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LoanDepot says it is committed to fair lending and “best-in-class appraisal policies and practices” and agrees to settle a high-profile appraisal bias lawsuit filed by a Baltimore couple who claimed their home was undervalued by more than $250,000 because they are Black .
this 2022 Litigation The couple’s claims of “painting” their home, which included removing family photos and artwork and replacing them with photos borrowed from white friends, drew national attention when they reassessed the home, which was valued at $472,000. The U.S. dollar was raised to $750,000.
Department of Justice and Consumer Financial Protection Bureau weighing So did the Mortgage Bankers Association in this case.
While the settlement amount remains confidential, it requires LoanDepot to conduct an internal review of the assessment for signs of discrimination and outline More than a dozen policies When a borrower requests a Reconsideration of Value (ROV), the lender agrees to comply.
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Lead attorney John Lehrman, who represents the couple, Nathan Connolly and Shani Mott, told us New York Times He hopes other mortgage lenders will take note of the settlement and use it as a blueprint for their own policies.
“No one has done this before in terms of rethinking value,” Lehrman told reporters. era. “Nathan and Shani are eager to find best practices that others can follow. To their credit, loanDepot is willing to not just talk the talk, but walk the walk.”
In a statement provided to Inman, a spokesperson for loanDepot said the company Continue to deny allegations in the lawsuit and “no admission of fault.”
But loanDepot is proud of the “commitments” outlined in the settlement, which “will formalize many of our existing practices and provide additional resources to assist our clients with the evaluation and review process.”
The settlement does not resolve the couple’s claims against the original appraiser, Shane Lanham, and his company, 20/20 Valuations LLC, nor does it resolve the defamation issue Counterclaim Lanham’s attorney filed a lawsuit against the homeowner.
Lanham’s appraisal “was carried out in a professional manner by an experienced appraiser in accordance with the market conditions existing at the time” and his lawyers argued in his defense that it was “not related to discrimination”.
Lanham’s attorney noted that the second appraisal the couple obtained seven months later when they sought to refinance the home with another lender “relyed on Mr. Lanham’s home sale and 20/20 valuation which had not even occurred at that time.” ‘evaluate. “
The story is New York Times In asking for a jury trial, his lawyers claimed that ABC News defamed Lanham, exposed him to “public scorn, hatred, disdain, or ridicule,” harmed his business and caused “severe emotional distress, Mental anguish and personal humiliation”.
Previous GoFundMe page The appraiser was formed to help Lanham pay his legal fees, but he said he has no plans to settle the case.
“I want everyone to know that this does not affect my position as I still intend to take my case, including the defense of the allegations against me and the prosecution of the defamation suit, to court,” Lanham wrote in an update on Monday. Submit to trial.”
Lanham told Inman via email that he had no further comment.
In amicus curiae or “amicus curiaeThe Mortgage Bankers Association argued in a brief supporting LoanDepot that appraiser independence requirements and other legal responsibilities are designed to prevent lenders from influencing or participating in the appraisal process.
This argument was also made by LoanDepot but was challenged by the Consumer Financial Protection Bureau and the U.S. Department of Justice, the agencies responsible for interpreting and enforcing fair housing and lending laws such as the Fair Housing Act (FHA) and the Equal Credit Opportunity Act (ECOA)
“LoanDepot’s position—insisting that the independent judgment of appraisers, even when racially biased, is sacrosanct—would be a gross violation of federal civil rights laws, including the FHA and ECOA, and the regulations enacted to implement them,” he said. the agency said in a statement. Statement of Interests The lawsuit was filed in the U.S. District Court for the District of Maryland, where the case was filed.
Government lawyers insist that LoanDepot’s “novel arguments regarding evaluation independence are not supported by any case law.”
“Shanifah”
for Connolly and MottBoth are faculty members at Johns Hopkins University, and the lawsuit aims to help other alleged victims of assessment bias.
Shani Mott
But the settlement wasn’t filed until March 22, 10 days after Mott, 47, died of cancer, and she and Connolly ended up refinancing the house from another lender.
In addition to her husband of 19 years, Mott leaves behind three children ranging in age from 10 to 16, according to a report. obituary exist baltimore sun.
Nathan Connolly
connolly told era He and Mott’s three children called the terms of the settlement the “SHANI Act – Safe Homes and Neighborhoods Initiative.”
The settlement requires LoanDepot to “clearly communicate to applicants their right to request” a reconsideration of value (ROV) and to escalate requests alleging appraisal discrimination to the company’s Appraisal Department and Fair Lending Panel.
The settlement states that “loanDepot shall provide at least a second appraisal when the first appraisal is deemed to be deficient, including when Loan Depot discovers (indications of) bias or discrimination.”
For applicants who have already locked in a mortgage rate, loanDepot agrees to maintain the lock during the ROV process and will not charge ROV or second appraisal fees during the appeal process.
The settlement also stipulates that LandDepot staff and any appraisers hired by the company be trained on fair housing and fair lending requirements, and prohibits lenders from engaging with appraisals that show “undervaluation of homes owned by minority applicants or minority Model of Ethnic Community Housing” appraiser signs contract. ”.
In a landmark 2021 study, Freddie Mac researchers say they have confirmed an “assessment gap” between homeowners in predominantly Latino and Black neighborhoods and those in predominantly white Census Compared with other districts, these communities are more likely to have appraisal results that are lower than the contract price.
The Biden administration launched an interagency initiative on June 1, 2021, the 100th anniversary of the Tulsa Race Massacre, to combat bias in home appraisals as part of efforts to build Black wealth and close the racial wealth gap.
The Interagency Task Force on Property Appraisal and Equitable Valuation (PAVE) is coordinating efforts to promote fairness in the appraisal process, including preventing algorithmic bias in home appraisals and breaking down barriers to entry into the appraisal industry.
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