LoanDepot, Appraiser Sued After ‘Whitewashed’ Home’s Value Surges
A Black couple in Maryland have filed a lawsuit against a real estate appraiser and mortgage lender loanDepot alleging fair housing and civil rights violations after another appraiser valued their home for more than a quarter of a million dollars more when the couple removed any indication of their race from the home and had a white colleague present during the appraisal.
The plaintiffs are Dr. Nathan Connolly and Dr. Shani Mott, a married couple with three children who are both professors at Johns Hopkins University.
According to the complaint, the couple bought a four-bedroom, 3.5-bathroom home — 209 Churchwardens Road in Baltimore — for $450,000 in March 2017 with a 30-year mortgage at a fixed rate of 4.65 percent. The home is located in the city’s historic Homeland neighborhood, which in 2020 was nearly 78 percent White and nearly 10 percent Black and is 0.6 square miles.
“Dr. Connolly and Dr. Mott were shocked by this low appraisal,” states the complaint, which goes on to describe, “a long and well-documented history of devaluing Black homes.”
“The valuation was impossibly low given the characteristics of their neighborhood and their home,” the complaint continues.
In April 2020, the plaintiffs took out a $30,000 home equity loan and invested that money, as well as their savings, to improve the home. In May 2021, the plaintiffs applied to loanDepot to refinance their existing mortgage debt to “take advantage of historically low interest rates,” according to the complaint.
LoanDepot approved their application for a loan with 2.25 percent interest rate, provided that an appraisal supported the $550,000 estimated value of the home. LoanDepot’s loan officer, Christian Jorgensen, allegedly told the plaintiffs that he expected them to “be good” because the estimate was “pretty conservative.”
LoanDepot hired 20/20 Valuations, an appraisal company owned by Shane Lanham, to conduct the appraisal. 20/20 valuations and Lanham are also defendants in the case.
According to the complaint, in June 2021 when Lanham arrived at the Churchwardens Road home all five family members were present and Lanham’s “demeanor was indifferent and aloof.”
“Lanham did not smile or make eye contact with Plaintiffs and said little other than noting that the home had a tankless water heater,” the complaint said.
“Defendant Lanham’s demeanor at their home seemed significantly different to Dr. Mott than it was when she spoke to Defendant Lanham on the telephone to schedule the appraisal, which was prior to when he would have had occasion to see Dr. Connolly and Dr. Mott in person.”
Afterward, Lanham called the plaintiffs to ask if they paid fees to the Homeland Association, which enforces the neighborhood’s covenants, and they confirmed they did.
“All households within Homeland are required to pay such dues, so Defendant Lanham’s question betrayed skepticism that their home was actually located within Homeland,” the complaint said.
According to the complaint, Lanham appraised the home’s value at $472,000 and loanDepot denied the plaintiffs’ loan because of that valuation.
“Dr. Mott told Jorgensen that the appraisal was racially discriminatory,” the complaint states.
Jorgensen then allegedly told the plaintiffs they could write a letter to loanDepot explaining why they believed the appraisal was flawed, but gave them a deadline of less than 10 days to submit the letter.
“Dr. Connolly and Dr. Mott eventually learned that loanDepot’s policy would have afforded Plaintiffs the right to formally appeal the appraisal and sixty days to do so, but Jorgensen did not tell them this until 2022, by which point that time period had long since expired,” the complaint said.
“Nor did he provide any guidelines for drafting the letter or explain how loanDepot would use or consider it or in what circumstances loanDepot would order a new appraisal.”
According to the plaintiffs, they submitted the letter by Jorgensen’s deadline, even though Mott was dealing with medical issues that would eventually result in a diagnosis of stage 4 cancer in the adrenal gland.
“While the additional burden of having to prepare the letter was difficult for Plaintiffs, they nonetheless decided to make the sacrifices necessary to prepare the letter because they determined that it was important to stand up in the face of racial discrimination,” the complaint said.
Attorneys for the plaintiffs alleged that Jorgensen’s demeanor toward Connolly and Mott changed after they protested that the low appraisal was due to racial discrimination.
“Previously Jorgensen was friendly, responsive, and proactive in providing information related to Plaintiffs’ loan application,” the complaint said.
“But after that call, he became unhelpful and consistently acted to maintain loanDepot’s rejection of the loan application based on Defendant Lanham’s appraisal.
“Jorgensen also began to avoid Plaintiffs’ telephone calls and they were unable to speak to him directly for months. By that point loanDepot had long ago rejected their application and Plaintiffs had secured a loan with another lender.”
“Jorgensen’s behavior reflects loanDepot’s retaliation against Plaintiffs for exercising their fair housing rights,” they added.
In December 2021, Connolly and Mott receive a notice from the state’s Department of Assessments and Taxation that their home’s value stood at $622,000. That prompted them to apply for another refinance loan with Swift Home Loans, which partnered with Rocket Mortgage. The following month, Rocket Mortgage approved them for a loan, again pending appraisal, at a 3.23 percent interest rate, which they bought down to 2.75 percent.
