Rocket Mortgage Sues HUD, Moves To Dismiss DOJ Lawsuit
By KIMBERLEY HAAS
Conflicts between regulations requiring appraiser independence and recent enforcement actions are the basis of a lawsuit filed in federal district court.
Lawyers for Rocket Mortgage are asking for declaratory and injunctive relief after officials at the U.S. Department of Housing and Urban Development charged the company with housing discrimination. HUD claims a biased appraisal led to Rocket terminating a refinance loan application for a Black woman in Denver.
Officials say that when the homeowner complained to Rocket, they would only proceed with her refinance loan application based on the appraised value she alleged was discriminatory. The woman was a customer of Rocket and appraisals of the property showed higher values in the past.
The home, a duplex, was appraised at $750,000 in 2018 and $860,000 in 2020. The appraisal in question was performed in 2021 and came in at $640,000, according to the charge.
Bill Emerson, president of Rocket Companies, said in an interview with The Mortgage Note that they want HUD to clarify how lenders are supposed to engage and get involved if there is potential discrimination. He pointed out that lenders are required to be at arm’s length during the appraisal process.
“We did what we could do in this particular transaction. We contacted a third-party appraisal management company. They hired a state-certified and licensed appraiser. That appraiser did the appraisal and the value came back the way that the value came back,” Emerson said.
Emerson said the client had every right to question the appraisal, but they couldn’t intervene in the process.
“What we’re allowed to do by law is to give her the opportunity for a value reconsideration which allows her to provide to the appraiser additional comps or other things that might be able to address the questions she had about the appraisal, which we offered her twice and she chose not to take,” Emerson said.
Emerson said all members of the lending industry can benefit from clarification on the HUD regulations.
“We’re not the only ones who have had to deal with this. There have been other cases and other companies have settled these cases. That’s not how we are, that’s not what we do,” Emerson said. “We simply can’t stand by idly and let our reputation be destroyed. We have to ask for the clarity we’re seeking.”
Lawyers for Rocket have also moved to dismiss a lawsuit brought forth by officials at the U.S. Department of Justice based on the same set of facts.
Emerson said in a statement that it is unreasonable for DOJ officials to sue Rocket for the conduct of an independent appraiser.
“It’s clearly a government overreach and it’s clearly a ploy to continue to extract money from the lending community,” Emerson told The Mortgage Note.
According to the motion to dismiss, there are no allegations that Rocket hired the appraiser who performed the appraisal in question. There are also no allegations that Rocket directed or participated in any of the appraiser’s conduct.
Officials claim that Rocket did not have to rely on the appraisal in question and could have ordered another one from a different appraiser. The company could have also remedied the situation by having the appraiser “consider more appropriate comps and fix other errors in the subject appraisal.”
Lawyers for Rocket say that is not true.
“The government’s own appraisal-related requirements — requirements the government cites but conveniently ignores — prohibit any such conduct. Those requirements expressly (i) mandate that an appraisal be ‘based on’ the appraiser’s ‘independent judgment,’ and (ii) prohibit ‘direct and indirect attempts’ by lenders to cause that value to be ‘based on any factor other than [that] independent judgment,'” the motion to dismiss states.
Lawyers for Rocket also wrote that DOJ officials do not have any facts to support a claim that the lender discriminated against the homeowner because of her race. To survive the motion to dismiss, officials would have had to show in their initial complaint that Rocket was motivated by a discriminatory purpose, they said.
In a press release, leaders at Rocket said they have originated three home loans for the woman and her mortgage is currently being serviced by the company. They pointed out that Rocket has introduced several programs to bridge the racial homeownership gap.