A Black couple who claimed an appraisal company undervalued their Baltimore home because of their race have settled their lawsuit against their mortgage lender, LoanDepot, which agreed to a series of sweeping policy changes that could provide significant relief to homeowners alleging racially biased appraisals the future.
As part of the settlement, Nathan Connolly and the estate of Shani Mott, who died March 12, will receive an undisclosed payment, in addition to policy changes that require a second opinion to be offered immediately if there is evidence of bias or discrimination .
Dr. Connolly and Dr. Mott, both Johns Hopkins University faculty members, sued LoanDepot, a mortgage lender, and Shane Lanham, an appraiser hired by one of the company's contractors, in August 2022.
A year earlier, the couple had given their house to Mr. Lanham, a white man, for appraisal, and he put the value of their four-bedroom home in Baltimore's Homeland neighborhood at $472,000. After the couple removed family photos from their home and had a white colleague pose as the homeowner – an action known as “whitewashing” – a second appraiser offered a valuation of $750,000. The couple said the difference in value — nearly $300,000 higher — was because the second appraiser believed the home's owners were white.
The couple told their story to the New York Times, drawing the attention of lawmakers and other homeowners concerned about biased assessments. The Justice Department filed a statement of interest in the case last March, and Rep. Maxine Waters, Democrat of California, who has made housing discrimination a priority, hopes to introduce a bill later this year to end racial bias in home appraisals .
The settlement, which her lawyers said was accepted Monday in U.S. District Court in Maryland, clarifies Dr. Connollys and Dr. This does not resolve your lawsuit against the appraisal company and Mr. Lanham, who also denies allegations of bias and has filed a counterclaim for defamation.
When reached by phone Monday, Mr. Lanham declined to comment on the pending litigation.
In an emailed statement, Jonathan Fine, a spokesman for LoanDepot, said: “LoanDepot strongly opposes bias in the home financing process. “While we continue to deny the specific allegations in this lawsuit and admit no fault, we are proud of the commitments announced today that formalize many of our existing practices and provide additional resources to assist our clients in assessing and reviewing procedures.”
Throughout the trial, Dr. Mott, who lectured on Black Studies, with stage 4 adrenal cancer. She died four days before her 48th birthday.
Dr. Connolly said he and his three children affectionately refer to the settlement's policies as the SHANI laws – the Secure Home and Neighborhood Initiatives.
The deal could have significant implications: LoanDepot is the sixth-largest mortgage lender in the country, with operations in every state.
This is not the first lawsuit of its kind involving a racially biased home appraisal that is resolved in a settlement. But unlike other settlements that have resulted only in financial harm, this results in a company-wide overhaul of policies and paves the way for other homeowners to challenge appraisals they believe may be biased and even regain equity in their homes otherwise could have been wasted without recourse.
In addition to quickly offering a second appraisal when signs of bias are present, LoanDepot clearly communicates to applicants that they have the right to request a review or adjustment of an appraisal, known as a “Reconsideration of Value” (ROV). , and ensures that any allegations of appraisal bias are resolved will be referred to LoanDepot's Fair Lending group, according to the settlement.
The lender has also committed to locking in applicants' interest rates during the ROV periods so that homeowners who request a new appraisal or value reassessment do not lose out on the mortgage rate they were promised at their initial appraisal. LoanDepot will also revamp its own employee training on fair housing and lending laws and the history of discrimination in American real estate; and commits to severing relations with any reviewers found to exhibit signs of bias in their work.
John Relman, one of the lawyers who represented Dr. Connolly and Dr. Mott said he hopes the changes at LoanDepot become a blueprint for other mortgage lenders to follow.
“Nobody had done this before in terms of reassessing values,” he said. “Nathan and Shani were keen to introduce best practices for others to follow. And to your credit, LoanDepot was willing to not just talk, but to act.”
Dr. Mott, a literary and Africana studies scholar whose work focused on the intersection of race and popular culture, was determined to use his experience to force changes in the mortgage process, Dr. Connolly, professor of history and expert on redlining and the legacy of white supremacy in America.
She entered hospice care in January, using a wheelchair and an oxygen tank, but on March 1, less than two weeks before her death, she gave an eight-hour deposition in the case, Dr. Connolly, 46. She dissected the State of the Union's landmark fair housing laws and how the history of both property rights and the mortgage industry are inextricably linked to the racial wealth gap in the United States. She went without her painkillers all day to keep a clear head, said Dr. Connolly.
“We came to this as students of American history, thinking about systemic racism and injustice,” Dr. Connolly in an interview. “We hope that this will have an impact on the entire industry and in that sense there is real promise for the future.” I am of course deeply saddened that Shani did not live to see this and that this should instead be part of her legacy must. But what a powerful legacy it is.”