consumer financial protection bureau (CFPB) and US Department of Justice (DOJ) announced Monday that they filed a “statement of interest to explain the Fair Housing Act (FHA) and Equal Credit Opportunity Act (ECOA) applications of lenders who rely on discriminatory home appraisals.”
Thank you for reading this post, don't forget to subscribe!The statement of interest was filed in a lawsuit, Connolly, et al. V. Lanham, et al., which is currently pending in the US District Court for the District of Maryland.
The lawsuit alleges that with an appraiser 20/20 rating Reduced a home’s appraisal because the owners, Nathan Connolly and Shani Motta, were black — and they were also denied the owners’ mortgage refinance application loandepot Based on low appraisals, which violated the FHA and ECOA.
In its announcement of the filing, the CFPB said LoanDepot is “contesting the case, inter alia, by suggesting that it cannot be held liable for making lending decisions based on discriminatory evaluations because the alleged discrimination is committed by a third party.” was done by the -party appraiser.
“The statement of interest filed by the CFPB and DOJ suggests that, to the contrary, mortgage lenders may be liable under the FHA and ECOA for relying on discriminatory appraisals,” the CFPB said.
“The law is clear that mortgage lenders may not take into account race, sex, or any other prohibited basis when evaluating an applicant’s creditworthiness. This means that the lender may not rely on the evaluation if they knew, or knew Must have held that the assessment was discriminatory.
Statements of interest are amicus briefs filed by the government in civil cases as part of federal civil rights enforcement. In this case, the joint statement comes from an understanding that federal laws have been violated, said Kristen Clark, assistant attorney general for the Justice Department’s Civil Rights Division.
“The discriminatory home appraisals are illegal, perpetuate the racial wealth gap, and deprive communities of color of the benefits of homeownership,” Clark said in the DOJ announcement.
“When appraisers or lenders treat homebuyers or homeowners differently because of race, they violate federal law. The Justice Department calls appraisal bias, modern-day redlining, discriminatory loan pricing practices, and other forms of discrimination , working to ensure an open and fair housing market that can rear its ugly head at any stage of the home buying process.”
The lawsuit, filed in May 2021 against mortgage lender Lending Depot and appraisal company 20/20 Valuations, claims that Shane Lanham, president of the appraisal company, “dramatically undervalued” his home because of his race and the home’s close location. discriminated against the couple. for a black census block – despite the house being located within Homeland, an affluent, white neighborhood in Baltimore.
According to the lawsuit, the couple sought to refinance their existing mortgage in 2021 to take advantage of the historically low mortgage rate environment. The couple applied for a refinance loan loandepot and was initially approved with a 2.25% interest rate, with a “conservative” estimated value of the home at $550,000 pending a property appraisal.
However, the couple said in the lawsuit that they were “shocked” when they were informed by LoanDepo’s loan officer that the appraiser Lanham had valued their home at only $472,000. After evaluation, LoanDepo said it would not extend the loan.
The couple then filed suit against LoanDepo and 20/20 Valuations. The complaint alleges that Lanham “cherry-picked low-priced homes” as a comparison, while ignoring sales in nearby majority-white areas that had higher prices.
One in three computers with values ranging from $435,000 to $545,000 was located outside Homeland in a majority-black census block. According to the suit, a fourth comparable, which sold for $650,000, was not used in calculating the home’s value.
After being turned down by the loandepo, the couple “white-washed” their home, replacing family photos with white photographs of white friends and co-workers. Instead of Connolly and Mott’s evaluation, a white colleague was present during the process. (Connolly is professor of history at Johns Hopkins University and a recognized expert on redlining.)
The suit claims that the home was appraised at $750,000, nearly 60% higher than it was seven months ago, despite the home not having significant improvements or meaningful changes in price.
rocket hostage The couple were approved for a refinance in January 2022, in which they lowered their rate to 2.75%.
In January 2023, Lanham filed a counterclaim against the couple. “Laboring someone as ‘racist’ and falsely accusing someone of racism is one of the most harmful, hurtful and destructive attacks in today’s society,” he wrote in the lawsuit. Lanham said the label had a “devastating effect” on his reputation, business, livelihood and well-being.
In its counterclaim, Lanham listed technical arguments for providing the $475,000 assessment. Among them, Lanham said a neighborhood property was listed for sale at $500,000 and was reduced to $475,000 just 10 days after Lanham completed its appraisal. The house sold two months later for $465,000. He also argued that the second appraisal was done seven months later, did not include the home next door as comp, and relied on the sale of the home that had not yet occurred.
