Lawsuit claims a home was undervalued because of race
Rocket Mortgage has defended itself against a federal lawsuit that accuses the lender of being involved in a biased appraisal of a Black homeowner's property in Denver.
The lawsuit, filed by the Department of Justice (DOJ), accuses Rocket of discrimination and retaliation after an appraiser undervalued the home of Francesca Cheroutes by more than $200,000.
When Cheroutes applied to refinance her home in January 2021, Rocket Mortgage hired appraisal management company Solidifi, which contracted appraiser Maksym Mykhailyna of Maverick Appraisal Group to assess her home.
However, Mykhailyna allegedly undervalued Cheroutes’ property. The complaint claimed the appraisal used home sales data from predominantly Black neighborhoods farther away, instead of comparable sales in nearby predominantly White areas where Cheroutes’ home is located.
Federal prosecutors said this resulted in Cheroutes receiving about a 25% lower valuation during a time when home values in Denver were on the rise.
After Cheroutes received the appraisal, she raised concerns with Rocket Mortgage, stating that she believed it to be discriminatory. Federal prosecutors alleged that the lender canceled her refinance application in retaliation.
Cheroutes then filed a complaint with the Department of Housing and Urban Development (HUD), which launched an investigation and found reasonable cause to believe that the Fair Housing Act had been violated. HUD referred the case to the DOJ, leading to the current lawsuit.
“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,” General Kristen Clarke, assistant attorney at the Justice Department’s Civil Rights Division, said in a Press release.
“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.”
Rocket Mortgage responded to the lawsuit, calling it "massive overreach" by the government.
The company said it had no direct involvement in the appraisal process, which was handled by an independent appraiser hired through an appraisal management company.
“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 company said in a statement emailed to The Detroit News. "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.
"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."
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