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Black couple says appraisal of their home was biased, settles lawsuit

A black couple who claimed an appraisal company undervalued their Baltimore home based on their race has settled a lawsuit against their mortgage lender, LoanDepot, and the company has agreed to a series of sweeping policy changes that could give Big relief for homeowners who claim racial bias in appraisals. future.

Under the settlement agreement, Nathan Connolly and his estate Shani Mott, died March 12In addition to the policy changes, which include providing a second evaluation immediately whenever there are signs of bias or discrimination, a payment of an undisclosed amount will be received.

Dr. Connolly and Dr. Mott, both faculty members at Johns Hopkins University, sued mortgage lender LoanDepot and Shane Lanham, an appraiser hired by the company’s contractors, in August 2022.

A year ago, the couple opened their home to Mr. Lanham, who is white, for appraisal, and he put the value of their four-bedroom home in the Baltimore Homes neighborhood at $472,000. …and had a white co-worker pose as the homeowner, an act known as “whitewashing,” and a second appraiser gave the home an estimated value of $750,000. The couple said the difference in value was nearly $300,000 higher because a second appraiser believed the home was worth the owner, who is white.

couple shared their stories with The New York TimesThe Justice Department filed a statement of interest in the case last March, and Rep. Maxine Waters, D-Calif., has made housing discrimination a priority and hopes to introduce a bill later this year to end housing discrimination. Racial bias in assessment.

Their attorneys said the settlement, which was accepted Monday in U.S. District Court in Maryland, resolves claims by Dr. Connolly and Dr. Mott against LoanDepot, which continues to deny any allegations of wrongdoing. It did not resolve their claims against the appraisal company, and Lanham denied the accusations of bias and countersued for defamation.

Reached by phone Monday, Lanham declined to comment on the pending litigation.

“LoanDepot strongly opposes bias in the home finance process,” LoanDepot spokesman Jonathan Fine said in an emailed statement. “While we continue to deny the specific allegations in this lawsuit and have not admitted wrongdoing, we are proud that the commitments announced today will enable Formalizing many of our existing practices and providing additional resources to assist our clients with the assessment and review process.”

Throughout the legal proceedings, Dr. Mott, who teaches Black Studies, has been battling stage 4 adrenal cancer. She died four days before her 48th birthday.

Dr. Connolly said he and his three children affectionately refer to the reconciliation guidelines as the “SHANI Act” – the Safe Homes and Neighborhoods Initiative.

The settlement could have significant ramifications: loanDepot is the sixth-largest mortgage lender in the United States, with offices in every state.

This is not the first lawsuit of its kind to allege racially biased home appraisals that require a settlement. But unlike other settlements that resulted in only monetary damages, this sparked company-wide policy changes that paved the way for other homeowners to challenge their appraisals. Feelings can be biased and can even recoup home equity that might otherwise have been wasted without recourse.

In addition to quickly providing a second appraisal if bias arises, loanDepot will clearly inform applicants of their right to request a review or adjustment of the appraisal, known as a Reconsideration of Value (ROV), and ensure that any allegations of appraisal bias are resolved in accordance with the settlement agreement. The issue has been escalated to LoanDepot’s Fair Lending Team.

Lenders also commit to locking in an applicant’s interest rate during the ROV period so that homeowners requesting a re-evaluation or reconsideration of value do not lose the mortgage rate they were committed to at the time of the initial appraisal. loanDepot will also overhaul its own loan rates, train staff on fair housing and fair lending laws and the history of discrimination in U.S. real estate, and pledge to sever ties with any appraisers found to have exhibited bias in their work.

John Lehrman, one of the attorneys representing Drs. Connolly and Mott, said he hoped the Loan Warehouse changes would serve as a blueprint for other mortgage companies to follow.

He said: “When it comes to rethinking value, no one has done this before. Nathan and Shani are very keen to find best practices that others can follow. To their credit, loanDepot is not only willing to talk the talk but also mean it.”

Dr. Mott, a literature and Africana studies scholar whose work focused on the intersection of race and popular culture, was determined to use his experience to push for change in the mortgage process, said Dr. Connolly, a history professor and expert. Redlining and the legacy of white supremacy in America.

Dr Connolly, 46, said she entered hospice care in January and used a wheelchair and an oxygen tank, but on March 1, less than two weeks before her death, she made an eight-year speech about the case. hours of testimony. The landmark Fair Housing Act, and how the history of property rights and the mortgage industry are inextricably linked to America’s racial wealth gap. Dr. Connolly said she took no painkillers throughout the day to keep her mind clear. .

“We come here as students of American history and think about systemic racism and injustice,” Dr. Connolly said in an interview. “We hope this will have a ripple effect throughout the industry, in that sense. “There is real hope for the future.” “Obviously, I’m very sad that Shani won’t be alive and healthy to see this happen and that this will be part of her legacy. But what a powerful legacy it is.” “

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