LoanDepot Appraisal Discrimination Settlement
Connolly and Mott v. Lanham, 20/20 Valuations, and loanDepot.com, U.S. District Court, Maryland. This is one of the appraisal discrimination cases that has received significant attention – among appraisers, the media and government agencies. A Black couple in Baltimore – Dr. Connolly and Dr. Mott, both university professors – filed suit in August 2022 alleging racial discrimination against loanDepot.com and the appraiser it engaged to appraise their home for a refinance. They alleged that the appraiser had taken into account their race in his valuation of their home in violation of the federal Fair Housing Act and other laws prohibiting discrimination. The defendant appraiser valued their home at $472,000; a second appraiser later valued it at $750,000 after the couple “whitewashed” the residence and had a white friend stand-in for them.
Significant developments have occurred in the case.
Dr. Shani Mott’s passing. As the New York Times reported today, Dr. Shani Mott passed away on March 12, four days before her 48th birthday after a battle with cancer. The Times reported that Dr. Mott had entered Hospice care in January, and that just two weeks before passing away, she had given an eight-hour deposition in the case, while sitting in a wheelchair and breathing from an oxygen tank. Whatever observers may think about the claims or appraisals in the case, that Dr. Mott would participate in a deposition as she neared death, I think, speaks to a strong, genuine personal belief by the couple in the merit of their claims.
The personal conviction she showed in her claims is something I’ve observed as a defense attorney in other appraisal discrimination cases – as a general matter, people who bring appraisal discrimination claims sincerely believe they’ve been discriminated against and harmed. Even though appraisers largely believe that such discrimination does not exist to the extent portrayed by federal regulators (the PAVE Tax Force) and though I personally believe the individual appraisers I’ve represented have not engaged in intentional discrimination, there is still real work to done – to win over of the confidence of both borrowers and regulators.
Settlement with loanDepot.com. The second development in the case is that on March 22, 2024, the attorneys for Drs. Connolly and Mott and for loanDepot.com filed a settlement with the court. There is a monetary component – which is confidential. More significantly, loanDepot.com agreed to an extensive revamping of: (a) its reconsideration of value practices; (b) fair housing/non-discrimination training requirements; (c) statistical tracking of appraisal outcomes; and (d) training and contractual requirements for AMCs and appraisers.
There are key takeaways for other lenders and AMCs to learn from the settlement agreement. I’ll discuss those takeaways in a future post. For now, you’ll find a full copy of the settlement agreement here: Connolly-Mott-loanDepot.com Settlement Agreement. It’s a good map for some of the policies, practices and actions that I’ve been helping lenders and AMCs with in regard to fair housing and appraisal bias issues.
The settlement does not include the defendant appraiser. That part of the case will proceed for now, with a trial scheduled later this year.
If you want to see a complaint and the actual appraisal reports in a different, recent case, click here.
- LoanDepot Appraisal Discrimination Settlement - March 28, 2024
- Should Property Data Collectors Be Licensed? - February 29, 2024
- VA Appraisal Request Form at Heart of AIR Violation Class Action - May 23, 2023
The appraisal reports included are not from this Connelly/Motts v Lanham case. Is there any means that we can get those to review?
In the ones that have been supplied, there seems to be little effort in completing due diligence and explanation of what was done and why. I’m glad I’m not having to defend such work. 3 comps and 1 active leave little ground to stand solidly on in court. One needs to ensure a proper sizable sampling pool to draw from and draw conclusion from. Use of only 3 sales can easily be painted as bias one way or the other – I guess it would depending on which outcome serves the plaintiff, higher or lower.
i quickly looked, but isn’t the ‘whitewashed’ report almost a year later than the others? if so, not a surprise it came in higher
Yes it was, however the increase would be well outside of the norm, nationally speaking. In both cases the sample pools seem small, but within a reasonable distance from the subject. Granted I’m not licensed in this area, but things seem potentially off with both. I really want to seem all reports used in this claim. I’m really interested in these cases and want to learn more.
