Six federal regulatory agencies on Thursday requested public comment on a proposed rule designed to ensure the credibility and integrity of models used in automated real estate valuations.
The proposed rule would implement quality control standards for automated valuation models (AVMs) used by mortgage originators and secondary-market issuers in valuing real estate collateral securing mortgage loans.
Under the proposal, the federal 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 agencies said 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;
- Help 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, driven in part by advances in database and modeling technology and the availability of larger property datasets.
The agencies said that while advances in AVM technology and data availability have the potential to help lower costs and reduce loan cycle times, 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 federal agencies seeking comment include the:
- Consumer Financial Protection Bureau (CFPB);
- Federal Deposit Insurance Corp. (FDIC);
- Federal Housing Finance Agency (FHFA),
- Federal Reserve Board;
- National Credit Union Administration (NCUA); and
- Office of the Comptroller of the Currency (OCC).
Comments on the proposed rule must be received within 60 days of its publication in the Federal Register.