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Rocket Mortgage sues HUD over its inclusion in appraisal lawsuit
The lawsuit, filed in US District Court in Colorado, accuses the department of heaping misplaced blame on Rocket Mortgage after a Black woman in Colorado accused a white appraiser of undervaluing her home.
Rocket Mortgage, the nation’s largest lender, has sued the US Department of Housing and Urban Development, saying its reputation was sullied by a Justice Department lawsuit over appraisal bias and that it should not have been included in the first place.
The lawsuit, filed Wednesday in US District Court in Colorado, accuses HUD of heaping misplaced blame on Rocket Mortgage after a Black woman in Colorado accused a white appraiser of undervaluing her home.
In April 2021, Francesca Cheroutes, who lives in Denver, filed a complaint with the Colorado Civil Rights Division about Maksym Mykhailyna, a local home appraiser. Cheroutes’ complaint was investigated by HUD, and on Oct. 21 of this year, the Justice Department filed a discrimination lawsuit against all parties involved in the valuation: Rocket Mortgage, Cheroutes’ lender; Solidifi U.S., the appraisal management company hired by Rocket to assign an appraiser; Maverick Appraisal Group, which performed the appraisal; and Mykhailyna, CEO of Maverick.
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Rocket Mortgage also filed a motion Thursday to dismiss the government’s claims against the company.
In an interview with The New York Times last month, Cheroutes said she immediately suspected racial bias when Mykhailyna visited her six-bedroom duplex in Denver in January 2021. She and her daughter were home when he arrived, and a “Black Lives Matter” sign was visible in the front yard.
A previous appraisal on the property, completed less than a year before, had valued it at $860,000. After that, home values in her neighborhood continued to rise, and she installed new gutters and added new countertops and bathroom lighting. But Mykhailyna assigned a subsequent home value of $640,000 in an appraisal that Cheroutes said was riddled with errors and inconsistencies.
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Cheroutes told the Times that she called Rocket Mortgage repeatedly to share her concerns over the appraisal but was told the company could not investigate the matter. When she told them she would not accept a loan based on a value of $640,000, Rocket opted to cancel her application for refinancing.
In its complaint, Rocket Mortgage said it should not have been included in the Justice Department’s lawsuit because government regulations blocked the company from exerting any control over appraisal values.
Lenders must “leave the valuation of a property securing a mortgage loan to the independent judgment of a licensed, third-party appraiser,” the complaint reads, adding that the government nevertheless appears to “require lenders like Rocket Mortgage to interfere in appraisal independence. This puts Rocket Mortgage between the proverbial ‘rock and a hard place.’”
Bill Emerson, president of Rocket Companies, said that he supported HUD’s investigation into the appraisal but that the department was making conflicting demands on lenders about how to act when appraisals are called into question.
“If the appraiser did something he shouldn’t have done, she should have justice,” he said. “But we have to follow the rules and the law, and that’s what we did here.”
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Cheroutes declined to comment on Rocket Mortgage’s countersuit.
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