Yeah I saw that too. I actually think the 4th appraisal used a couple superior comps in terms of quality of construction and 3 car garages. Appraisal 1 and 3 seemed decent. A lot of smaller GLA comps were used though in comparison to the subject. Either way, a 1 year difference in sales can mean a lot especially during that time line. It’s a shame this actually went to court because a lot could have been explained. Some people are just sue happy though.
And just like that, any given appraisal can be out there for the whole world to see. No wonder there is so much confusion. The hybrid flex report should not be allowable, that is not an appraisal. First a note of condolence, this story is now rather sad.
Some administrative notes; Always apply a land size adjustment. Always apply a per year age adjustment even if nominal. Basement room counts require adjustments too. Use the bottom two free form grid lines for something meaningful. A large deck deserves more than small adjustments. Call a contractor, stay current on real world costs. Consider C line adjusts for notable quality of material differences. Include a hundred photos every time, use the 12 and 15 per page options. Use the flash in the utility rooms. The C rating is for the whole home, not individual components. See addenda and referral redirect statements, which points to boilerplate, an insufficient approach. Fill every single writable area completely. Include no less than a full page of unique detailed writing for each report. Include overviews of MLS research so reviewers and readers have a clear understanding of research methodology, so they can review the same data the appraiser did. Use the rich detail aerial color maps. Use a watermark on the license image. Try to fit all the sketch areas within a single page, always include decks, porches, shed, and label the driveway or parking situations, front yard, back yard, utility area, AC location, electric location, etc.
Appraisers should never post EO insurance documents in their reports, that is not a GSE requirement. It is the lender and/or amc’s duty to retain EO documentation. Reference you have insurance if you must, do not include the actual document in your reports.
Obviously the amc’s involved are of no consequence, the work quality has clearly declined under the amc industries watch. I’ll be there to help these lenders with a better work product, but only if they have an internal appraisal department, provide direct assignment with consistent upfront stated fees, and do not force me to deal with an amc or share my fee with them.
The appraiser E & O policy holder prohibits the inclusion of the E & O declarations page to individual appraisals. A copy of the appraiser E & O is on file with the client/AMC.
In compliance with Colorado HB 12-1110, the appraiser must disclose in the appraisal report the fee paid to the appraiser for a residential real property appraisal, if the appraiser was engaged by an appraisal management company to complete an appraisal assignment. The compensation fee for this appraisal is $_______.00.
I’m sorry if the borrower felt wronged – however my gut feelings are that she was led down that path. God Bless
The appraisal report attached has some serious issues. Some of which maybe software issues. There are no basement adjustments where there should have been and I know that Wintotal messes up my basement adjustments regularly. I always have to double check them to make sure they are correct. Looks like GLA is not bracketed. Just not a good report at all too many issues with this report.
Don’t forget these report are not those used in the Connelly v Lanham case. Those are for another case in Ohio. Peter was pointing out the overall issues is shotty appraisal work that leave more to the imagination than factual identification of the problem solving that is required in every appraisal assignment, of which was clearly missing the samples – but again, that was the point of sharing those. I do have concerned the appraiser’s signature is now left out there – though I highly doubt anyone will use the signatures of any of those report shown above.
Wintotal or Total? Try removing your primary form from your template via change to another primary. Save. Re open. Re load a fresh 1004. Then add your pre write back in, and save again. As the tech guy explained this to me, residual problems in field functions can carry over undetected, but they can cause recurring errors. I have one field which constantly erases itself and I have to check it every time.
Most people looking from the outside in have no clue how complicated the GSE’s imposition of MISMO & XML UAD requirements caused the specialized appraisal software to become. Using the software competently is a specialization to itself, equivalent to a two year associates degree or more to figure out all the details and use it intuitively. And the GSE’s think it’s a good idea to have us all learn a completely new format with updated forms. The learning curve takes years, it will take appraisers even longer to competently use new forms, than it took for the GSE tech staff to develop them. Modernization!
