Rocket Mortgage sues feds over discrimination allegations

Candice Williams, The Detroit News on Dec 5, 2024

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Rocket Mortgage is suing the federal government, seeking dismissal of a law suit that claims the Detroit lender discriminated against a Black homeowner who received an allegedly low appraisal when seeking to refinance her property loan.

Rocket Mortgage said Thursday that its federal lawsuit against the U.S. Department of Housing and Urban Development challenges what it calls inconsistencies between regulations that require appraiser independence and enforcement actions that hold lenders accountable for those appraisers.

Rocket Mortgage filed a motion to dismiss the Department of Justice’s lawsuit against the company, which it says is based on "the same regulatory conflicts and incorrect application of the law."

“It is unreasonable that the DOJ chose to sue Rocket Mortgage for the conduct of an independent appraiser," Bill Emerson, president of Rocket Companies, said in a statement Thursday. "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 the pursuing justice against those who may have committed wrongdoing.

"Today’s filings highlight the conflict between HUD’s regulations and the DOJ’s enforcement positions. We are looking forward to laying out all the facts of this case in court. Rocket Mortgage has thousands of passionate team members who focus every day on doing the right thing. It would be an offense to our workforce if we let the DOJ’s and HUD’s wrongful actions go unchecked.”

The lawsuit follows a filing from federal prosecutors in October accusing Rocket Mortgage of discrimination after an appraiser allegedly undervalued a Black woman's home, despite rising property values in her neighborhood. The woman, Francesca Cheroutes, had sought to refinance the mortgage on her Denver property in January 2021, according to a complaint. The DOJ also accused Rocket of cancelling the woman's mortgage refinance application in retaliation after she reported the discrimination.

At the time of the filing, Assistant Attorney General Kristen Clarke of the Justice Department’s Civil Rights Division said the lawsuit was part of the department's "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."

Rocket Mortgage at the time called the lawsuit "massive overreach," noting that an independent agency conducted the appraisal.

“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. “We have always been guided by the fundamental principle that all homebuyers and homeowners should be treated fairly and should have every opportunity to achieve their dream of owning their own home or using their equity to improve their lives. Our long, exemplary track record of fair housing lending speaks for itself.”

In an email Thursday, HUD said that it does not comment on ongoing litigation.

Rocket Mortgage said that the accusation of discrimination was against the appraiser and that the DOJ "dragged" Rocket Mortgage into a lawsuit based on the assertion that the company “had the authority to correct the [allegedly] discriminatory appraisal, or cause it to be corrected, but failed to do so.”

"This is 100% false," the company said in a statement. "Rocket Mortgage had no 'authority to correct; the appraisal as a matter of law and the claims against the company should be immediately dismissed."

Rocket Mortgage said it originated three home loans for the borrower named in the lawsuit, with no issues. Rocket Mortgage is servicing the borrower's loan, as it did at the time of the appraisal mentioned in the lawsuit.

When the borrower expressed concerns about the home valuation during the refinance, Rocket Mortgage said it offered a legal option to challenge the appraisal through a value reconsideration process. The company said the borrower twice chose not to participate in the process.

Rocket Mortgage is represented by Michigan-based Morganroth & Morganroth and Washington D.C.-based Goodwin Procter.