Rocket Mortgage Turns the Table on HUD

As previously reported, this summer the U.S. Department of Housing and Urban Development (HUD) filed a housing discrimination charge under the Fair Housing Act against an appraisal company, individual appraiser, appraisal management company and lender based on an asserted biased appraisal and denial of a mortgage refinance loan application based on the appraisal. The lender, Rocket Mortgage, has now filed a complaint against HUD in the U.S. District Court for the District of Colorado focusing on an issue of concern for mortgage lenders—how to address the recent government focus on viewing lenders as being responsible for policing appraisers regarding appraisal bias and yet comply with pre-existing government appraiser independence requirements that limit the extent to which a lender can interact with appraisers. 

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As Rocket Mortgage observes in its compliant, the competing factors put “Rocket Mortgage between the proverbial “rock and a hard place.” If it takes action with an appraiser regarding an allegedly discriminatory appraisal, then it faces the prospect of a government enforcement action or private lawsuit alleging violations of statutory appraiser independence requirements. But if it complies with those independence requirements by not taking action to “directly or indirectly” attempt to influence the “independent judgment” of a third-party appraiser, then it faces the prospect of government enforcement actions and private lawsuits for alleged violations of the FHA. This reality of the government’s inconsistent and conflicting approach requires judicial intervention.”

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Focusing on the lack of guidance from HUD, or other government agencies, regarding the competing factors, Rocket Mortgage also states that “[w]hen confronted with the problem of irreconcilably competing federal obligations, HUD has simply ducked the problem, instead expecting mortgage lenders to solve for themselves the paradox of intervening to ‘correct” appraisers’ actions while following appraiser independence rules. Worse still, it has avoided public scrutiny over that tension by failing to provide notice of, and an opportunity to comment on, its new policy of seeking to hold lenders responsible for the actions of independent appraisers under the FHA.”

Rocket Mortgage requests a declaratory judgment that (1) it is not liable as a lender under the Fair Housing Act for an appraisal by an independent, third-party appraiser, and (2) the Truth in Lending Act’s appraiser independence requirements precludes any requirement for a lender to “instruct” or “induce” an appraiser to address or correct a valuation for issues implicating the Fair Housing Act. Rocket Mortgage also asserts that HUD’s new policy seeking to hold mortgage lenders responsible for alleged bias or discrimination by an independent, third-party appraiser could not be implemented without HUD following the notice and comment requirements under the Administrative Procedure Act. Rocket Mortgage requests that the court issue an order vacating HUD’s policy of holding mortgage lenders responsible for failing to correct or remediate perceived or alleged appraiser bias or discrimination in an appraisal.