I would suggest to anyone that feels they have been racially discriminated against in any appraisal assignment, they need to complete no less that 5 assignments where ethnical and cultural “pieces” remain in place and another 5 appraisals with those same items removed. This would be a total of 10 assignments with the same scope of work and they all must be completed within days of each other to eliminate and changes in market data. It would be very interesting to see how the value ranges differ, or concur, what outliers exist and why. This would be a proper enough sampling pool to start to see if there are any issues with bias on a specific house and specific people involved. The only two variables would be the “appearance” of the subject house and the appraiser.
Yeah, that does not work though. Because three out of four licensed appraisers refuse mortgage lending work due to the amc companies presence, and only half of all appraisers complete mortgage lending work, the other quarter, only if an amc is not involved. Unlike previous times pre amc’s, where nearly all licensed appraisers were willing to complete GSE work and fit that into their workloads routinely. And these issues are lending related. One can not get pre qualified at five or ten different mortgage companies at once, to use their mortgage lending appraisers. Clearly the primary issue here is the continued use of appraisal management companies and how they drive appraisal quality down with their restrictive terms. Most appraisers hired to provide services, if not working for a GSE, will use the GP form not the 1004, and will not abide the same scope of work which an amc would have imposed on the first appraiser and appraisal in question. The whole reason half of the appraiser community refuses GSE work outright, is due to the restrictive scope of work and requirement to follow the every more restrictive rules of the various selling guides. And even if the appraiser accepted those terms, there would be no underwriter, lender, or amc side admin review which would quite likely affect the end work product before it was delivered to the person whom ordered the appraisal. Further highlighting the failure of the lending and amc industries ‘appraisal modernization’ retooling of the process where they lean too heavily on automation instead of simply ordering second appraisals and field reviews via the same lender like they used to do.
I’m not suggesting they do this through the lender. They hire appraiser’s to complete the work on GP forms with similar scopes of work to replicate the 1004 as much as possible. This would be expensive, but workable.
The form is not all that important, so that’s good clarification. Yet one could still not get around the fact that three out of four appraisers they may reach to ‘recreate’ the process, do not actually ever work for the same or any amc companies under similar terms and conditions of engagement.
Unless theoretically someone could convince an appraiser having already left the amc industry, to be willing to bid for the order, then accept restrictive half rate or less service fees pertaining to an independent engagement. The reduced service fees the amc’s provide are clearly having substantial influence into the process. The reduced fees, excessive oversight, unfair engagement terms, are why they refused amc service in the first place and would be therefore unfamiliar with the engagement and working conditions the original amc appraiser was subjected to. Must complete the report within 48 hours of inspection, must inspect within 24. They’d have to wait 30 to 60 days for payment.
Again; highlighting how the old model of the lender simply ordering direct assignment full fee origination appraisals, then following up with full fee second appraisals or full fee field review services, was a superior operational model which better protected the lender, the borrower, the appraisers, and also as I’m illustrating with this theoretical example, was guaranteed to utilize a lenders approved appraiser whom was already familiar with the process and would be engaging on basically equivalent terms as the origination appraiser.
You are making way harder than it is. You can get your hands on a letter of engagement. If you have than any Appraiser can do the job. They are not that hard. The borrower is the one hiring directly so they pay for it all and whatever the Appraiser asks. It’s not that hard.
Your position is the same work quality is delivered, regardless of substantial differences in engagement terms and fee?
Bagging, I’m sang engage a 10 appraisers to complete market valuations on the same house with a week of each other. Offer the same scope of work or as similar as one can get to the requirements on an 1004 form to the GP form. Pay the fee, whatever that fee is to engage 10 said appraisers. So no I’m not expecting each Appriaser to be paid the same, nor do I expect the quality to be the exact same. Just get ten appraiser to complete the task and see what the results are. I understand there will be differences but hopefully the differences in the reports quality and value aren’t that far off.
Is English your third language? Asking for a friend.
Yep
Those individuals who loudly shouted they required Obama phones and are now shouting for reparations also genuinely believe they have been targeted and harmed. The fact that the borrowers feel they were wronged does not support any factual evidence of same. Sorry. This is another sociopolitical contrived divisive plan to split America. And it’s bullshit.
