Appraisal bias suit that sparked policy changes is dismissed

Shane Lanham first heard he was being sued for racial discrimination from a New York Times reporter who called him for comment. That story ran with the headline: Home Appraised With a Black Owner: $472,000. With a White Owner: $750,000.

The New York Times article described how Drs. Nathan Connolly and Shani Mott, who were both professors at Johns Hopkins University in Baltimore, had taken down family photos and "whitewashed" their home, getting a second appraisal for a refinance that valued their home at nearly $300,000 more than Lanham's appraisal. They sued Lanham and his Parkville, Maryland-based business, 20/20 Valuations LLC, in 2022.  

"The accusation is damning enough, but it was an unfair narrative," Lanham said in an interview with American Banker. "The case has been following me around for three years. It was presented to the public as a common practice for appraisers to low-ball minority home values, and I didn't believe it was true and I want to play a part in debunking that narrative."

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Last month, District Court Judge Stephanie A. Gallagher dismissed the lawsuit against Lanham for lack of evidence. She found that the plaintiffs fell short of proving discriminatory intent and did not have an appraisal expert to support the much higher $750,000 appraisal. 

Lanham said he always thought the second appraisal was too high and that "if they had vetted the appraisals from the very beginning, they might not have needed three years of litigation." 

"When the final verdict of the judge was that there was not enough evidence to proceed, I was relieved but not surprised," he said. 

Still, Judge Gallagher also dismissed Lanham's countersuit for defamation. The judge noted that after filing their lawsuit, the plaintiffs "immediately commenced a nationwide media blitz."    

Connolly and Mott received an undisclosed settlement from Loandepot.com, which agreed to make changes to its appraisal complaint process. Mott passed away in 2024. The couple was represented by the law firm Relman Colfax PLLC, and have until mid-August to appeal the court's dismissal of the suit.

"It's fair to say that these cases can be difficult to prove," said Tim Ofak, a member at law firm Weiner Brodsky Kider, who was not involved in the case. "Their expert's testimony was partially stricken [by the judge] and they did not have factual evidence to refute the defendant's experts." 

A separate appraisal bias lawsuit in Ohio that also received widespread media coverage was dismissed in March by a district court judge because the discriminatory allegations could not be sufficiently substantiated. In that case, the lawsuit is still ongoing against the lender, $664 billion-asset U.S. Bank in Minneapolis, for its decision-making process in denying the borrower's cash-out refinance application based on the home's collateral and the borrowers' history of delinquency.

Notably, fewer than a dozen appraisal bias lawsuits have been filed in the last five years, by some estimates. Most of the suits filed by homeowners involved allegedly low-ball appraisals sought for the purpose of refinancing while interest rates were low.

In 2021, the Biden administration responded to the appraisal bias claims by creating the Property Appraisal and Valuation Equity task force to root out racial and ethnic bias in appraisals. In July, Housing and Urban Development Secretary Scott Turner disbanded the initiative. Even so, the Appraisal Qualifications Board will begin requiring new qualifying and continuing education courses for all appraisers to include a focus on valuation bias and fair housing laws and regulations next year.

Lanham noted that appraisal bias "was a hot topic a few years ago, when I got accused … but it doesn't feel like it's as hot a topic as it was."

Long history of discrimination

"Maybe at some point in time, if it becomes hot again, my case law will be referred back to and be helpful in some way," he added.

The historical practice of redlining has created long-standing disparities in home values.

Research by the Brookings Institute, Urban Institute and academic researchers have found that homes in majority-Black neighborhoods are devalued and typically are appraised at lower values than comparable properties in majority-white neighborhoods. Some research has focused on how appraisal valuations have contributed to a generational wealth gap. 

"Appraisal bias is hard to detect and most people who experience appraisal bias don't have the awareness that they may be experiencing unfairness," said Lisa Rice, president and CEO of the National Fair Housing Alliance, who has worked on hundreds of appraisal bias cases. "You can hire two or three appraisers to appraise the same property and they can each pick different comparables, so there is a lot of subjectivity to the process."

Andre Perry, a senior fellow in the Metropolitan Policy Program at Brookings, said that there is "tons of evidence of discrimination in housing."

"On its face, America has a long history of being able to discriminate against Black homeowners and neighborhoods," said Perry, the author of the 2025 book "Black Power Scorecard: Measuring the Racial Gap and What We Can Do to Close It."

"There is so much subjectivity in the process when you're talking about racial bias."

Tobias Peter, co-director of the American Enterprise Institute's Housing Center and an AEI research fellow, said he has found flaws with research claiming systemic bias by appraisers. 

Appraisal bias "is more driven by a couple of bad apples than intrinsic bias," said Peter, who served as an expert witness in the case for Lanham. 

