In a recent episode of the HousingWire Daily podcast, Editor in Chief Sarah Wheeler sits down with Bill Emerson, president of Rocket Companies, to discuss its recent lawsuit against the U.S. Department of Housing and Urban Development (HUD) and the principle of appraisal independence for lenders.
This conversation has been edited for length and clarity. To kick off, Wheeler and Emerson discuss the key motivating factor behind Rocket Companies’ lawsuit against HUD.
Emerson: When you take a look at the suit that was filed against us, we find it very interesting that the first line in the press release is “Rocket.” It’s not the appraiser or Solidifi, the third-party appraisal company.
Per the Dodd Frank Act, back in 2010, appraisal independence is the rule, so a lender cannot get involved in the determination of value as it relates to an appraisal. When HUD puts our name in the headline, it’s to find a big name so they can have this individual suit show up in the press. We did nothing wrong. We followed the rules; we followed the law.
Clarity must be brought to the industry. You can’t meander around and have a regulator decide when they’re going to enforce something. And appraisal independence here is crystal clear.
Wheeler: In your suit, you say this is a misuse of the Fair Housing Act. Can you explore and talk about the remedy that you gave to the homeowner?
Emerson: This was a three-time Rocket client. Why would we not want to help a three-time client? The appraisal came in lower than it did previously. We ordered this appraisal from a third party, who contracted the state-licensed appraiser. At the end of the day, the client didn’t like the appraisal. We offered a reconsideration of value twice to the client. They refused it twice and ultimately decided not to proceed with the transaction.
Wheeler: Do you feel like HUD is trying to send a message?
Emerson: They’re clearly trying to send messages to the industry. There shouldn’t be discrimination in the process. There shouldn’t be bias in the process to the extent that it’s preventable. We don’t disagree with that at all. In this case, we want the correct party to be responsible, not a lender like us who cannot affect the outcome.
Wheeler: How do you help appraisal bias as a lender?
Emerson: I don’t think there’s anything we can do in the current environment with the way the laws and the rights are written. But there’s enough data in the marketplace. And with the advent of artificial intelligence (AI), we can take hard looks at that data — with human intervention.
The initial reaction from anybody inside the beltway is, we don’t understand something, so we regulate it to death to protect people. So, start to use data again and change some of the rights so that we can do that.
To close out the conversation, the duo explore potential changes in federal regulatory policies and subsequent impacts on the mortgage industry.
Emerson: A change in the federal policy and landscape can be helpful, right? But you will find states that disagree with that, and they will then lean in harder. But I’m a firm believer that we have massive opportunities.
