CU Comments Wanted for Automated Valuation Models Proposed Rule
The rule intends to make sure lenders’ real estate valuation models are credible.
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.
READ MORE: The Notice of Proposed Rulemaking: Quality Control Standards for AVMs.