On March 13, 2023, the CFPB and the DOJ filed a Statement of Interest in the United States District Court for the District of Maryland to help ensure appraisals used to make lending decisions are objective and non-discriminatory. This action is in relation to an alleged home appraisal bias in the case of Connolly & Mott v. Lanham et al.
In May 2021, a Black couple living in Baltimore sought to refinance their home to take advantage of the historically low interest rates. The couple alleges that 20/20 Valuations, a third party appraiser, undervalued their home by appraising it at only $472,000, which caused loanDepot.com, LLC to deny their application for a refinance loan. A different appraiser later valued the home at $750,000, prompting the couple to sue loanDepot, 20/20 Valuations and its owner under ECOA, the Fair Housing Act (FHA), and other federal and state civil rights laws. loanDepot moved to dismiss the case by suggesting that it can’t be held liable for making a lending decision based on a discriminatory appraisal because the alleged discrimination was committed by a third-party appraiser.
The Statement of Interest filed by the CFPB and the DOJ addresses three legal questions raised by loanDepot’s motion. The Statement of Interest argues that:
For claims of disparate treatment under FHA and ECOA, Plaintiffs need only plead facts that plausibly allege discriminatory intent;
Under FHA and ECOA, lenders can be held liable for relying upon discriminatory appraisals; and
Section 3617 does not require a “predicate violation” of the FHA.
Read the CFPB’s article here.
The Statement of Interest can be found here.