Corporate Racism Case Study: Rocket Mortgage and The Systemic Devaluation of Black Homes

The $220,000 Disappearance

In January 2021, Francesca Cheroutes, a Black woman and homeowner in Denver’s thriving Hale neighborhood, decided to make a smart financial move. With mortgage rates at historic lows, she contacted Rocket Mortgage to refinance her duplex, a property she had meticulously maintained and improved for a decade.

This should have been a simple, profitable transaction. Just eight months earlier, in May 2020, an appraisal conducted for Rocket valued her home at $860,000. In a Denver real estate market that was shattering records for price growth, she had every reason to believe her home’s value had only increased.

But what happened next, according to a lawsuit filed by the U.S. Department of Justice, was not a financial transaction. It was an act of racial discrimination that vaporized nearly a quarter-million dollars of her family’s wealth overnight.

The appraiser, Maksym Mykhailyna, arrived at her home, where a “Black Lives Matter” sign was displayed in the front yard. When he met Ms. Cheroutes and her daughter, he saw they were a Black family. He was dismissive, ignoring her detailed list of recent improvements—new doors, new gutters, updated kitchens and baths.

His final valuation: $640,000. In a booming market, after significant upgrades, Ms. Cheroutes’s home had somehow lost $220,000 in value. The only thing that had changed was the appraiser who saw her face.

The Corporate Playbook: A Conspiracy of Action and Inaction

The shocking devaluation of Ms. Cheroutes’s home wasn’t the result of random chaotic market forces. According to the DOJ complaint, it was the result of a series of deliberate choices by the appraiser and the subsequent ratification of those choices by the mortgage lender.

Part 1: Manufacturing a Low Value

Mr. Mykhailyna allegedly reverse-engineered it by manipulating the core components of an appraisal.

• Redrawing the Neighborhood: He defined Ms. Cheroutes’s “subject neighborhood” not by the popular, valuable, and predominantly white area where she lived, but by cherry-picking properties from distant neighborhoods with Black populations four to five times higher.
• Ignoring True Comparables: He disregarded six valid duplex sales within one mile of her property, which would have supported a much higher value. Instead, he used inferior properties, including two adjacent to East Colfax Avenue, a street notorious for activities that depress housing values.
• Applying a Double Standard: Mykhailyna claimed that Colorado Boulevard, a major street west of her home, was a “hard” neighborhood border, justifying his refusal to use comps from the more valuable, adjoining Congress Park neighborhood. Yet, just one month prior, when appraising a property for a white family, he had crossed that same “hard border” to select comps from that very neighborhood.
• Manipulating the Data: He made massive, unjustified downward adjustments for lot size that were thirteen times larger than his typical practice. He also simply did not count the third bedroom in the basement of each of her duplex’s units—two entire bedrooms that he had counted in the comparable properties. By his own report’s math, this omission alone could have suppressed the home’s value by as much as $320,000.

Part 2: Ratifying the Discrimination

When Ms. Cheroutes received the shockingly low appraisal, she immediately contacted Rocket Mortgage, explaining the errors and stating her belief that it was motivated by racial discrimination. Rocket’s response, as alleged by the DOJ, was not to investigate the discrimination, but to punish the victim for reporting it.

A Rocket representative told her that because she had “raised the issue of discrimination, he could not talk to her or help her”.

Rocket then issued an ultimatum: either accept a new loan with less favorable terms based on the discriminatory $640,000 valuation, or they would cancel her application. When she continued to protest and ask for a new, fair appraisal, Rocket Mortgage cancelled her loan. They had a choice to correct a clear injustice and instead chose to validate it, effectively retaliating against a customer for exercising her civil rights.

A Cascade of Consequences: The Real-World Impact

This was a direct attack on the financial and emotional well-being of the Cheroutes family.

The Theft of Generational Wealth

For most American families, and especially for Black families, home equity is the primary source of wealth. The $220,000 that disappeared from Ms. Cheroutes’s balance sheet represents lost capital for retirement, for her children’s future, or for weathering a financial crisis.

Table data sourced from the DOJ complaint attached at the bottom of this article.

The financial harm was immediate. Blocked from a favorable refinance, Ms. Cheroutes was forced to take out a less stable, variable-rate home equity line of credit. But the deeper harm was the “emotional distress and humiliation” of being told her home was worth less simply because a Black family lived in it. She was left to fear that her own son would face the same discrimination while trying to buy his own home.

Analysis: A System Designed for This

The horrifying experience of Francesca Cheroutes is not an isolated incident. It is the on-the-ground result of a systemic push within the real estate industry to weaken the very rules designed to prevent such discrimination.

A letter sent in February 2023 by the DOJ, CFPB, HUD, and other federal agencies to the Appraisal Standards Board (ASB)—the body that writes the national rules for appraisers—reveals the larger, bureaucratic battle. The agencies expressed grave concern that the ASB was attempting to eliminate a clear summary of federal anti-discrimination laws from its standards.

In its place, the ASB proposed a new, undefined distinction between “unethical discrimination” and “unlawful discrimination”. The agencies warned this move was dangerous because it implies the existence of “ethical discrimination”—a concept that would “create confusion in the appraisal industry” and be nearly impossible for regulators to enforce.

This is a classic neoliberal tactic: replace hard, fast government regulations with vague, industry-friendly “ethics” codes. Such a change would give appraisers like Mykhailyna cover, allowing them to claim that using race or other protected characteristics was somehow “essential to the assignment and necessary for credible assignment results”. It is the creation of a loophole big enough to drive a system of redlining through.

Dodging Accountability and Reclaiming Power

The system is designed to allow the powerful to evade justice. The appraiser (Mykhailyna), the appraisal management company that hired him (Solidifi), and the lender that used the result (Rocket Mortgage) all failed to stop the discriminatory act. It took a federal lawsuit to force accountability.

But there are pathways to change. The joint letter from the federal agencies is a powerful act of resistance, using regulatory power to demand that civil rights laws be affirmed, not diluted. The DOJ’s lawsuit on behalf of Ms. Cheroutes is the necessary legal consequence for those who violate these laws.

True reform, however, requires more. It demands that we codify the strongest possible anti-discrimination language into every corner of the financial world. It requires proactive testing for bias and severe, personal penalties for executives who enable or ignore discrimination.

Conclusion: A Story of a System, Not an Exception

The story of Francesca Cheroutes is a stark reminder that systemic racism is not an abstract theory. It is a home appraisal that steals your family’s wealth. It is a lender that punishes you for speaking out. And it is a national standards board that quietly tries to rewrite the rules to make it all seem “ethical.”

The battle over obscure language in a regulatory handbook in Washington, D.C., has a direct, devastating impact on a family in Denver. Ms. Cheroutes’s case is the perfect illustration of how our modern, deregulated capitalist economy is designed to produce such outcomes. It is a system where profit and industry convenience are prioritized over justice and civil rights, leaving individuals to fight a lonely battle against interconnected corporate actors.

Disclaimer: All factual claims in this article related to the Rocket Mortgage case and the Appraisal Standards Board are derived from the public complaint filed by the U.S. Department of Justice (Case No. 1:24-cv-02915) and a public comment letter filed by federal agencies on February 14, 2023.

saucerino:

https://www.justice.gov/archives/opa/pr/justice-department-sues-rocket-mortgage-appraisal-management-company-and-appraiser-race

https://www.justice.gov/d9/2024-10/complaint_-_united_states_v_rocket_mortgage.pdf

https://www.nytimes.com/2024/11/01/realestate/home-appraisal-discrimination-rocket-mortgage.html