Appraisals and ValuationsLegal

loanDepot settles appraisal bias lawsuit 

Company will pay an undisclosed amount to plaintiffs and make policy changes but has not admitted fault

loanDepot has settled a lawsuit filed by a Maryland couple accusing the firm of appraisal bias, ending a case that gained national attention two years ago. 

Court documents filed on March 22 show that the lender and plaintiffs Nathan Connolly and Shani Mott — the latter a scholar of Black studies at Johns Hopkins University who died March 12 in Baltimore of adrenal cancer — agreed with a voluntary dismissal with prejudice.

California-based loanDepot will pay an undisclosed amount and commit to improving its mortgage appraisal practices. But the company hasn’t admitted any fault.  

In a suit filed in August 2022, the Maryland couple accused loanDepot and appraisal firm 20/20 Valuations — including company president Shane Lanham and the appraiser who performed the valuation — of racial bias after their home was appraised at a far lower value than it was a few months later when they removed indications that a Black family lived there. 

They conducted a “whitewashing” experiment, replacing family photos with pictures of white friends and colleagues. Instead of Connolly and Mott greeting the appraiser, a white colleague was present during the process. 

The home was appraised for $750,000, almost 60% higher than the initial appraisal performed. 

They claimed loanDepot “discriminated and retaliated against them by failing to overturn” the first appraisal and/or order them a new appraisal, thereby violating several rules, including the Fair Housing Act and the Equal Credit Opportunity Act.

A spokesperson for loanDepot told HousingWire that the company “strongly opposes bias in the home finance process.”

“While we continue to deny the specific allegations in this lawsuit and have made no admission of fault, we’re proud of the commitments announced today, which will formalize many of our existing practices and provide additional resources to help our customers in the appraisal and review process,” the spokesperson wrote in an emailed response.  

The attorney for the plaintiffs did not immediately responded to a request for comments.

The settlement requires loanDepot to implement enhancements to its mortgage appraisal policies and procedures within 120 days. 

The changes include communicating to applicants that they have the right to request a reconsideration of value (ROV); explaining why an ROV is denied or the valuation is unchanged; and training its credit, valuation and customer service staff on the topic. 

The document states that loanDepot “should not utilize appraisers who have previously been found to have discriminated in an appraisal by a regulatory body of court of law.” 

The settlement agreement does not resolve or release any claims against 20/20 Valuations and Lanham.  

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