Settlement in Landmark Appraisal Discrimination Case

By: Hope Williams, Supervising Attorney, Legal Aid of North Carolina – Fair Housing Project

A settlement promising a significant impact on the home appraisal industry has been reached between the plaintiffs and one of the defendants, loanDepot.com, LLC, in a landmark appraisal discrimination case.

As reported in the Fair Housing Project of Legal Aid of North Carolina’s Fall 2022 Fair Housing Newsletter, in this case, Drs. Nathan Connolly and Shani Mott, a Black couple living in a mostly white historic neighborhood in Maryland, represented by Relman Colfax PLLC, filed suit alleging race discrimination and retaliation, after a 2021 appraisal conducted in connection with a residential refinance showed only a $25,000 increase in home value four years after the original purchase, in spite of renovations valued at almost double that amount and substantial increases in home values in the area, and failing to overturn the appraisal and/or have a new one conducted. The plaintiffs applied to loanDepot to refinance their mortgage and, according to the complaint, 20/20 Valuations conducted the appraisal that then led to the denial of the Plaintiffs’ refinancing application, based on the low home valuation. A later appraisal valued the home at $250,000 over their initial purchase price, after Drs. Connelly and Mott removed all evidence from the home that they were Black and had a white friend stand in for them, a practice called “whitewashing”.

Defendant loanDepot entered into a settlement agreement with Drs. Connelly and Mott on February 29, 2024. Pursuant to the settlement agreement, loanDepot, one of the ten largest residential lenders in the United States, will take the following actions:

• loanDepot will notify consumers of their right to request a Reconsideration of Value (ROV), will provide detailed information about the process, and will conduct ROVs at no charge and in a timely manner. A ROV is the process in which a home valuation that is believed to be inaccurate is reconsidered.
• Among other details, the ROV process will specify circumstances in which loanDepot will offer a second valuation of a home. If a consumer has a locked interest rate, that rate will be maintained during the ROV process.
• loanDepot will provide consumers with information about their right to file a complaint with the Consumer Finance Protection Bureau and U.S. Department of Housing and Urban Development as part of the ROV process if unfair lending practices or housing discrimination is suspected.
• loanDepot will conduct internal monitoring to detect potential discriminatory appraisals.
• loanDepot staff will be trained about fair housing and fair lending laws, the history of discrimination in the appraisal and residential lending industries, and ongoing indicia of discriminatory practices in these areas. Their staff will also be trained in the ROV processes identified in the settlement.
• loanDepot will conduct statistical analyses to track appraisal and loan application outcomes based on the protected class of the consumer.
• When contracting with appraisal management companies and appraisers, loanDepot will include terms requiring fair housing training for persons conducting appraisals. They will also require certification that appraisers have not been found to have engaged in discriminatory appraisal practices by a regulatory body or court of law, and that appraisers have not received multiple complaints alleging appraisal bias.

The plaintiffs also received an undisclosed amount in damages pursuant to the settlement agreement. For more information and to read the settlement agreement, please see the press release issued by Relman Colfax, PLLC, the firm representing Drs. Connelly and Mott in the case. The claims against the appraiser, Shane Lanham, and the appraisal company, 20/20 Valuations, LLC, are still pending. loanDepot did not admit any wrongdoing in connection with this matter.

This settlement follows the resolution of another high-profile appraisal bias lawsuit out of Marin County, California. That case, filed by Tenisha Tate-Austin, her husband Paul Austin, and the Fair Housing Advocates of Northern California, alleged that the Defendant appraiser used similar techniques and appraised the Austins’ home at nearly half a million dollars less than a later appraisal in which the homeowners removed evidence of their race from their home. That case settled in March 2023 for an undisclosed amount of damages. The appraiser in that case was also required to undergo fair housing training, including watching the powerful documentary Our America: Lowballed which chronicles the experiences of Ms. Tate-Austin and Mr. Tate, as well as other persons of color who underwent the devastating impacts of having their homes valued based not on the structure itself, but on the race of the homeowners.