Rocket continues fight for appraisal clarity from HUD

Rocket Mortgage just wants some clarity from the government on its appraisal rules.

The lender this week argued to keep its lawsuit against the Department of Housing and Urban Development afloat, a challenge stemming from feds' investigation of an allegedly biased appraisal from 2021. While HUD is pursuing an enforcement action against Rocket, the industry giant is challenging the rules behind the regulator's prosecution. 

Rocket's December suit against HUD targeted its updated guidance for lenders to "correct" appraisals by independent third parties when there's perceived or alleged bias. Such guidance opposes the Truth in Lending Act, the lender argues, which requires lenders to honor appraisers' independence.

"Absent immediate judicial review, Rocket Mortgage will continue to suffer the hardship of being forced to decide between violating HUD's policy or violating TILA," wrote attorneys for Rocket in a Tuesday filing. 

Aside from seeking judicial clarity on the rule, Rocket is also challenging the guidance via an Administrative Procedure Act claim. HUD purportedly did not seek public input on its appraisal update, failing to fulfill an APA notice-and-comment requirement. 

Rocket's pleas come in response to HUD's motion to dismiss the lawsuit last month. The regulator suggested to a Colorado federal court that the complaint was the lender's attempt to forestall the separate enforcement prosecution. That case remains pending and also names an appraiser and appraisal management company as defendants. 

In that separate litigation, Rocket cited a HUD mortgagee letter by new Secretary Scott Turner rescinding Biden-era policies aimed at addressing alleged appraisal discrimination. While Turner has championed deregulatory efforts, HUD and the Department of Justice so far appear intent on pursuing the appraisal enforcement on Rocket. 

Representatives for HUD and Rocket didn't respond to requests for comment Wednesday. In a statement last week, Rocket slammed the DOJ's enforcement lawsuit and rejected accusations of discrimination.

Counsel for Rocket this week suggested HUD's uncertain guidance imposes additional burdens on mortgage lenders. The department's lawsuit against Rocket and appraisal firms is the most prominent, if not the sole appraisal challenge feds have taken to a lender in federal court in recent years.

The government targeted Rocket in a separate case last year, when the Consumer Financial Protection Bureau accused it and a brokerage of operating a kickback scheme. The bureau under Trump-appointed acting director Russell Vought however quickly dismissed that lawsuit and other prosecutions against mortgage lenders.