Rocket pushes back on enforcement lawsuit as feds persist

Rocket Mortgage is fighting a homeowner's attempt to latch onto a federal enforcement lawsuit the Trump administration is seemingly intent on continuing. 

The lender last week filed a motion to dismiss Francesca Cheroutes' intervenor complaint, which incorporates arguments the Department of Justice made in an October filing. Prosecutors say Rocket, a Colorado-based appraiser and an appraisal management company are alleged to have violated the Fair Housing Act by making a purported discriminatory valuation on Cheroutes' property in 2021.

Rocket's latest motion emphasized defenses it raised in a previous filing, mainly that it has no statutory authority to correct an allegedly discriminatory appraisal. Government lawyers have pushed back, arguing Rocket could have ordered a new appraisal or requested the appraiser use more appropriate comparable sales. 

The mortgage giant in December sued the Department of Housing and Urban Development for its mixed messaging regarding a lender's role in dealing with disputed appraisals. If there was any discrimination in Cheroutes' appraisal, it would have come from the independent appraiser, not Rocket, the company reiterated. 

"Despite this, the DOJ dragged Rocket Mortgage into a lawsuit based on the assertion that the company 'had the authority to correct the [allegedly] discriminatory appraisal, or cause it to be corrected, but failed to do so,'" said Rocket Mortgage in a statement Monday. "This is 100% false."

Rocket further rejected Cheroutes' discrimination claims by stating there is no factual basis for presuming it or any of its team members "did anything 'because of' race."

The DOJ and attorneys for other parties didn't respond to requests for comment Tuesday. 

Counsel for Rocket also cited a March HUD Mortgagee Letter rescinding Biden-era policies aimed at addressing purported appraisal bias. HUD said it made that move to align with the Trump administration's push to "reduce unnecessary regulatory burden."

The new administration has dropped enforcement actions against mortgage lenders via the Consumer Financial Protection Bureau, including a complaint against Rocket over a purported kickback scheme. Prosecutors however haven't shown similar signs of pulling back from the appraisal case. Attorneys with the DOJ's Civil Rights Division last month asked a judge to reject Rocket and other defendants' attempt to delay discovery. 

"The United States has a strong interest in proceeding expeditiously with this suit, and staying discovery would prejudice this interest," federal prosecutors wrote in a March 6 filing. 

HUD also pushed back on the separate Rocket lawsuit, in which the lender accuses the feds of violating the Administrative Procedure Act. Government attorneys characterized Rocket's separate complaint as an attempt to forestall the enforcement action. 

Solidifi, the appraisal management company named in the appraisal suit, also filed a motion last Friday to dismiss Cheroutes' suit, stating it is prohibited from attempting to influence an appraisal. 

Maksym Mykhailyna, the appraiser behind the evaluation in question, responded to Cheroutes' complaint last week with a blanket denial of the accusations. 

In January, Colorado regulators ordered Mykhailyna to surrender his license and fined him $97,500 after a probe found he retained the services of unlicensed individuals outside the U.S. to complete his assignments. He also aided and abetted the submission of appraisals with signatures of professionals who didn't author the evaluations, according to regulators. 

State officials mentioned the federal appraisal case, but it's unclear if the violations they uncovered were directly related to Cheroutes' case. An attorney for Mykhailyna didn't return a request for comment Tuesday. 

Rocket in January enjoyed a court victory in a separate, decade-old appraisal case in which the lender was previously found guilty of interfering with the appraisal process. A federal appeals court decertified a lower court's class certification and reversed $10.5 million in granted damages. Class members have since asked the circuit court to reconsider its decision.