On June 1, 2023, the federal regulatory agencies requested public comment on a proposed rule designed to ensure the credibility and integrity of models used in real estate valuations. Specifically, 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.
The OCC, the Federal Reserve Board, FDIC, NCUA, CFPB, and FHFA have issued the proposed rule in accordance with the requirement of the Dodd-Frank Act. Under the proposal, the agencies would require institutions that engage in certain credit decisions or securitization determinations to adopt policies, practices, procedures, and control systems to ensure that AVMs used in these transactions to determine the value of mortgage collateral:
Adhere to quality control standards designed to ensure a high level of confidence in the estimates produced by AVMs;
Protect against the manipulation of data;
Seek to avoid conflicts of interest;
Require random sample testing and reviews; and
Comply with applicable nondiscrimination laws.
Comments must be received within 60 days of the proposed rule’s publication in the Federal Register.
Read the CFPB’s press release here.
The proposed rule can be found here.