Rocket Mortgage Takes on HUD: Lawsuit Aims to Clear Discrimination Claims
(This story has been updated due to an earlier inaccuracy.)
Rocket Mortgage, the titan of retail mortgage lending, is fighting back with a lawsuit against the federal government. Why, you ask? They’re taking a stand against allegations that they retaliated against a Black woman who claims she faced racial discrimination during her mortgage refinance journey.
This legal battle, against the U.S. Department of Housing and Urban Development (HUD), aims to clear up the stormy waters of conflicting government regulations that demand appraiser independence while holding lenders accountable for appraisers’ actions. Rocket Mortgage made their case in a bold statement released Thursday.
Back in July, HUD alleged that an appraisal by Rocket Mortgage’s contracted agent was laced with bias, targeting a homeowner in Denver simply because of her race. The agency claimed the appraisal drastically undervalued her duplex in a predominantly white neighborhood, leading the homeowner to file a complaint with the Colorado Civil Rights Division, alleging discrimination based on race and color while also claiming that Rocket Mortgage retaliated against her for voicing her concerns.
“Recent appraisals of similar properties have shown a steady rise in value, yet this appraisal took a nosedive, all while the Denver market was booming,” HUD stated emphatically.
In October, the U.S. Department of Justice took action, filing a lawsuit against Rocket Mortgage and its appraisal team, asserting that this case is part of a broader mission to eradicate appraisal bias affecting Black communities and other marginalized consumers. The DOJ also contended that Rocket Mortgage retaliated against Francesca Cheroutes after her complaint to HUD regarding her home’s undervaluation.
Cheroutes claims in her complaint that her loan application was abruptly canceled by Rocket Mortgage after she reported the discriminatory appraisal. Following an investigation, HUD referred the matter to the Department of Justice, finding “reasonable cause” to believe that the appraisal companies breached the Fair Housing Act.
Rocket Mortgage didn’t take this lying down; they filed their own motion to dismiss the DOJ’s case, with President Bill Emerson calling it “unreasonable” to hold the lender accountable for the actions of an independent appraiser.
“We refuse to let our name be used as a pawn in this legal chess game, which should focus on pursuing justice against those who may have actually done wrong,” Emerson stated defiantly. “Our filings today underscore the clash between HUD’s regulations and the DOJ’s enforcement stance.”
A Deeper Issue: The residential real estate market grapples with its history of racial injustice, prompting legal scrutiny.
Rocket Mortgage: A Reluctant Participant in a Larger Narrative
The DOJ’s allegations trace back to a January 2021 appraisal of Cheroutes’ duplex when she sought to refinance her loan with Rocket Mortgage. The lender’s partnership with appraisal management company Solidifi US Inc. led to the involvement of the Maverick Appraisal Group for the property evaluation.
Federal prosecutors allege that the Maverick appraiser assigned a valuation of $640,000 for the property—an astounding $220,000 less than an appraisal Cheroutes had received just a year prior. On top of that, it’s claimed that the appraiser relied on sales data from Black neighborhoods located far from Cheroutes’ home.
“Shockingly, the complaint reveals that the appraiser overlooked comparable sales from nearby neighborhoods, yet conveniently used that same data to support a higher valuation for a similarly situated home owned by a white individual,” the DOJ pointed out.
After receiving this controversial appraisal, Cheroutes reported her concerns to Rocket Mortgage, asserting that the value was driven by racial bias. Instead of addressing her complaints, the lender canceled her refinance application.
Rocket Mortgage maintains that the discrimination claims rest solely with the independent appraiser, asserting that the DOJ has wrongfully implicated them in the lawsuit based on a misguided belief that they could rectify the appraisal—a claim they vehemently deny.
“This assertion is completely unfounded,” the company stated. “Rocket Mortgage had no legal power to amend the appraisal, and therefore, the allegations against us should be dismissed without hesitation.”
Contributing: Krystal Nurse, USA TODAY
:max_bytes(150000):strip_icc()/12-3line-cabf906d6b2f406c96d5daf03a60fc23.png?w=220&resize=220,150&ssl=1 "Mortgage Rates Slide for Third Day: Is Now the Time to Refinance?")