Amid a growing number of reports about Black homeowners’ homes being undervalued, one of the nation’s largest mortgage lenders has settled a 2022 lawsuit filed by a Black couple in Maryland who claimed racial bias in their home appraisal.
Although their mortgage lender, loanDepot, agreed to a host of sweeping policy changes after the settlement last week, the company continues to deny any allegations of “wrongdoings,” The New York Times reported.
The lawsuit obtained by Atlanta Black Star was filed by Nathan Connolly and Shani Mott. They alleged loanDepot and appraiser Shane Lanham discriminated against them by “dramatically undervaluing their home in an appraisal” based on race, and the location of the Baltimore home adjacent to a Black census block and located within an affluent, predominantly white neighborhood.
Lanham also denied the allegations.
According to the 2022 lawsuit, Lanham appraised their home “for only $472,000, over $75,000 below the loan officer’s ‘conservative’ estimate of value” and loanDepot denied their loan application “because of the low valuation.”
The Black couple then challenged the appraisal in a “detailed letter.” However, “loanDepot maintained its application denial and did not provide any substantive response” to their “communications about the discriminatory and flawed nature of the appraisal,” the lawsuit stated, adding that the company stop responding to their phone calls.
Following the removal of family photos from their home and having a white associate impersonate the homeowner, a practice referred to as “whitewashing,” the home appraised for $750,000 during the second appraisal, according to the lawsuit.
The couple attributed the nearly $300,000 increase in value to the second appraiser’s assumption that the homeowners were white.
The settlement included an undisclosed payment to Connolly and the estate of Mott, who died on March 12 after battling cancer, as reported by The New York Times. She taught Black studies at Johns Hopkins University.
In an email, Jonathan Fine, a spokesperson for loanDepot, told The New York Times, “loanDepot strongly opposes bias in the home finance process. While we continue to deny the specific allegations in this lawsuit and have made no admission of fault, we’re proud of the commitments announced today, which will formalize many of our existing practices and provide additional resources to help our customers in the appraisal and review process.”
As for policy changes, the mortgage lender will offer a second appraisal when there are signs of discrimination and bias in the process, according to reports. loanDepot will revamp staff training on fair housing and lending laws, history of real estate discrimination and will cut ties with biased appraisers.
In addition, loanDepot will promptly inform applicants about their right to request a Reconsideration of Value (R.O.V.), and escalate any bias allegations to their Fair Lending group. They also commit to keeping interest rates locked during R.O.V. periods to ensure fairness for homeowners.
The settlement comes as reports of low home appraisals for Black families have emerged in other states.
In an experiment, a real estate broker assessed the appraisal value of his expansive New York residence with and without signs of Black occupancy.
Jude Jean Paul Bernard, an Instagram financial coach, shared a video with his 38,000 followers illustrating the disparity. Despite a smaller neighboring house being appraised at $4.8 million, Bernard’s home was valued at $4.4 million in January 2022 when he left Black identifiers, such as artwork and family photos, visible.
Another incident happened in 2021, where a Black woman in Indiana said the value of her home jumped by more than $100,000 after she removed Black identifiers from her house after a third home appraisal.
“I get choked up even thinking about it now because I was so excited and so happy, and then I was so angry that I had to go through all of that just to be treated fairly,” Indianapolis homeowner Carlette Duffy told local station Fox29 at the time.
Duffy decided to refinance her home in a Black neighborhood near downtown Indianapolis and intended to use the equity to buy her grandparents’ nearby home, renovate it, and preserve it within the family.
