The U.S. Department of Justice has initiated legal action against Rocket Mortgage and several appraisal firms, claiming they undervalued a Black woman’s home in Denver, marking yet another instance of discrimination in housing that continues to amplify the wealth gap for communities of color.

This lawsuit arose after Francesca Cheroutes from Colorado reported to the U.S. Department of Housing and Urban Development (HUD) that her property was appraised lower due to her race.

In her complaint, Cheroutes claimed that Rocket Mortgage canceled her loan application as retaliation for her assertions regarding the discriminatory appraisal. HUD found “reasonable cause” in her claims and forwarded the matter to the Justice Department, which concluded that Rocket Mortgage, Solidifi US Inc., Maverick Appraisal Group Inc., and a Maverick appraiser breached the Fair Housing Act.

The Justice Department indicated that the appraisal conducted by Maverick placed Cheroutes’ home at over $200,000 lower than a similar property owned by a white person, despite an increase in property values in the Denver area.

The lawsuit was filed on Cheroutes’ behalf. Assistant Attorney General Kristen Clarke emphasized that this case is part of an ongoing effort to eliminate appraisal bias that has prevented Black individuals and other consumers of color from accessing credit and home ownership.

“Bias in appraisals worsens the racial wealth gap and contradicts the ideals of equity, transparency, and fairness needed in today’s housing market,” Clarke stated. “The Justice Department will persist in holding appraisers, lenders, and others accountable for discriminatory practices. No one should endure the injustice and financial damage resulting from appraisal bias.”

According to U.S. attorneys, although Cheroutes lives in a predominantly white neighborhood, the Maverick appraiser failed to take into account comparable sales from similar nearby areas. Instead, they used sales data from farther communities with larger Black populations, a stark contrast to a previous appraisal for a white homeowner where the appraiser used sales from the same neighborhood.

It was noted in the lawsuit that Cheroutes mentioned to the loan officer that she had a Black Lives Matter sign in her yard and expressed regret for being present during the appraisal, believing it might have influenced the appraiser’s perception.

Black Americans have historically challenged racism in home appraisals, asserting that the value of their homes often increases significantly when they display photos of white families. Last year, the Biden Administration unveiled reforms aimed at tackling appraisal biases.

“Home appraisals should reflect fair and objective assessments of a property’s market value, but they frequently do not,” stated Vice President Kamala Harris at that time.

Federal Allegations: Appraiser allegedly favored Black neighborhoods for valuation

U.S. attorneys indicated that the issues at hand originated from an appraisal of Cheroutes’ home in January 2021 during her refinancing attempt. In 2020, her home—a duplex—was valued at $860,000.

Cheroutes has owned her home since 2011, living in one of the duplex units. She initiated the refinancing process in 2020 when mortgage rates dropped to historic lows, as documented in the lawsuit.

A federal complaint submitted in U.S. District Court in Colorado described how the Maverick appraiser met with Cheroutes in January 2021 and recognized that a Black family resided there since Cheroutes’ daughter was present and engaged with a potential employee accompanying the appraiser.

Cheroutes conveyed to the appraiser the renovations she had completed on the property; however, these improvements were not reflected in the appraisal report, according to court documents.

The lawsuit claimed that the value placed on Cheroutes’ property was $640,000, which is $220,000 less than a previous appraisal she received. Additionally, the Maverick appraiser’s valuation was lower than the sales of six comparable duplexes within a mile of Cheroutes’ home, which should have been included per Solidifi’s guidance.

The properties that Solidifi advised utilizing for comparison were located within a mile radius of Cheroutes’ home and had values ranging between $698,000 to $1.2 million. Instead, the appraiser opted for sales data from Black neighborhoods situated further away from Cheroutes’ residence, according to legal documents.

Cheroutes alerted Rocket Mortgage regarding her home’s value and expressed her belief that it was influenced by racial bias.

Rocket Mortgage utilized the new appraisal value, as stated in court filings, and informed Cheroutes that she could proceed with the application or face cancellation. After Cheroutes requested another appraisal, Rocket Mortgage subsequently canceled her application.

In March 2022, Cheroutes had her home appraised at $885,000.

“The allegations detail discriminatory practices by both a lender and an appraiser that negatively impacted a homeowner. These unfair practices have persisted for far too long in Denver,” remarked Acting U.S. Attorney Matt Kirsch for the District of Colorado.

In response to an inquiry from YSL News, Rocket Mortgage stated that federal regulations require lenders to maintain a “hands-off” approach during the appraisal process, collaborating with an independent appraisal management company that assigns tasks to licensed appraisers to prevent undue influence or bias.

bias from lenders or other individuals involved in the application process.

“It’s apparent that the government is not adhering to its own regulations or facts and is merely including us in this case to gain media attention based on our reputable brand and prominent industry status,” stated the company. “We are eager to reveal the government’s excessive overreach in this situation.”

Maverick Appraisal Group has not replied to YSL News’s repeated requests for comments.

Solidifi refrained from commenting specifically on the lawsuit but stated they will “vigorously defend any claims” regarding bias in their appraisal procedures.

Longstanding Discrimination in the Appraisal Process

Cheroutes isn’t alone in experiencing significant undervaluation of her property as a Black American.

In 2021, a Black woman from Indianapolis witnessed her home’s value soar from $125,000 to $259,000 after she removed personal elements tied to her race and heritage, replacing them with images reflecting a white man. She took this step after guessing that race was influencing the appraisal.

Carlette Duffy subsequently lodged fair housing complaints against the mortgage lenders and appraisers.

In a separate 2020 incident, a Black couple in California had their home appraised twice: first with photos of their family, and then again showcasing a white family. They were stunned to find their home value had doubled with the latter representation. Tenisha Tate-Austin and Paul Austin reached a settlement in 2023 against an appraiser and the appraisal management company.

“We missed the opportunity for a better interest rate due to the biased appraisal we received,” Tenisha Tate-Austin expressed through her lawyer.

The systematic undervaluing of Black homeowners’ properties is a significant factor hindering Black Americans from bridging the housing gap. In 1960, 65% of white households owned homes, compared to just 38% of Black households. By 2021, this gap had widened further, with homeownership rates at 73% for whites and 44% for Blacks, as reported by the Urban Institute.

In 2023, Harris noted that lower appraisals contribute to the racial wealth gap, as Black and Latino homeowners face higher loan costs, receive less from property sales, and struggle to access home equity loans.

“Homeownership is one of the most powerful means of building wealth available to American families,” she stated. “Millions depend on the equity from their homes to finance their children’s education, launch businesses, retire comfortably, and generate wealth for future generations. We also know that for many generations, people of color have been obstructed from fully enjoying the advantages of homeownership.”