Rocket Mortgage, the third-largest U.S. mortgage lender, is suing the U.S. Department of Housing and Urban Development (HUD), alleging the agency is “unfairly” holding the company accountable for the actions of an independent appraiser in a 2021 case.
The lawsuit was filed Wednesday in U.S District Court in Colorado. A HUD spokesperson did not immediately respond to HousingWire’s request for comments.
Detroit-based Rocket claims HUD has misused the Fair Housing Act, placing the lender in “conflicting and irreconcilable positions” regarding government mandates on appraiser oversight and independence.
“The reason we chose to file the lawsuit against HUD is we, as a lender, remain at arm’s length in an appraisal transaction,” Bill Emerson, president of Rocket Companies, said in an interview. “We cannot affect or influence the appraised value — there has to be independence that goes all the way back to the Dodd-Frank Act.
“For HUD and the Department of Justice to claim that we somehow have authority to correct an appraisal due to discrimination is not true. We have a juxtaposition here,” Emerson added.
Under the Dodd-Frank Act and Truth in Lending Act (TILA), lenders must use independent, state-licensed appraisers to avoid conflicts of interest. Lenders are also prohibited from influencing appraisal values based on anything other than the appraiser’s independent judgment.
In addition to its new lawsuit against HUD, Rocket is also seeking to dismiss a case filed by the U.S. Department of Justice in October. The DOJ alleges that Rocket, along with two appraisal companies — Maverick Appraisal Group and Solidifi — and appraiser Maksym Mykhailyna, issued a biased home valuation that resulted in the denial of a refinance loan to a Black homeowner in Denver.
Both lawsuits stem from a case in January 2021, when the homeowner applied for a refinance through Rocket. She alleges that appraiser Mykhailyna used sales from homes in more distant neighborhoods with predominantly Black populations while disregarding comparable sales of properties located within a mile of her home.
This appraisal valued the property $200,000 lower than a prior appraisal conducted less than a year earlier, despite a 25% surge in Denver home prices during the same period. The homeowner claims she raised concerns with Rocket, but the company ultimately canceled her application. She later filed a complaint with HUD, which referred the case to the DOJ.
“There’s no reason for us to be in this lawsuit,” Emerson said. “Nobody would know who the appraisal management company or the appraiser is. They’re just garnering headlines and utilizing our name to do so.”
In its defense, Rocket said it originated three home loans for the borrower named in the lawsuit with no issues. It also offered a path to challenge the appraisal mentioned in the lawsuit through a value reconsideration process which complies with the law. But the borrower declined to engage in that process on two separate occasions.
“If our client was discriminated against, we want our client to get there — it’s just not against us,” Emerson said.
According to Emerson, the lawsuit against HUD depends on what happens to the motion to dismiss the case against the DOJ. “But my guess is the industry would be happy to see the clarity we are asking for. We are prepared for the long haul,” he said.
