(Bloomberg) -- Rocket Mortgage is pushing back against US accusations that it’s at fault for lowball appraisals by outside firms that allegedly discriminated against a Black borrower, contending that federal law bars lenders from trying to influence the valuations.
The nation’s largest retail mortgage lender is asking a federal court to fix “conflicting” regulatory mandates that require mortgage providers to use and oversee independent appraisers but keep hands off the results, Rocket Mortgage said Thursday in a statement.
The company, a unit of Detroit-based Rocket Cos., sued the US Department of Housing and Urban Development and asked the judge to rule that lenders aren’t liable for the actions of appraisal firms.
HUD in July alleged that Rocket Mortgage and several appraisal companies undervalued the property of a Denver-area homeowner because she was Black, according to the agency’s administrative action. The agency cited faulty data and “inexplicably large adjustments” that exceeded Rocket Mortgage’s own standards and were missed on review.
The US Department of Justice in October followed with its own discrimination suit against the companies, saying it wants to end appraisal bias that keeps “Black communities and other consumers of color from accessing credit and benefitting from homeownership.”
The HUD action is directed against an individual appraiser, not Rocket Mortgage, the company said in its statement. The DOJ “dragged” the lender into a lawsuit based on the assertion that the company had the power to correct the appraisal but failed to do so, according to the statement.
“This is 100% false. Rocket Mortgage had no ‘authority to correct’ the appraisal as a matter of law and the claims against the company should be immediately dismissed,” the firm said.
In its court filing, the lender said it’s caught in “conflicting and irreconcilable positions,” noting that the US previously took Rocket Mortgage and some of its rivals to court “for what the government perceived to be intrusions on appraiser independence.”
A representative for HUD said the agency doesn’t comment on ongoing litigation. The DOJ declined to comment. Rocket’s shares slipped as much as 2.7% in New York trading. The stock is down more than 6% this year.
The case is Rocket Mortgage LLC vs. United States Department of Housing and Urban Development, 1:24-cv-03368, US District Court for District of Colorado.
(Updates with response from DOJ in the last paragraph.)
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