3 minute read
A Colorado federal judge has allowed an appraisal bias lawsuit against Rocket Mortgage to move forward, denying the company’s motion to dismiss.
The U.S. Department of Justice — following a move made by the U.S. Department of Housing and Urban Development (HUD) — filed the case in October 2024 against the lender, appraiser Maksym Mykhailyna and his company, Maverick Appraisal Group, as well as appraisal management company Solidifi U.S. Inc. Rocket later sued HUD, arguing the agency “unfairly” held it accountable.
DOJ alleges that the defendants undervalued a Black homeowner’s property based on her race in an appraisal made in 2021 in Denver. In addition, Rocket is accused of retaliating against the homeowner by canceling her refinance application when she reported the discrimination.
In a statement, a spokesperson for the lender wrote, “Despite the judge’s ruling, Rocket Mortgage remains steadfast that it did not discriminate in any way.”
U.S. Judge Gordon P. Gallagher ruled Friday that Rocket’s motion to dismiss failed to address key theories of liability. While the company argued it was barred by law from changing the appraisal, Gallagher said regulations permit lenders to obtain additional valuations of a borrower’s property.
Judge Gallagher stated, “Nowhere in its motions or replies does Rocket address its alleged ability to order a separate appraisal or explain its failure to do so even after receiving Cheroutes’s complaint about racial discrimination.”
The judge concludes that Rocket did not address plainly alleged theories of liability.
The judge also rejected Solidifi’s argument that Mykhailyna’s role as an independent contractor shielded the company, noting that federal law recognizes independent contractors can still be considered agents.
“Even though Colorado’s legal restrictions preserve appraiser discretion, they do not limit Solidifi’s control in a manner or to an extent relevant here. The applicable federal regulation is similar,” Gallagher said.
According to the DOJ, Mykhailyna relied on sales from predominantly Black neighborhoods farther from the subject property while ignoring closer comparable sales. His valuation came in more than $200,000 below a prior appraisal, despite Denver home prices rising 25% during that time. After the homeowner complained to Rocket Mortgage, the company canceled her refinance application, she alleges.
According to the Rocket spokesperson, the DOJ “dragged” the firm into a lawsuit based on the assertion that it had the authority to correct the allegedly discriminatory appraisal but failed to do so, which is “100% false” as a matter of law.
“It’s also important to note that Rocket Mortgage offered the homeowner a path to challenge the appraisal through a value reconsideration process, which complies with the law, but she declined to engage in that process on two separate occasions,” the spokesperson added. “Rocket Mortgage looks forward to explaining its position in court and fully expects to the vindicated in this case.”
