Rocket Mortgage Accused of Discrimination Against Black Homeowner

Federal prosecutors are accusing lender Rocket Mortgage of discrimination after an appraiser allegedly undervalued a Black woman’s home, despite rising property values in her neighborhood.

Francesca Cheroutes sought to refinance the mortgage on her Denver property in January 2021, according to the complaint.

Rocket is also accused of retaliating against Cheroutes when it reported discrimination by canceling its mortgage refinancing application, the U.S. Department of Justice said in a news release Monday.

“This lawsuit is part of our ongoing efforts to end appraisal bias that prevents Black communities and other consumers of color from accessing credit and benefiting from homeownership,” said the Assistant Attorney General. Kristen Clarke of the Justice Department’s Civil Rights Division.

“Appraisal bias exacerbates the racial wealth gap and runs counter to the principles of justice, transparency and equity we need in our real estate market today. The Department of Justice will continue to hold accountable appraisers, lenders, and others who discriminate against loan applicants. No one should have to endure the indignity and financial harm associated with review bias.

Rocket Mortgage called the lawsuit a “massive overreach” and pointed out that the appraisal was conducted by an independent agency, rather than Rocket.

“Under federal law, mortgage lenders are required to work independently during the appraisal process, partnering with independent appraisal management companies who contract the work to state-licensed professional appraisers” , the company said in an email. “The intent of the law is to determine the value of the home without any input or bias from the lender or any other party interested in the transaction.

“It is clear that the government is not interested in its own rules or facts, and is simply including us in this matter to grab headlines because of our strong brand and leading position in the industry. We look forward to exposing the government’s massive overreach in this matter.”

The allegations

The Justice Department’s complaint alleges that after Cheroutes applied for a mortgage refinance loan in January 2021, Rocket Mortgage contracted with appraisal management company Solidifi to complete the appraisal. Solidifi retained appraiser Maksym Mykhailyna and his company, Maverick Appraisal Group, to appraise the home.

The house is located in a predominantly white Denver neighborhood, prosecutors said, but Mykhailyna used sales of properties in more remote neighborhoods with larger black populations to calculate its value.

Mykhailyna did not even consider sales data for homes located within a mile of the plaintiff’s property in a nearby neighborhood, according to the complaint, although a few months earlier he had used sales of houses in this same neighborhood to support the evaluation of a house with a white owner in the Cheroutes neighborhood.

Mykhailyna allegedly valued the property more than $200,000 lower than an appraisal of the same property that had been completed less than a year earlier, a drop of more than 25% at a time of rising property values. houses in Denver.

The Justice Department said Mykhailyna sent her assessment to Solidifi, which reviewed it and then forwarded it to Rocket Mortgage and Cheroutes. When she received the review, she contacted Rocket Mortgage and explained why she thought it was discriminatory. In response, Rocket Mortgage canceled its refinancing request, prosecutors say.

Cheroutes filed a complaint with the Department of Housing and Urban Development (HUD), which then conducted an investigation, determined that reasonable grounds existed to conclude that the defendants had violated the Fair Housing Act, and returned the case before the Ministry of Justice.

“HUD applauds today’s action and remains committed to working with the DOJ to ensure that appraisal companies and mortgage providers are held accountable when they violate our nation’s fair housing laws” , said Principal Assistant Secretary Diane M. Shelley of HUD’s Office of Fair Housing and Equal Opportunity. . “It’s been more than 56 years since the passage of the Fair Housing Act, and it is unconscionable that Black and brown families still face discrimination in housing transactions.”

A spokesperson for RKO Holdings did not immediately respond to questions about the frequency of Rocket Mortgage’s contracts with Solidifi or whether it had been made aware of prior allegations of discriminatory practices by the company or Mykhailyna.

Neither Solidifi nor Maverick immediately responded to requests for comment.

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