Rocket Mortgage, the leading retail mortgage lender in the U.S., has initiated legal action against the federal government, contesting allegations that it discriminated against a Black homeowner by providing a lower appraisal value for her property due to her race.

This lawsuit targets the U.S. Department of Housing and Urban Development (HUD) and requests that a federal court resolve discrepancies between government regulations that mandate independence for appraisers and the enforcement actions that hold lenders accountable for their appraisers’ decisions, according to a statement from Rocket Mortgage released Thursday.

In July, HUD alleged that various appraisal firms, including Rocket Mortgage, issued a prejudiced appraisal for a homeowner in the Denver region because of her race. HUD asserted that these companies provided an “insupportably low appraisal” for a duplex located in an area with a predominately white population in Denver.

“Prior appraisals of this property had shown a consistent increase in value, yet this one reported a significant decline, all while the Denver housing market was experiencing considerable growth,” HUD stated.

In October, the U.S. Department of Justice (DOJ) filed its suit against the same appraisal companies, part of ongoing efforts to eliminate appraisal bias affecting Black communities and other people of color. The DOJ also claimed that Rocket Mortgage took retaliatory action against the homeowner, identified as Francesca Cheroutes, after she complained to HUD about the devaluation of her home linked to her race.

Cheroutes alleged in her complaint that Rocket Mortgage canceled her loan application when she raised concerns about the discriminatory nature of the appraisal. HUD forwarded her case to the DOJ after finding “reasonable cause” to believe that the appraisal companies violated the Fair Housing Act.

The lender, headquartered in Detroit, announced on Thursday that it has also filed a motion to dismiss the DOJ’s lawsuit. Bill Emerson, president of Rocket Companies, described the DOJ’s action as “unreasonable,” asserting that it should not be held liable for the actions of an independent appraiser.

“We will not remain passive while the courts are exploited to misuse our company’s name in the pursuit of public attention rather than true justice against those potentially at fault,” Emerson stated. “Today’s legal actions underline the inconsistency between HUD’s guidelines and the DOJ’s enforcement practices.”

Rocket Mortgage claims DOJ unjustly implicated company in lawsuit

The DOJ’s allegations relate to a January 2021 appraisal of Cheroutes’ duplex when she sought to refinance her mortgage with Rocket Mortgage. The lender had partnered with an appraisal management firm, Solidifi US Inc., which then engaged the Maverick Appraisal Group to assess the property, according to federal prosecutors.

The federal complaint contended that an appraiser from Maverick estimated the property’s value at $640,000, roughly $220,000 less than an appraisal that Cheroutes had received in 2020. Additionally, the complaint claimed that the appraiser utilized sales data from Black neighborhoods that were distant from Cheroutes’ residence.

“Specifically, the complaint asserts that Mykhailyna failed to take into account data from home sales located less than a mile from the complainant’s property in a neighboring area, despite previously using sales in that same area to justify an appraisal for a home owned by a white individual in the complainant’s neighborhood,” stated the DOJ.

Upon receiving the appraisal, Cheroutes alerted Rocket Mortgage about her concerns regarding fairness and alleged racial bias in the property’s valuation. In response, the lender canceled her refinance application, according to the complaint.

Rocket Mortgage maintained that the discrimination allegations should be directed toward the independent appraiser, not the company itself. They argued that the DOJ “wrongfully involved” them in a lawsuit by claiming they should have intervened in correcting the appraisal but did not.

“This assertion is entirely false,” the company stated. “Rocket Mortgage had no legal ‘authority to correct’ the appraisal, and therefore, the claims against the company should be dismissed immediately.”