Feds Sue Rocket for Race-Based Appraisal Bias. Rocket Fights Back.

Retail lending powerhouse Rocket Mortgage is now suing the U.S. Justice Department. Rocket says the government wrongly dragged the company into a discrimination lawsuit.

It was a Colorado deed holder who first called out a lowball appraisal. The Justice Department claimed that Rocket derailed the refinance application after that calling-out.

But Rocket leadership denies having retaliated against the deed holder. Now, Rocket wants a court to dismiss the allegations of race-based appraisal bias. It’s a case with direct bearing on how a deed holder can tap into home equity by refinancing — regardless of who that deed holder is.

A Deed Holder Complains

The original complaint came to the Colorado Civil Rights Division in 2021. In it, a Black deed holder claimed that Rocket Mortgage hired an appraiser who discriminated against her. Then, she claims, Rocket dropped her refinancing application to get back at her for the complaint.

Rocket was using an appraisal firm named Solidifi US — which, in turn, hired the Maverick Appraisal Group to assess the Denver-area duplex. Maverick sent out an appraiser who determined the duplex was worth $640K.

The year before, the deed holder had the same duplex appraised through Rocket and its value came out to about $860,000. If anything, the appraisal should have come out higher than it did the prior year, because home prices had risen during that time. So the deed holder told Rocket Mortgage about the matter, and her sense that the lowball number had something to do with her race.

The Complaint Goes Federal

In the next stage, the U.S. Department of Housing and Urban Development (HUD) examined the deed holder’s complaint.

HUD noted some interesting aspects in the appraisal. A Black Lives Matter sign was visible in the appraisal images, and the deed holder could be seen in the home.

HUD found “reasonable cause” to believe the lowball appraisal offended the federal Fair Housing Act. To enforce the Act, HUD then referred the case to the Department of Justice.

In October 2024, the DOJ sued multiple defendants, alleging racial discrimination. The defendants were:

• Rocket Mortgage.

• The two subcontractors: Solidifi U.S. Inc., and the Maverick Appraisal Group.

• The individual appraiser who wrote up the lowball report. The DOJ claims that the appraiser based the report on sales figures from high-minority areas, rather than homes located much closer to the duplex.

All defendants face federal discrimination claims. And the DOJ further claims that Rocket Mortgage retaliated against the loan applicant.

What really ruffled feathers at Rocket Mortgage? The company is named first on the DOJ’s complaint. What’s more, Rocket’s name alone shows up in the title of the government’s media release.

Rocket says the move was meant to be eye-catching, to generate the highest possible degree of media attention for the DOJ’s work.

Rocket Fires Back

Rocket says the feds are missing several points. The company says it duly followed the law and offered the duplex owner a path to obtain a review. But the duplex owner wouldn’t take it, says Rocket.

“We offered a reconsideration of value twice,” says Rocket. But the client “refused it twice and ultimately decided not to proceed with the transaction.”

Moreover, says Rocket, this is not the company’s first time working with this applicant. Everything worked out fine with her three previous loans. Rocket says this fact shows that there was no prejudice on its part.

And Rocket says the feds need to deal with a contradiction in their own law if they want to hold companies to account for what an appraiser does. Rocket points to a 2010 rule under the federal Dodd-Frank Act that requires  appraisal independence from lenders. This means a lender can’t step in to second-guess the valuation an appraiser comes up with. So, Rocket says, the federal allegations of discrimination are misplaced. The problem here was the individual appraiser, Rocket insists.

Adoption of the Dodd-Frank Act in 2010 followed the housing crash. One of its rules mandates appraisal independence, so that lenders don’t put their thumbs on the scale when they evaluate the worth of a home.

By not intervening, Rocket leadership insists, it was doing the right thing under the law.

So, Rocket Mortgage has just sued the federal agencies, denying their allegations of racial bias. Rocket wants a court to do two key things:

• Dismiss the federal case against Rocket Mortgage.

• Order a fix to what the company says are inconsistencies in the law. Lending companies are not allowed to modify a contractor’s appraisal. So, Rocket insists, they cannot be liable for a bad one.

Bill Emerson, Rocket’s president, says unfair appraisals should not be allowed to happen. Anyone who can prevent them, should. But Emerson says going after Rocket is unreasonable.

At issue, according to Rocket, is an appraisal report from an independent professional, who is licensed to work in Colorado. Rocket has made clear its opinion that it was dragged into a lawsuit based on a notion that it could fix the lowball appraisal, but wouldn’t.  

What’s the Big Picture?

What happens next will unfold just as agencies and lenders prepare to deal with the changes that a second Trump administration will bring. So, will the handover of presidential authority impact current policies against appraisal bias?

First, let’s focus out. Let’s keep the bigger picture in mind. It was 20 years ago that Black homeownership peaked in the United States. Half of Black households owned at that time. We’d think, over two decades, that the situation would have substantially improved. It hasn’t. Currently, the segment of Black households that hold their own deeds is below 45%.

Will fairness lose more ground in the next four years? Or will there be ways to turn this long trendline around?

Watch this space. We’ll keep our readers posted.