Under the Trump administration, HUD has highlighted research claiming factors unrelated to race, including income and average credit scores, are more significant drivers of differences in home values and appraisals. 

Yet, in most real estate transactions, the appraiser is the only party working for a fixed fee while realtors and mortgage bankers are commission-based.

"If there was a peer review of all these appraisals, I don't know that a lot of these cases would go forward," said Tony Pistilli, president of valuations at Restb.ai, a technology company that uses AI to automate property valuations and real estate listings. 

Bill Dallas, a longtime mortgage banker, former president of Finance of America Mortgage, and chairman of Dallas Capital, a family office, said that "contrary to some narratives, there is limited evidence that systemic bias in appraisals is widespread or driving disparities in lending outcomes today."

Appraisers operate under strict federal guidelines and appraisals themselves are highly regulated, standardized, and reviewed by underwriters and valuation models. Lenders note that there are many checks in place — from automated valuation models to investor due diligence — that create multiple layers of validation and reduce the risk of individual bias affecting lending decisions. Most underwriting decisions are rarely based on a single appraisal alone, especially for most loans which are backed by Fannie Mae, Freddie Mac or Ginnie Mae. 

Donna Halfpenny, a self-employed Chicago appraiser and realtor, said most appraisers settle cases because they run out of money to fight since most errors and omissions insurance policy coverage — a kind of liability insurance for appraisers — is limited to $100,000. She also took issue with media coverage of the case and the lack of follow-up, noting "there is not one proven case of appraisal bias." 

"Claims of appraisal bias have been blasted throughout the media for several years now, but they never cover the results, and that's not fair to an entire profession," she said.

Congress has also been active. Sen. Raphael Warnock, D-Ga., who sits on the Senate Banking Committee, offered a bill earlier this year that would require mortgage lenders to allow consumers to request a second appraisal, or reconsideration of value, based on a list of nine "unacceptable" appraisal practices. The list includes references to any crime rates or crime statistics in an appraisal, and any analysis that relies on inappropriate comparable properties.

Still, homes priced below $400,000 do not require an appraisal from Fannie Mae or Freddie Mac. The government-sponsored enterprises have made a big push for appraisal waivers that allow eligible borrowers to bypass an in-person appraisal. The number of appraisal waivers reached a peak of nearly 50% during the pandemic, but have dropped to roughly 12% a year on average.

Art vs. science

In the Connolly v. Lanham case, Judge Gallagher, a Trump appointee, noted that an appraisal "is to some degree an art, not a science, [and] some degree of variability is to be expected." 

Lanham claimed his appraisal was conducted in a "fair and reasonable fashion, addressed the specific circumstances of the plaintiffs' property, and aligned with professional norms and standards," Gallagher wrote. The judge excluded a portion of the testimony of the plaintiffs' expert, Junia Howell, a visiting assistant professor of sociology at the University of Illinois Chicago, because she is not an appraiser. Howell has written about the growing racial inequality in home appraisals. 

"Without a qualified appraiser as an expert, Plaintiffs offer no solution for how the appraisal should have been done to comply with the USPAP or other professional norms," the judge wrote, referring to the Uniform Standards of Professional Appraisal Practice. USPAP is a set of ethical and performance standards required for state-licensed and state-certified appraisers that reinforce the principles of the Fair Housing Act, which prohibits discrimination in housing based on race, color, religion, sex, national origin, familial status, and disability. 

The lawsuit focused on the location of the home, which was on a major road in the historic Homeland area of Baltimore. 

"Although it is understandable that Plaintiffs would have preferred to use higher value homes in a different part of Homeland, the only appraisal experts in this case have testified that it was proper to prioritize homes north of Homeland Parkway for this appraisal," the judge wrote. 

Since appraisals are based on a home's location and value relative to other, comparable homes nearby, allegations of racism are tough to prove.

"Although this Court credits Plaintiffs' position that an appraisal within the universe of fair, accurate, and reasonable appraisals could nevertheless be primarily motivated by discrimination (that is, the reason for a lower but fair appraisal result could be discrimination, not the location or condition of the home), neither Plaintiffs nor Dr. Howell adduce any evidence that discrimination was, in fact, Defendants' real reason," Gallagher wrote in the 27-page opinion dismissing the lawsuit. 

Lanham estimates that his legal costs totaled more than $200,000. He sold assets, borrowed money from family and opened a GoFundMe account to fight the lawsuit. He credits his errors and omissions insurance with covering more than $100,000 of his costs, which helped him "get through the trial and try to clear my name."

Claims of appraisal bias can financially ruin an appraiser, and some have received hate mail and death threats, appraisers said.

"It affected my business a great deal. My income got cut by 66% in the first two years after the suit was filed and I struggled for a couple of years to survive," Lanham said. "What I was accused of wasn't true, it wasn't provable and that's vindication."