A black couple who claimed an appraisal company undervalued their Baltimore home based on their race has settled their lawsuit against their mortgage lender, loanDepot, which has agreed to a series of sweeping policy changes that could provide significant relief to homeowners who claim they have racially biased assessments in the future.
Under the settlement, Nathan Connolly and the estate of Shani Mott, who died on March 12, will receive a payout of an undisclosed amount, in addition to policy changes that include immediately offering a second evaluation whenever there is evidence of bias or discrimination.
Dr. Connolly and Dr. Mott, both faculty members at Johns Hopkins University, sued loanDepot, a mortgage lender, as well as Shane Lanham, an appraiser hired by a contractor for the company, in August 2022.
A year earlier, the couple had opened their home to Mr. Lanham, who is white, for an appraisal, and he put the value of their four-bedroom home in Baltimore’s Homeland neighborhood at $472,000. After the couple removed their home from their family photos and had a white colleague pose as the homeowner, an action known as “whitewashing,” a second appraiser offered a value of $750,000. The couple said the difference in value — nearly $300,000 higher — came about because the second appraiser thought the home’s owners were white.
The couple shared their story with The New York Times, drawing the attention of lawmakers and other homeowners concerned about assessment bias. Last March, the Justice Department filed a declaration of interest in the case, and Rep. Maxine Waters, D-Calif., who has made housing discrimination a priority, hopes to introduce a bill to end racial bias in home appraisals later this year.
The settlement, which their lawyers said was accepted by the U.S. District Court in Maryland on Monday, resolves claims by Dr. Connolly and Dr. Mott against loanDepot, which continues to deny any allegations of wrongdoing. It does not resolve their claim against the appraisal company and Mr. Lanham, who also denies allegations of bias and sued for defamation.
Mr. Lanham, reached by phone Monday, declined to comment on the pending litigation.
In an emailed statement, loanDepot spokesman Jonathan Fine said, “loanDepot strongly opposes bias in the home financing process. While we continue to deny the specific allegations in this lawsuit and have not admitted wrongdoing, we are proud of the commitments announced today, which will formalize many of our existing practices and provide additional resources to assist our clients in evaluating and review I process, process.”
Throughout the legal process, Dr. Mott, who lectured on Black Studies, was battling stage 4 adrenal cancer. He died four days before her 48th birthday.
Dr. Connolly said he and his three children fondly refer to the settlement’s guidelines as SHANI Laws — Safe Home and Neighborhood Initiatives.
The settlement could have significant reach: loanDepot is the nation’s sixth-largest mortgage lender, with offices in every state.
It’s not the first such lawsuit alleging a racially biased home assessment to be settled in a settlement. However, unlike other settlements that resulted in only monetary damages, this creates a company-wide review of the policy, opening the way for other homeowners to challenge valuations they believe may be discriminatory and even recover their equity in their homes that might otherwise have been wasted without recourse.
In addition to quickly offering a second appraisal when bias is indicated, loanDepot will also clearly communicate to applicants the right to request a reconsideration or adjustment of an appraisal, known as a Reconsideration of Value, or ROV, and ensure that any allegations of appraisal bias are escalated to loanDepot’s Fair Lending group, according to the settlement.
The lender is also committed to keeping applicants’ rates locked in during ROV periods, so homeowners who request a re-appraisal or re-valuation don’t lose the mortgage rate they were promised at their original appraisal. loanDepot will also review its own staff training on fair housing and fair lending laws, as well as its history of discrimination in American real estate. and undertakes to sever ties with any appraisers found to be showing signs of bias in their work.
John Relman, one of the attorneys representing Dr. Connolly and Dr. Mott, said he hopes the changes at loanDepot will be a blueprint for other mortgage companies to follow.
“No one had done this before in terms of value review,” he said. “Nathan and Shani were very keen to get best practices that others could follow. And loanDepot, to their credit, was willing to not just talk the talk, but walk the walk.”
Dr. Mott, a scholar of African literature and studies whose work has focused on the intersection of race and popular culture, was determined to use his experience to force change in the mortgage process, said Dr. Connolly, a professor of history and expert on Redlining and the legacy of white supremacy in America.
She entered hospice care in January and used a wheelchair and oxygen tank, but on March 1, less than two weeks before her death, she gave an eight-hour deposition in the case, said Dr. Connolly, 46. He dissected the nation’s landmark fair housing laws and how the history of both property rights and the mortgage industry is inextricably linked to the racial wealth gap in the United States. She was off painkillers for the day to keep her mind clear, Dr Connolly said.
“We were coming to this as students of American history and thinking about systemic racism and injustice,” Dr. Connolly said in an interview. “We hope this will ripple across the industry and in that respect there is real promise going forward. I am obviously deeply saddened that Shani was not alive and well to see this happen, and that should be part of her legacy. But what a great legacy it is.”