Lender defends against claims it failed to address bias in a third-party appraisal, calling them legally unfounded
Rocket Mortgage has filed a suit against the Department of Housing and Urban Development (HUD) for dragging its name in a “baseless” complaint alleging that the lender is responsible for correcting appraisal bias by an independent appraiser.
The lawsuit, filed in the District Court for the District of Colorado, seeks clarity on conflicting regulatory mandates and asks the court to dismiss claims brought by HUD and the Department of Justice (DOJ) as part of a broader case on appraisal bias.
The DOJ’s lawsuit, filed on October 21, accused Rocket Mortgage of failing to correct a biased home appraisal conducted by an independent third-party appraiser during a refinance for a borrower.
Despite the appraisal being conducted by an external, state-licensed appraiser with no direct affiliation to Rocket, the DOJ claimed Rocket “had the authority to correct the discriminatory appraisal” but failed to do so.
“This is 100% false,” the mortgage giant said in a statement, asserting that federal laws such as the Dodd-Frank Act and the Truth in Lending Act (TILA) mandate appraiser independence and prohibit lenders from influencing valuations.
“It is unreasonable that the DOJ chose to sue Rocket Mortgage for the conduct of an independent appraiser,” said Rocket Companies president Bill Emerson. “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.”
The company also noted that it “originated three home loans for the borrower named in the lawsuit, with which there were no issues. The borrower’s loan is currently being serviced by Rocket Mortgage, and also was being serviced by Rocket Mortgage at the time of the appraisal in question.
“When the applicant expressed concern with the home’s valuation during this refinance, Rocket Mortgage offered a path to challenge the appraisal through a value reconsideration process which complies with the law. The borrower declined to engage in that process on two separate occasions.”
Kristen Clarke, assistant attorney of the DoJ’s Civil Rights Division, said in an October press release that the initiative aims to ensure fairness and equity in the housing market.
“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,” Clarke said. “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.”
However, Rocket contended that the DOJ’s focus on the company is an effort to gain publicity for its broader mission of addressing appraisal bias.
“It is notable that, in a case about the alleged actions of an independent appraiser that was contracted through an unaffiliated third party, Rocket Mortgage is listed first in the DOJ’s filing and is the only company mentioned by name in the headline of the government’s press release announcing the DOJ’s lawsuit,” Emerson said.
Rocket Mortgage is requesting the court to declare that federal laws prohibit lenders from influencing appraisers’ independent valuations. It also asked the court to affirm that lenders are not legally responsible for the actions of independent, third-party appraisers, as well as invalidate any HUD policies that impose lender liability for correcting or remediating appraiser conduct.
“Any assertion that Rocket Mortgage is biased is false,” the lender stated.
Read more: Rocket Mortgage calls DOJ allegations of discriminatory home appraisal a "massive overreach"
The case, Rocket Mortgage, LLC v. United States Department of Housing and Urban Development, will proceed in federal court, where Rocket Mortgage seeks to have the DOJ’s claims dismissed.
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