The Department of Justice’s lawsuit against Rocket Mortgage reads like a damning indictment of corporate negligence. Accused of racial discrimination in home appraisals, Rocket Mortgage stands at the center of a scheme that allegedly manipulated property values based on the owner’s race, depriving Black homeowners like Francesca Cheroutes of their rightful wealth. But the repercussions extend beyond one woman’s home in Denver, shedding light on a corporate machine that profits off deeply rooted disparities in America’s housing system.
The Weight of Homeownership for Black Americans
Home equity serves as a critical pathway to wealth accumulation, especially for Black families, who rely more heavily on property ownership than other demographics. According to a Pew Research Center study, home equity constitutes approximately 63% of the average Black homeowner’s net worth, versus just 41% for White homeowners. The DOJ’s case emphasizes that practices undermining Black homeowners’ ability to build wealth strike at the core of financial stability and intergenerational wealth.
The Appraisal
In January 2021, Cheroutes sought to refinance her Denver duplex to secure a lower interest rate. At the time, Rocket Mortgage had recently appraised her property at $860,000. However, in this instance, they contracted Solidifi, who engaged appraiser Maksym Mykhailyna to reassess the property. The resulting valuation, completed in just one year, was shockingly reduced to $640,000, marking a $220,000 disparity with no rational explanation, according to the DOJ.
Cheroutes had recently invested in renovations, upgrading gutters, doors, kitchen countertops, and lighting—improvements that should have increased her property’s worth. However, these were omitted from the report, an omission the DOJ argues was deliberate and racially motivated.
Racial Bias in Appraisal Choices
According to DOJ filings, Mykhailyna’s approach was marred by overt bias. He disregarded comparable sales within Cheroutes’s predominantly White neighborhood, opting instead for distant properties in predominantly Black neighborhoods with lower property values. In doing so, Mykhailyna ignored six comparable sales within one mile, which boasted higher prices, to instead select undervalued properties from 2.5 miles away, across neighborhood and demographic divides.
One of Mykhailyna’s chosen comparables sat on East Colfax Avenue, a thoroughfare notorious for high crime rates and reduced property values. DOJ investigators argue that even a casual observer would recognize the impact this environment would have on property valuation. In a similar appraisal just a month prior for a White-owned property, Mykhailyna employed different standards, choosing higher-valued comparables from predominantly White areas to justify a more favorable valuation.
An Alarming Pattern of Errors
Beyond comparable choices, the DOJ notes a series of additional valuation discrepancies. Mykhailyna inexplicably excluded Cheroutes’s basement bedrooms from the valuation, a move that the DOJ alleges intentionally skewed the appraisal downward by as much as $320,000, based on comparable property values. These errors extended to fundamental elements, such as misidentifying the neighborhood’s school as Palmer Elementary, a school serving a higher percentage of Black students, while omitting the correct school, Steck Elementary, with significantly different demographics.
Rocket Mortgage’s Selective Blindness
When Cheroutes raised concerns with Rocket Mortgage, her pleas were met with bureaucratic indifference. Upon learning of her suspicion of racial bias, Rocket responded by canceling her loan application outright, refusing to entertain any investigation into her claim. A Rocket Mortgage representative, Matthew Watson, informed Cheroutes that the company could not address her concerns due to her discrimination claims, a response that DOJ investigators argue compounded the discrimination she had already endured.
The DOJ’s case argues that Rocket had ample opportunity to correct the appraisal or order a second, unbiased valuation. Yet, instead of conducting even a basic investigation, Rocket effectively silenced Cheroutes by threatening to cancel her refinancing options unless she accepted the under-valued appraisal.
Broader Implications
The emotional and financial toll on Cheroutes has been severe. Deprived of a refinancing opportunity that would have reduced her monthly mortgage payments and overall loan term, she ultimately resorted to a less favorable, variable-rate home equity line of credit, fearing that other lenders would repeat the discriminatory practices she had experienced with Rocket.
Cheroutes’s experience highlights the enduring legacy of discriminatory practices in real estate and mortgage lending, even in a modern era ostensibly committed to fairness. For the Black community, whose hard-won homeownership often represents a generational asset, discriminatory appraisal practices erode this wealth, reinforcing economic inequality.
Systemic Failures NecessitateSystemic Change
This case isn’t isolated. Housing market studies suggest that racial bias in appraisals is disturbingly common, with properties owned by Black families routinely appraised at lower values compared to White-owned homes in the same neighborhoods. Such patterns deny Black families equitable access to financial benefits, deepening wealth gaps along racial lines.
The DOJ’s lawsuit against Rocket Mortgage and its affiliates demands sweeping changes to end this discriminatory appraisal cycle. Until then, Cheroutes, along with countless others, remains vulnerable to the toxic legacy of a system unwilling to confront its biases.