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On Thursday, six federal regulatory agencies sent out a request for comment concerning a proposed rule that aims to "to ensure the credibility and integrity of models used in real estate valuations." The focus of the proposed rule would implement quality control standards for automated valuation models (AVMs) used by mortgage originators.
The NCUA, CFPB, FDIC, Federal Reserve, Federal Housing Finance Agency (FHFA) and Office of the Comptroller of the Currency (OCC) issued the request for comment.
The joint statement detailed the proposed rule as the following: "Under the proposed rule, the agencies would require institutions that engage in covered transactions to adopt policies, practices, procedures, and control systems to ensure that AVMs adhere to quality control standards designed to ensure the credibility and integrity of valuations. The proposed standards are designed to ensure a high level of confidence in the estimates produced by AVMs; help protect against the manipulation of data; seek to avoid conflicts of interest; require random sample testing and reviews; and promote compliance with applicable nondiscrimination laws."
AVMs are used as part of the real estate valuation process for mortgage originators and, according to the six-agency statement, "it is important that institutions using AVMs take appropriate steps to ensure the credibility and integrity of their valuations. It is also important that the AVMs institutions use adhere to quality control standards designed to comply with applicable nondiscrimination laws."
The White House also issued a statement Thursday on the same issue in which the administration is attempting to remove racial bias in home valuations.
"Homeownership remains a central part of the American dream and the primary contributor to generational wealth building and housing stability for millions of families," the statement read. "For far too long, bias in home valuations has limited the ability of Black and brown families to enjoy the financial returns associated with homeownership, thereby contributing to the already sprawling racial wealth gap."
According to a post on NAFCU's website, the proposed standards are designed to achieve the following:
- Ensure a high level of confidence in the estimates produced by AVMs.
- Help protect against the manipulation of data.
- Seek to avoid conflicts of interest.
- Require random sample testing and reviews.
- Promote compliance with applicable nondiscrimination laws.
Comments must be received within 60 days of the proposed rule's publication in the Federal Register.
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Michael Ogden
Editor-in-Chief at CU Times. To connect, email at [email protected]. As Editor-in-Chief of CU Times since 2016, Michael Ogden has led the editorial team in all aspects of content strategy and execution, including the creation of the publication’s exclusive and proprietary research database of the credit union industry’s economic landscape. Under Michael’s leadership, CU Times has successfully shifted to an all-digital editorial product with new focuses on the payments, fraud, lending and regulatory beats. Most recently, he introduced a data-focused editorial product for subscribers that breaks down credit union issues into hard data, allowing for a deeper and more factual narrative for readers. In 2024, he launched the "Shared Accounts With CU Times" podcast, which offers a fresh, inside-the-newsroom perspective through interviews with leaders from the credit union industry and the regulatory world. He dives into pressing credit union issues, while revealing the personalities working behind-the-scenes to push the credit union world forward. His background includes years as a radio and TV anchor/reporter and a public relations and digital/social media manager, where he covered the food and music industries, as well as cooperatives and credit unions. Over the years, he has launched numerous exclusive video and podcast series, including a successful series of interactive backstage interviews with musicians at music festivals, showcasing his social media and live streaming production skills.
