DOJ says Rocket Mortgage is liable for biased appraisal

The Department of Justice is asking a Colorado federal court to reject Rocket Mortgage's plea to throw out a suit accusing it of appraisal bias.

In a filing, the DOJ lays out a number of arguments to cement the standing of its litigation pegged against the Detroit, Michigan-based lender. The suit claims Rocket relied on an allegedly biased appraisal, which resulted in a borrower having their refinance application tossed.

One of the most notable arguments from the DOJ is its assertion that mortgage lenders do hold accountability for relying on third-party appraisals that are biased.

"Contrary to Rocket's contention, it cannot escape liability merely because another party was the one who initially acted with discriminatory intent," the federal agency wrote in a filing Jan.9. 

The DOJ noted that while mortgage lenders cannot "influence an appraiser," a rule which is codified in the Truth in Lending (TILA) regulation, companies do have the right to request a second appraisal, or ask an appraiser to consider other factors in appraising a property, which Rocket did not do. Law360 first covered the most recent DOJ filing.

"The appraisal independence statute did not require Rocket to use a discriminatory appraisal," the DOJ added. "As alleged, Rocket could have avoided relying on the discriminatory appraisal by ordering another appraisal from a different appraiser, or by requesting that [Maksym] Mykhailyna consider more appropriate comparable sales."

Rocket's interpretation on the matter is entirely different.

In a statement, the mortgage lender, which is also suing the Department of Housing and Urban Development for these claims, said it "categorically disagrees with the government's response" to its motion to dismiss.

"The facts are clear – as a lender, Rocket Mortgage must remain independent from the appraisal process," the mortgage lender wrote. "Rocket Mortgage offered our client 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."

"This is exactly why Rocket Mortgage filed suit against the Department of Housing and Urban Development, to correct the conflicts between the government's regulations requiring appraiser independence and its enforcement actions seeking to hold lenders liable for the conduct of independent licensed appraisers," the megalender added in a written statement. HUD first filed a suit against Rocket in July 2024 accusing it, an appraisal management company and an appraiser of discriminating against a Black homeowner four years prior.

Four months later, the DOJ filed a separate suit accusing Rocket, AMC Solidifi and the appraiser of violating the Fair Housing Act. According to the DOJ litigation, Francesca Cheroutes had her Denver home undervalued in 2021 because of her race and Rocket Mortgage canceled her refinance application once she reported this alleged discrimination to the company.

Rocket retaliated with its own litigation filed in December 2024 against HUD, and asked for the DOJ's case to be dropped. 

The lender argued at the time that the only reason it was included in the case by the government entities was to bring "headlines to their claim."

"[The] filings highlight the conflict between HUD's regulations and the DOJ's enforcement positions," said Bill Emerson, president of Rocket Companies, in a statement one month prior. "We are looking forward to laying out all the facts of this case in court."