DOJ, CFPB File Statement of Interest in Appraisal Discrimination Suit

The Department of Justice (DOJ) and the Consumer Financial Protection Bureau (CFPB) recently filed a statement of interest clarifying the responsibilities of lenders under the Fair Housing Act and the Equal Credit Opportunity Act (ECOA).  The statement of interest was filed in a lawsuit currently pending before the U.S. District Court for the District of Maryland alleging that an appraiser and lender violated the Fair Housing Act and ECOA by lowering the valuation of a home based on the homeowner’s race and by denying a mortgage refinancing application based on that appraisal.

According to the homeowners, an initial appraiser significantly undervalued their Baltimore home at $472,000 because of their race.  The homeowners further allege that the lender denied their refinance application based on this discriminatory appraisal despite being informed by the homeowners that they believed it to be discriminatory.  When the homeowners sought a second valuation from a different appraiser, the appraisal resulted in a valuation of $750,000.  The homeowners maintain that the second valuation was higher because they had replaced their family photos with photos of white friends and enlisted a white colleague to pose as the homeowner.

After the defendants filed motions to dismiss the case, the DOJ and CFPB filed their statement of interest addressing three legal principles.  First, the statement describes the appropriate pleading standard for disparate treatment claims under the Fair Housing Act and ECOA: according to the DOJ and CFPB, plaintiffs asserting disparate treatment claims need only plead factual allegations of discriminatory intent to survive dismissal.  Second, the statement asserts that a lender violates the Fair Housing Act and ECOA by relying on an appraisal that it knows or should know to be discriminatory, and that appraiser independence requirements are designed to comply with these anti-discrimination laws.  And third, the statement argues that a violation of Section 2617 of the Fair Housing Act, which prohibits retaliation, does not require an underlying violation of another provision of the Fair Housing Act.

The motions to dismiss are currently pending before the court.