After 4 years of heightened focus on the issue of appraisal discrimination, HUD has issued its first Charge of Discrimination in relation to one of the 200+ appraisal-related complaints HUD has received from consumers. The legal significance of a Charge of Discrimination is that it means HUD has determined after investigating that reasonable cause exists to conclude that discrimination has occurred in violation of the Fair Housing Act.
The underlying complaint was filed in April 2021 with a state agency by a borrower in Denver; HUD took over handling the investigation in June 2021. The borrower, who is Black and lives in a predominantly White area, alleges that the valuation of her duplex was low based on her race. HUD’s Charge of Discrimination names the appraiser, an AMC and Rocket Mortgage as respondents.
This is a new chapter for HUD, marking its first Charge of Discrimination relating to an appraisal in, at least, the last decade. The next step in the process is that any of the parties may choose to have the case litigated in federal court – if none of the parties makes that election, the matter would be decided before an administrative law judge at HUD. Each party has 20 days after receipt of notice in which to make the election.
Some of the alleged indicia of discrimination described in the Charge include: the appraiser’s use of comparables from areas of higher Black population when the appraiser allegedly used comparables from more White areas in other appraisals of nearby properties; valuing the property substantially lower than other appraisers in earlier appraisals; making unsubstantiated adjustments; and “incorrectly associat[ing] the Subject Property … with a local school that had a higher concentration of Black students.”
For lenders, it’s important to note that a separate legal allegation in the Charge alleges that Rocket Mortgage violated the Fair Housing Act’s prohibitions against retaliation for reporting a discriminatory housing practice (42 U.S.C. § 3617). This legal allegation stems from Rocket Mortgage’s alleged failure to appropriately handle the borrower’s concerns about the appraisal and its denial of her loan. Such alleged retaliation can create liability even if the underlying appraisal is not found to be discriminatory.
A PDF of the Charge of Discrimination and materials from other recent appraisal discrimination cases are available here: https://www.valuationlegal.com/bias/.
