District Court Declines to Dismiss Appraisal Discrimination Case

The U.S. District Court for the District of Maryland recently denied motions to dismiss a lawsuit alleging appraisal discrimination by a lender and appraiser, allowing the case to move forward, including the appraiser’s counterclaim against the homeowners for defamation.  

The plaintiffs, who are Black homeowners living in a majority white neighborhood in Baltimore, allege that the appraiser undervalued their home because of their race and that the lender relied on this discriminatory value in denying the homeowners’ refinancing application despite being informed by the homeowners that they believed it to be discriminatory.  In support of their claims, the homeowners allege that the appraiser improperly relied on comparable sales disproportionately located in majority-Black census blocks; the homeowners further allege that they obtained a second appraisal after “whitewashing” their home, which resulted in a 60% higher valuation than the first appraisal.  The homeowners also allege that the lender failed to properly inform them of their right to appeal the appraisal and then became unresponsive after they raised their complaints of discrimination.  The homeowners sued the lender and appraiser for violations of the Fair Housing Act, ECOA, the Civil Rights Act, and Maryland’s fair housing statute.

The appraiser and lender each filed a motion to dismiss the claims against them, asserting that the homeowners failed to show sufficient evidence of discrimination.  The court held that the homeowners pled allegations that plausibly suggest the appraiser and lender discriminated against them on the basis of race, which is sufficient to survive dismissal on the homeowners’ federal claims.  The court dismissed the homeowners’ state law claim, however, on the basis that the homeowners did not exhaust their administrative remedies before bringing the claim, as required under the state statute. The court also dismissed one of the homeowners’ three Fair Housing Act claims, which the court found was brought under a provision of the statute that only applies to actions associated with the sale or rental of a dwelling, not refinancing transactions.

The court also denied the homeowners’ motion to dismiss a counterclaim filed by the appraiser in which he alleged defamation and false light invasion of privacy stemming from interviews the homeowners conducted with major news outlets in which they accused the appraiser of engaging in racial discrimination.  In his counterclaim, the appraiser alleges that these accusations were false and that the homeowners knew of their falsity because they were aware of lower-priced home sales and market conditions supporting the lower value, such as that the home next door sold for $7,000 less than the allegedly discriminatory value shortly after their refinancing application was denied.

WBK previously reported that the CFPB and DOJ filed a joint statement of interest in this case.