harm associated with appraisal bias.”
According to the Detroit Free Press, Rocket Mortgage failed to offer the homeowner the option for a second appraisal after she suggested that racial discrimination was the reason behind a low appraisal on her two-level duplex, per the lawsuit. The homeowner reportedly purchased the duplex for $270,000 in 2011 and had it appraised at $860,000 in the spring of 2020.
In January 2021, the homeowner sought to refinance her mortgage, and Rocket Mortgage required a more recent appraisal.
The Justice Department’s complaint stated that Rocket contracted with Solidifi, an appraisal management company, to complete the required home appraisal. Solidifi then retained Mykhailyna and his company, Maverick Appraisal Group, to appraise the home, located in a predominantly white neighborhood in Denver, CO.
Within that month, the homeowner received a new appraisal of $640,000. As stated in the lawsuit, the white appraiser relied on comparable sales from farther away neighborhoods with larger Black populations instead of using sales from closer, predominantly white neighborhoods, reported the Detroit Free Press.
According to the Justice Department, Mykhailyna failed to consider data from the sales of homes located less than a mile from the complainant’s property in a neighboring area. However, he allegedly referenced sales from the same neighborhood to support an appraisal of a white homeowner’s property in the complainant’s neighborhood a few months prior, further adding to her concern that her home was undervalued due to her race and color.
The Black homeowner contacted Rocket Mortgage to report that her new appraisal was significantly lower than expected, according to the Detroit Free Press. She shared that she believed it was due to her race, noting that she was home at the time of the appraisal and had a Black Lives Matter sign in her yard.
The loan officer acknowledged that the 25% drop in value from the previous appraisal, completed less than a year earlier, did not sound correct and said Rocket would take a look at the issue.
According to the outlet, a Rocket Mortgage “Solution Consultant” received the loan application but allegedly told the homeowner he could not assist or communicate with her because she had complained about discrimination. He also explained that if she chose not to proceed with refinancing using the new, lower appraised value of her home, he would have to cancel the loan — which is ultimately what happened.
Rocket Mortgage claimed in a Oct. 21 statement that the government is engaging in “massive overreach,” asserting that its company’s inclusion in the DOJ’s lawsuit is due to its “strong brand and prominent position in the industry.”
“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,” the statement read, per the Detroit Free Press. “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 company added the assertion that the government “isn’t interested in their own rules, or facts.”
Solidifi also issued a statement vowing to defend itself against the lawsuit’s allegations, saying it is “committed to working with regulatory authorities, lenders and the appraiser community to reduce and eliminate appraisal bias and discrimination,” the outlet reported.
Other parties in the matter had not provided comment at the time.
