Justice Department Sues Detroit-Based Rocket Mortgage, Alleging Discrimination Against Black Homeowner

Eminem and ex-President Obama in Detroit

The Department of Justice on Monday announced it is suing Dan Gilbert's Detroit-based Rocket Mortgage, alleging it retaliated against a Black homeowner by canceling her refinance application after she complained about a low-ball appraisal. The woman claimed the appraisal was based on racial discrimination.

When a mortgage firm low balls an appraisal, it lowers the value of the home and prevents the owner from getting the desired loan amount because lenders can only lend against the appraised value. 

"This lawsuit is part of our ongoing efforts to bring an end to appraisal bias which prevent Black communities and other consumers of color from accessing credit and benefitting from homeownership,” said Assistant Attorney General Kristen Clarke of the Justice Department’s Civil Rights Division, in a statement. “Appraisal bias exacerbates the racial wealth gap, and runs contrary to the principles of fairness, transparency and equity that we need in our housing market today."

Rocket Mortgage issued a statement, according to Benzinga, saying,"We look forward to exposing the government's massive overreach in this matter.” 

The suit alleges that the Denver homeowner applied for a mortgage refinance loan from Rocket Mortgage in January 2021. The company contracted with an appraisal management company, Solidifi US Inc., which retained Maksym Mykhailyna at Maverick Appraisal Group to actually appraise the home in the predmonately White neighorhood.

The suit alleges that Mykhailyna based his appraisal on sales from properties in further-away neighborhoods with larger Black populations instead of closer neighborhoods that were predominantly white.

Mykhailyna appraised the property at $640,000, which was $220,000 lower than an earlier appraisal, at a time of rising home values in the Denver area. The appraisal was also lower than the sales prices of all six comparable duplexes within a mile of the property, the lawsuit said. 

After the homeowner received the appraisal, she contacted Rocket Mortgage and explained why she believed it was discriminatory, the DOJ said.

In response, Rocket Mortgage cancelled her refinance application, the Justice Department said.

The homeowner filed a complaint with the Department of Housing and Urban Development (HUD), which conducted an investigation and concluded there was reasonable cause to find the defendants had violated the Fair Housing Act. It referred the matter to the Justice Department.

The suit names as defendants Rocket Mortgage, Solidifi US Inc. and Maksym Mykhailyna and the Maverick Appraisal Group.

“The complaint alleges racially discriminatory practices by a lender and an appraiser that harmed a homeowner. These discriminatory practices have gone on for too long in Denver,” said Acting U.S. Attorney Matt Kirsch for the District of Colorado in a statement.

Rocket Mortgage said in its statement:

"Under federal law, mortgage lenders are required to work at arm's length during the appraisal process, partnering with independent appraisal management companies who assign the work to state-licensed professional appraisers. The law’s intent is to determine the home’s value without any input or bias from the lender or any other party with interest in the transaction."

“It is clear the government isn't interested in their own rules, or facts, and are simply including us in this case to score headlines based on our strong brand and prominent position in the industry. We look forward to exposing the government's massive overreach in this matter.”