Owning a Home While Black: Couple Allege Valuation Bias | National
NEW YORK (AP) — How much does it cost to hide your family photos in your home, or anything else that shows your race? If you’re black and trying to figure out how much your house is worth, one family suggests it could cost hundreds of thousands of dollars.
A Baltimore couple are suing an appraiser and mortgage lender, alleging their home was severely undervalued because they are black, preventing them from refinancing their mortgage. The couple say a separate appraisal, done after they ‘whitewashed’ the place by removing family photos and asking a white colleague to replace them, increased the home’s value by $278,000.
The two “were shocked by the rating and acknowledged that the low rating was due to racial discrimination,” according to the lawsuit filed earlier this week in U.S. District Court in Maryland.
Officials of the lender accused in the case, loanDepot, declined to discuss the allegations. But in a statement, the listed company said it strongly opposes bias. “While valuations are conducted independently by outside expert firms, all participants in the home finance process should work to find ways to help eliminate bias.”
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The valuation company in the case, 20/20 Valuations, could not immediately be reached for comment. Neither he nor the individual evaluator named in the suit have attorneys listed in court documents yet.
The situation started last year, when two Johns Hopkins University professors, Nathan Connolly and Shani Mott, wanted to do the same as millions of others across the country. They were hoping to take advantage of low interest rates and refinance their mortgage and a home equity loan.
The couple had bought their four-bedroom home in 2017 for $450,000 and made several upgrades to it. They renovated their club room for $35,000, for example. They also invested in a tankless water heater, recessed lighting and other upgrades that the family’s attorneys say increased the value of the home.
This would add to the general rise in house prices in the region and across the country between 2017 and 2021.
The couple applied in mid-2021 to loanDepot, who initially approved them for an interest rate of 2.25%, pending an appraisal to ensure the home was worth enough in the event of default. A LoanDepot loan officer told the family that a “pretty conservative” estimate was $550,000, according to the suit.
But the 20/20 Valuations appraiser, who was hired by loanDepot, said the home was only worth $472,000, according to the complaint. This prompted loanDepot to call to say it would not extend the loan, according to the complaint.
The lawsuit alleges that while searching for other homes to compare to the plaintiff’s home, the appraiser ignored nearby sales in majority white areas, similar to the plaintiff’s, which had higher values. Instead, the complaint said it included lower-value homes and those in areas with more black residents.
Later that year, the couple learned that the government had assessed the value of their home at $622,000. After that they tried to get another loan. This time, they conducted an experiment where they replaced family photos with those borrowed from white friends and colleagues. They’ve even brought in some new artwork, including a vintage print of a “white pinup girl model.” And they made sure not to be at home during the expertise, with a white colleague instead to greet the expert.
After that, the house was appraised at $750,000, 59% more than the appraisal less than seven months earlier.
“It’s shocking to a lot of people that a house has to be an objective appraisal, but when the appraiser appraises it thinking it’s a black-owned house, it gets a value, and everything suddenly it’s worth 50% more when the appraiser thinks it’s a white house-property,” said John Relman of the Relman Colfax law firm which represents the plaintiffs.
“You have two eminent professors at Johns Hopkins. They did everything they were told to do,” Relman said. But “the appreciation discrimination is so nuanced and so pernicious that it literally follows them into this predominantly white neighborhood. And they, unlike their neighbours, do not have access to the increasing value from which they should benefit.
The housing industry in the United States has a long history of racial discrimination, a history that helped to widen the racial wealth gap and which continues to this day. Last year, on the 100th anniversary of the Tulsa Massacre, President Joe Biden said he was launching an interagency initiative to combat bias in home appraisals.
This is a story of which the plaintiffs are well aware. Connolly wrote a book about how land ownership helped define the conditions of Jim Crow segregation between the early 1900s and the 1960s. Mott wrote about African American and American literature and history.
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