Rocket Mortgage accused of discriminating against Black homeowner who sought to refinance

Max Reinhart, The Detroit News on Oct 21, 2024

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Federal prosecutors accuse 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, the complaint said.

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

“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,” said Assistant Attorney General Kristen Clarke of the Justice Department’s Civil Rights Division.

“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. 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.”

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

“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 an email. "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."

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 Denver neighborhood that is predominantly White, prosecutors said, but Mykhailyna used sales from properties in further-away neighborhoods with larger Black populations to calculate its value.

Mykhailyna even failed to consider data from sales of homes less than a mile from the complainant’s property in an adjoining neighborhood, the complaint alleges, though a few months earlier he had used sales of homes in that same neighborhood to support an appraisal of a home with a White owner in Cheroutes' neighborhood.

Mykhailyna allegedly appraised the property to be more than $200,000 lower than an appraisal on the same property that had been completed less than a year before, a more than 25% decrease at a time of rising home values in Denver.

The Justice Department said Mykhailyna sent his appraisal to Solidifi, which reviewed it and then forwarded it to Rocket Mortgage and Cheroutes. When she received the appraisal, she contacted Rocket Mortgage and explained why she believed it was discriminatory. In response, Rocket Mortgage canceled her refinance application, prosecutors allege.

Cheroutes filed a complaint with the Department of Housing and Urban Development (HUD), which later conducted an investigation, determined that there was reasonable cause to conclude the defendants had violated the Fair Housing Act and referred the matter to the Justice Department.

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

An RKT Holdings spokesperson did not immediately respond to questions about how often Rocket Mortgage contracts with Solidifi or whether it had been made aware of any previous allegations of discriminatory practices by the company or by Mykhailyna.

Neither Solidifi nor Maverick immediately responded to requests for comment.