The Justice Department is suing Rocket Mortgage over an independent appraisal that prosecutors are claiming lowballed property values based on the homeowner’s race.
The lawsuit was filed on Oct. 21 in U.S District Court in Colorado. Solidifi U.S. Inc., the appraisal management company; Maverick Appraisal Group, and Maverick CEO Maksym Mykhailyna, were also named in the filing reported by CBS News.
The case centers on Francesca Cheroutes, a Black attorney with the U.S. Department of Labor who sought to refinance her Denver home following structural improvements in 2020.
Maksym Mykhailyna came to appraise the property in January 2021, determining it to be worth $640,000 — 25 percent less than an appraisal Cheroutes received a year prior before improvements were made.
The suit claims Mykhailyna’s appraisal included several errors, such as failing to include improvements and structural details and listing the wrong elementary school for the property.
Mykhailyna also used the value of houses located several miles away from Cheroutes’ home — from areas with a higher population of Black homeowners — as a baseline for appraisal, the Justice Department alleged.
To perform the original appraisal, Rocket Mortgage contracted with Solidifi, which links lenders and appraisers for home valuations. Solidifi hired Mykhailyna to appraise Cheroutes’ home.
The case brings additional scrutiny to the home appraisal industry. The vast majority of home appraisers are white, according to the Bureau of Labor Statistics.
Since the summer of 2020, when clashes around race and discrimination rose to the forefront of American consciousness following the murder of George Floyd, dozens of Black homeowners have alleged discrimination in home appraisals.
Mykhailyna claims he extended the radius because there were no comparable homes to Cheroutes’ nearby, but the complaint lists six comparable properties that were available within Solidifi’s recommended search area.
Following the appraisal, Cheroutes claims she contacted Rocket Mortgage multiple times over concerns over Mykhailyna’s work, but was informed the loan company could not investigate.
In a statement, Rocket Mortgage said it was legally bound to accept the appraisal. After Cheroutes indicated she would not accept a refinanced loan based on a home value of $640,000, the company canceled her application for refinancing.
Rocket Mortgage’s response prompted Cheroutes to file a complaint with the Department of Housing and Urban Development, which determined “that reasonable cause existed to believe that Defendants violated the Fair Housing Act.”
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In a phone interview with the New York Times, Mykhailyna maintained that Cheroutes’ race had nothing to do with how he had valued her home, and said the homeowner was “using the race card to create this conflict.”
Rocket Mortgage delivered a blistering statement in response to the Department of Justice’s lawsuit and said it would file a motion to dismiss itself from the case.
“The DOJ has failed to present a single factual allegation against Rocket Mortgage, instead seeming to absurdly suggest that we should have ignored the appraisal and set our own value for the home — an action that would constitute an outright legal violation,” a spokesperson said.
Federal regulations require mortgage lenders to hire independent appraisal management companies that assign work to independent, state-licensed appraisers to prevent any influence from lenders on home valuations, the statement noted.
“The DOJ’s baseless inclusion of Rocket Mortgage in this suit appears to be little more than a calculated move to grab media headlines rather than pursue genuine justice,” the statement said.
— Caroline Handel
This article has been updated to include a statement from Rocket Mortgage.