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Rocket Mortgage says it is being forced to walk an “impossible tightrope” to walk a tightrope that is impossible to walk, with the government requiring lenders to give appraisers independence in cases where appraisers engage in racial bias or discrimination. sued federal regulators for holding lenders accountable.
“The government requires Rocket Mortgage to rely solely on an independent appraiser’s opinion of value and to hold the company liable for failing to influence or otherwise modify the valuation. “This is not possible,” the company said in a press release Thursday.
Rocket Mortgage’s lawsuit against the Department of Housing and Urban Development (HUD) is part of the company’s defense of a lawsuit filed by the U.S. Department of Justice on October 21, alleging that a Denver woman was unable to refinance her mortgage at a lower rate. It’s part of the process. That percentage increased after an appraiser undervalued her home because she is Black.
In addition to appraiser Maxim Mikhailina, the Department of Justice named Rocket Mortgage and appraisal management company Solidify US as defendants in the complaint.
The Justice Department lawsuit alleges that Solidifi reviewed the allegedly biased appraisal but did nothing to correct it, and that Rocket Mortgage retaliated by canceling property owner Francesca Cerotes’ loan application. claims to have done so.
Rocket Mortgage on Wednesday filed a motion to dismiss as a defendant in the Justice Department’s appraisal bias lawsuit and filed its own petition against HUD challenging rules issued for Federal Housing Administration (FHA) lenders in May. filed a lawsuit.
In its lawsuit, Rocket Mortgage seeks to overturn a HUD ruling that the Fair Housing Act requires mortgage lenders to modify allegedly discriminatory appraisals, ignoring appraisal independence requirements. He said there was.
Rocket Mortgage Co. said this policy (specified in a letter to FHA lenders dated May 1, 2024) prompted Fannie Mae and Freddie Mac to adopt similar requirements without public notice or opportunity for comment. claims.
Lawyers for Rocket Mortgage wrote, “HUD will hold lenders liable for appraiser bias or discrimination if they fail to ‘cure deficiencies’ related to perceived appraiser bias or discrimination.” “We are taking the following measures.” “However, HUD is not clear on the circumstances under which allegations of appraiser bias or discrimination would require lenders to ‘remediate’ or what such ‘remediation’ should look like.” has not been explained.”
Additionally, conflicting laws requiring lenders to respect the “independent judgment of appraisers” have placed Rocket Mortgage “between the proverbial rock and a hard place,” the Detroit-based company said. lawyers for the lenders said.
Rocket Mortgage says in its complaint that “taking action with an appraiser regarding alleged discriminatory appraisals could result in government enforcement actions and private litigation for violations of statutory appraiser independence requirements. ” he said.
“However, if a company complies with independence requirements by not taking any steps “directly or indirectly” that seek to influence the “independent judgment” of third-party appraisers, then the company They face the possibility of government enforcement action and private litigation for alleged violations.” [Fair Housing Act]. The reality of the government’s inconsistent and contradictory approach requires judicial intervention. ”
A HUD spokesperson said the agency does not comment on ongoing litigation.
Lawyers for Rocket Mortgage, in a separate motion, asked the judge handling the Justice Department’s rating bias lawsuit to remove the company as a defendant, saying the company lacked the authority to modify allegedly discriminatory ratings. Ta.
“In an apparent attempt to make headlines and score political points at the expense of Rocket Mortgage’s reputation and reputation, the government “Rocket Mortgage is the primary defendant in this lawsuit and in its statements to the press,” the company’s attorney said.
According to them, the government’s complaint is based on “allegations of discrimination by independent third-party appraiser Maksim Mikhailina in an appraisal he (and he alone) performed on a residential property belonging to Francesa Cerutos. It is said that There is no allegation that Rocket Mortgage hired or met Ms. Mikhailina. ”
Mr. Mikhailina and his company, Maverick Appraisal Group, were originally indicted by HUD in an administrative proceeding along with Solidifi and Rocket Mortgage, but Mr. Cherutu decided to have the Justice Department pursue the case in federal court. As a result of the selection, the process was completed in July.
Mr. Mikhailina did not respond to Mr. Inman’s request for comment, and so far no attorney has registered with the court to represent him in the Justice Department case.
appraisal management company
In order to comply with regulations aimed at protecting appraisers from pressure from lenders, Rocket Mortgage had ordered the disputed appraisals through a third-party appraisal management company, Solidifi.
Solidifi denies wrongdoing and “firmly defends any allegation that it failed to detect or correct any alleged bias in its ratings,” and said the company is committed to eliminating bias and discrimination in its ratings.
Appraisal Management Corporations (AMCs) are experts in the industry after regulators asked Fannie Mae and Freddie Mac to create rules aimed at protecting appraisers from coercion by lenders after the 2007-2009 housing bust and recession. As a result, it quickly became popular.
The rule supersedes the Dodd-Frank Wall Street Reform and Consumer Protection Act, which includes valuation independence requirements that help AMCs solidify their position as important players in the mortgage business. was.
bill emerson
“Rocket Mortgage is listed first in the Justice Department’s filing in a lawsuit involving the alleged conduct of an independent appraiser contracted through an unrelated third party, and is the only company mentioned by name in a government news headline. “It is noteworthy that the company announced the Justice Department’s lawsuit,” Rocket Companies President Bill Emerson said in a statement Thursday.
However, rather than relying on the allegedly discriminatory appraisal, the Justice Department ordered that Lockett either order the appraisal from another appraiser or ask Mikhailina to “consider a more appropriate value” for the appraisal. He also claimed that he could have asked the company to “correct other errors.”
“In fact, Mr. Lockett asked Mr. Mihailina to correct an error in the subject matter assessment that was unrelated to the charges against Mr. Cerutes, and Mr. Mihailina corrected the error,” prosecutors said.
Rocket Mortgage said in a Thursday press release that it has “provided Cherutz with a path to contest the appraisal through a compliant value review process.” The borrower refused to participate in the process on two separate occasions. ”
Rocket Mortgage said it had originated three previous mortgages for Cherutu and that its servicer is collecting monthly payments on the current mortgage.
“Claims that Rocket Mortgage is biased are false,” the company said. “Rocket Mortgage remains committed to making homeownership available to everyone who can sustainably afford it. In fact, the company has introduced several programs to close the racial homeownership gap. I am.”
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