In a recent episode of the HousingWire Daily podcast, editor-in-chief Sarah Wheeler talks with Bill Emerson, president of Rocket companiesto discuss his 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 begin, Wheeler and Emerson discuss the key motivating factor behind Rocket Companies’ lawsuit against HUD.
Emerson: If you look at the lawsuit filed against us, we find it very interesting that the first line in the press release is “Rocket.” It’s not the appraiser or Solidifithe external valuation company.
Under the Dodd Frank Act of 2010, appraisal independence is the rule, so a lender cannot become involved in the determination of value if it relates to an appraisal. When HUD puts our name in the headline, it is to find a big name so that this individual suit can appear in the press. We have done nothing wrong. We followed the rules; we followed the law.
There needs to be clarity in the sector. You can’t wander around and let a regulator decide when they’re going to enforce something. And judgment independence is crystal clear here.
Cyclist: In your lawsuit you say this is an abuse of the Fair Housing Act. Can you research and talk about the remedy you gave to the homeowner?
Emerson: This was a triple Rocket client. Why wouldn’t we want to help a three-way customer? The valuation was lower than before. We had this appraisal carried out by a third party, which has contracted a government-recognized appraiser. Ultimately, the customer was not satisfied with the appraisal. We offered the customer a value reconsideration twice. They refused twice and ultimately decided not to go through with the transaction.
Cyclist: Do you feel like HUD is trying to send a message?
Emerson: They are clearly trying to send messages to the industry. There should be no discrimination in the process. There should be no bias in the process, to the extent that this can be prevented. We do not agree with that at all. In this case, we want the right party to be responsible, not a lender like us who can’t influence the outcome.
Cyclist: How do you prevent assessment bias as a lender?
Emerson: I don’t think we can do anything in the current environment with the way the laws and the rights are written. But there is plenty of data on the market. And with the advent of artificial intelligence (AI), we can take a closer look at that data – with human intervention.
The first reaction of everyone inside the beltway is: we don’t understand something, so we regulate it down to the last detail to protect people. So start using data again and change some permissions so we can do that.
To conclude the conversation, the duo explore potential changes in federal regulatory policy and subsequent impacts on the mortgage industry.
Emerson: A change in federal policy and landscape could be helpful, right? But you will find states that disagree, and they will step up their efforts. But I am convinced that we have enormous opportunities.