In this case, we don’t know that yet. We have not been given privy to the information contained in the reports completed. We only have the complaint provided, nothing more, nothing less. While I honestly feel in the Connelly/Motts v Lanham case, Lanham will ultimately win, we have yet to see the report(s) completed and how each will or will not stand. If the work provided in this article are anything like those in this case, this will get ugly all the way around, from peers to users of said reports.
Thank you all for the great comments. Hopefully many more to come. Thank you to the article author for providing the intriguing content and heartfelt personal perspective. Everyone please remember the difference between administrative review and appraisal review. Nobody here is providing anything other than reflection on administrative review process. Only an appraiser engaged for a specific task with a specifically formed scope of work alongside an applicable state license can provide actual report content review service which can be relied upon by intended users, or anyone else for that matter. We’re back to the ‘duty of care’ argument. Appraisers whom expect report confidentiality and use time saving cost cutting methods may want to reconsider how far and wide any and every appraisal report may reach.
Fully agreed on that. Never know when and if your assignment, signature, E&O and license is put on blast. I strip everything from the E&O documents to be compliant with my E&O, but seeing it like this is scary.
“We’re back to the ‘duty of care’ argument. Appraisers whom expect report confidentiality and use time saving cost cutting methods may want to reconsider how far and wide any and every appraisal report may reach.”
I could not agree more. There are far to many areas where time savings can come and bit us all hard. Higher fees and less work. Once the new UAD reporting requirements kick in, there is going to be more required of the standard 1004 forms with said redesign. Good luck to us all.
I’m always extremely skeptical of these racial bias claims without the supporting appraisal reports.
Why is it not brought up at all that Nathan Connolly and Shani Mott are professors at Johns Hopkins University who teach about redlining and Africana studies. Connolly is the Herbert Baxter Adams Associate Professor of History, and Mott is an Africana studies instructor. When you are a hammer all you see are nails. Is it at all possible that professors who teach about appraisal bias every day might be biased themselves?
It was brought up that they are professors. That shouldn’t have any impact on what the appraiser does and the report quality. They will have thier day in court as does the appraiser. So hopefully the Appriaser did thier job correctly.
In the realm of real estate appraisal, the precision and defensibility of adjustments are paramount. It’s disconcerting to observe that none of the appraisals presented in this case exhibit any foundational support for their adjustments. The absence of scatterplots for linear regression analysis, pivot tables, correlograms, and boxplots is a glaring oversight, raising significant doubts about the validity of their conclusions. Such tools are critical for a nuanced analysis of sales data, enabling appraisers to make informed and defendable adjustments based on market conditions, property features, and other key factors.
At DataHub Solutions LLC, we’ve pioneered the ValuPro360 program, a comprehensive Excel-based solution designed for the modern appraiser. Our system leverages meticulously crafted worksheets to analyze sales data from single family homes. With a sturdy foundation in linear regression analysis through scatterplots and pivot tables, our program systematically derives adjustments for a wide range of factors including Gross Living Area (GLA), site size, bedroom count, bathroom count, garage parking availability, and the presence of amenities such as pools, solar panels, shops, barns, or accessory dwelling units.
ValuPro360 is engineered to ensure that every adjustment is backed by solid data analysis, using modules to transfer and analyze data across multiple worksheets for comprehensive assessment. Our approach not only promotes transparency and accuracy in appraisal reports but also sets a new standard for the industry and helps eliminates bias, as the data analysis does the talking. You can’t argue with data.
I strongly advocate for a more methodological approach to appraisal adjustments, one that is rooted in rigorous data analysis and empirical evidence. For those interested in exploring how to elevate their appraisal practices and avoid lawsuits like this, I invite you to visit our website at datahubsolutionsllc.com. Discover how ValuPro360 can transform your appraisal reports from mere estimates into well-supported analyses that stand up to scrutiny.
I”m pretty sure the appraisals in this case were debunked last year as being racially biased. If I remember correctly the original appraiser was African American. The original appraisal opinion of value was higher than a subsequent appraisal. I don’t remember anything about the quality but the whole case was bs. I could also be thinking about a different case but the concept remains.