Another appraiser, Daniel Dodd, conducted the second appraisal in January 2022. Before his visit the family “whitewashed” their home, removing family photographs and artwork and replacing them with photos borrowed from white friends and colleagues and art featuring white subjects. No one in the family was home during the second appraisal and instead a white colleague of the plaintiffs greeted Dodd.
“Plaintiffs felt embarrassment, humiliation, and anger that they had to carry out this experiment, and Dr. Mott, who was undergoing cancer treatment, suffered physical pain and severe exhaustion from the exertion of whitewashing the home in advance of the appraisal,” the complaint said.
Three days later, Dodd’s appraisal came in at $750,000 — $278,000 more and 59 percent higher than Lanham’s appraisal half a year earlier.
“Defendant Lanham’s dramatically lower valuation reflected his beliefs that a Black family did not genuinely belong in Homeland and could not be the owners of a higher valued home, and also that their home was less valuable because it was at the edge of an area with a predominantly Black population,” the complaint said.
“Lanham violated professional standards to devalue Plaintiffs’ home because of these racist beliefs. Defendant loanDepot relied on Lanham’s appraisal despite being informed that it was infected by discrimination and stopped answering or returning Plaintiffs calls once they challenged the appraisal on that basis. Defendants’ actions reflect intentional racial discrimination and retaliation against Plaintiffs for identifying those actions as discriminatory.”
According to the complaint, Lanham’s appraisal was “inconsistent with professional appraisal standards” in that he “improperly limited his search for comparable recently-sold properties to a very small portion of Homeland” north of a major road called Northern Parkway, rather than the entire neighborhood.
“Defendant Lanham thereby limited his search to about 16 percent of the total land area of Homeland,” the complaint said. “This excluded over 80 potential comps of the almost 100 available, leaving him to choose from only fifteen.”
Lanham ultimately chose three comps to value the plaintiffs’ home, one of which the plaintiffs allege was, unlike their home, a fixer-upper, and another that was not within the Homeland neighborhood at all. They allege Lanham ignored similarly-sized comps with much higher sales prices within blocks of their home, including two north of Northern Parkway.
By contrast, Dodd chose five comps from throughout all of Homeland, four of which were south of Northern Parkway and one of which was north of it.
The complaint also alleged that Lanham made “excessive downward adjustments to the homes he selected as comparables” and failed “to make appropriate upward adjustments based on the condition and features of the Churchwardens Home.”
The suit accuses the defendants of violating the Fair Housing Act, the Equal Credit Opportunity Act, the Civil Rights Act of 1866, and Maryland fair housing laws. It seeks compensatory and punitive damages.
In an emailed statement, a loanDepot spokesperson told Inman, “We strongly oppose bias in the home finance process and support the plans to combat appraisal bias and promote more sustainable, affordable housing for minority and low- to moderate-income families and communities put forth by the Interagency Task Force on Property Appraisal and Valuation Equity and by the Mortgage Bankers Association.
“While appraisals are performed independently by outside expert appraisal firms, all participants in the home finance process must work to find ways to contribute to eradicating bias.”
Lanham did not respond to a phone call and voicemail requesting comment.
Racial discrimination in appraisals has received increasing scrutiny in recent years due to well-publicized instances of home valuations rising after Black homeowners remove any trace of their race from homes, the Biden administration’s Interagency Task Force on Property Appraisal and Valuation Equity, and a recent study by the Federal Housing Finance Agency (FHFA) in which the agency examined millions of appraisal reports and found thousands of overt references to race, ethnicity and other protected classes, “indicating the continued presence of valuation bias.”
The Maryland lawsuit is similar to that of a Black couple in Marin County, California, who sued appraiser Janette Miller, her firm Miller & Perotti Real Estate Appraisals Inc. and appraisal management company AMC Links LLC, alleging fair housing and civil rights violations after another appraiser valued the couple’s home for nearly half a million dollars more after the couple removed any indication of their race and had a white friend pose as the owner of the house.
That suit is in its discovery phase and a settlement conference is scheduled in the case for September 14, according to Liza Cristol-Deman, an attorney for the plaintiffs and a partner at Brancart & Brancart, a San Francisco Bay Area law firm that represents plaintiffs in state and federal housing discrimination cases.
The judge overseeing the case recently dismissed the plaintiffs’ claim for negligent misrepresentation, but their claims against all defendants for violation of the Fair Housing Act, Civil Rights Act of 1866, California Fair Employment and Housing Act, California’s Unruh Civil Rights Act, and California’s unfair competition law remain, according to Cristol-Deman.
Regarding the Maryland case, she told Inman, “We are aware of that case and support Dr. Connolly’s efforts (and the efforts of others) to remedy racial discrimination in real estate appraisals.”
An attorney for Miller, Peter Catalanotti, did not respond to a request for comment.