Agencies Issue Final Rule to Help Ensure Credibility and Integrity of Automated Valuation Models
WASHINGTON, D.C. - Six federal regulatory agencies today issued a final rule, pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act, designed to help ensure the credibility and integrity of models used in valuations for certain mortgages secured by a consumer’s principal dwelling. In particular, the rule will implement quality control standards for automated valuation models (AVMs) used by mortgage originators and secondary market issuers in valuing those homes. The final rule is substantially similar to the proposal issued in June 2023.
Under the final rule, the agencies will require institutions that engage in certain transactions secured by a consumer’s principal dwelling to adopt policies, practices, procedures, and control systems designed to:
- ensure a high level of confidence in estimates;
- protect against data manipulation;
- seek to avoid conflicts of interest;
- require random sample testing and reviews; and
- comply with nondiscrimination laws.
Driven in part by advances in database and modeling technology and the availability of larger property datasets, AVMs are being used with increasing frequency as part of the real estate valuation process. While advances in AVM technology and data availability have the potential to reduce costs and turnaround times of the property valuation process, it is important that institutions using AVMs take appropriate steps to ensure the credibility and integrity of the valuations produced. It is also important that the AVMs institutions use adhere to quality control standards designed to comply with applicable nondiscrimination laws.
The final rule will become effective on the first day of the calendar quarter following 12 months after publication in the Federal Register.
Media Contacts
CFPB, Mike Robinson, (202) 597-4022
FDIC, Julianne Fisher Breitbeil, (202) 340-2043
FHFA, Nick Jacobs, (202) 649-3618
FRB, Meg Nelson, (202) 452-2955
NCUA, Joseph Adamoli, (703) 518-6572
OCC, Stephanie Collins, (202) 649-6870
The Consumer Financial Protection Bureau is a 21st century agency that implements and enforces Federal consumer financial law and ensures that markets for consumer financial products are fair, transparent, and competitive. For more information, visit www.consumerfinance.gov.