The Department of Justice on Monday intervened in a federal lawsuit alleging that an appraiser and a mortgage lender discriminated against a couple who are both Johns Hopkins University professors by significantly lowering the value of their Baltimore home and denying a loan because they are Black.
In response to a pending motion to dismiss the lawsuit by the mortgage lender, loanDepot, justice department civil rights attorneys filed a “statement of interest” in a federal district court in Maryland arguing that the case raised significant questions about appraisal racial bias, noting that President Joe Biden had identified the issue “as a priority for the federal government”.
The White House established an interagency taskforce led by Marcia Fudge, the Department of Housing and Urban Development secretary, in 2021 focused on rooting out disparities in home appraisals.
“The assertion by loanDepot that federal law prevented it from remedying or disregarding the allegedly discriminatory appraisal is patently false,” Department of Justice attorneys wrote.
Drs Nathan Connolly, a professor of history, and Shani Mott, an instructor in Africana studies, both at Johns Hopkins University, wanted to apply to refinance their mortgage and take advantage of historically low interest rates. They made renovations to their four-bedroom home in a predominantly white neighborhood in Baltimore.
They claimed in the lawsuit that the appraiser, Shane Lanham, of 20/20 Valuations, “dramatically” undervalued their Baltimore home at $472,000, and that loanDepot denied their loan application based on that valuation. Lanham countersued the couple for defamation in January arguing they falsely accused him of racism and that the accusation had a “devastating impact” on his reputation and business. The appraisal, he argued, “had nothing to do with discrimination” of Connolly and Mott’s race.
Connolly and Mott sought out a different lender, but this time they “whitewashed” their house and removed any signs that a Black family with three children lived there. They replaced family photos and children’s drawings with items from white friends. They brought a white colleague, a fellow Johns Hopkins professor, to stand in their place when the appraiser showed up.
The home was then valued at $750,000.
“We were clearly aware of appraisal discrimination,” Connolly told the New York Times. “But to be told in so many words that our presence and the life we’ve built in our home brings the property value down? It’s an absolute gut punch.”
Their discrimination case, just one of many throughout the US, offers a glimpse into the ways housing assessments are riddled with systemic racism, exacerbating inequities among homeowners seeking to determine their property’s worth. It exposes how homeowners of color are devalued compared with white homeowners depending on the neighborhoods where they reside, a stark reminder of the longstanding toll federal policies such as redlining had in dividing American cities.
A 2022 analysis of appraisal data from the Federal Housing Finance Agency showed that white homeowners were twice as likely to see their home values increase than owners of color.
Federal civil rights attorneys argued that Connolly and Mott needed to “only plausibly allege that defendants acted with discriminatory intent” to show that the appraiser and lender violated the Fair Housing Act and Equal Credit Opportunity Act.
What’s more, the Department of Justice argued that loanDepot could be held liable for “relying on an appraisal that it knows or should know to be discriminatory”. Connolly and Mott also did not have to show an underlying Fair Housing Act violation to make their racial discrimination claim.
“Discriminatory home appraisals are unlawful, perpetuate the racial wealth gap, and deny communities of color the benefits of homeownership,” Kristen Clarke, assistant attorney general of the Department of Justice’s civil rights division, said in a statement. “The Justice Department is working to ensure an open and fair housing market by taking on appraisal bias, modern-day redlining, discriminatory loan pricing practices, and other forms of discrimination that may rear their ugly head at any stage of the home-buying process.”
The justice department previously intervened in a separate housing appraisal discrimination case last January when it filed a “statement of interest” in the case of Paul Austin and Tenisha Tate-Austin, a Black couple in Marin City, California, who had “whitewashed” their property and had a white friend pose as the homeowner after a low initial appraisal.
In that case, the home value rose from $995,000 to $1.4m. That case ended in a settlement last Wednesday.
