The Consumer Financial Protection Bureau (CFPB) has initiated a process of reviewing computer models used to help determine home valuations to make sure they are accurate, fair, and unbiased.
While traditional appraisals are conducted in-person, many lenders now employ algorithmic computer models to determine home valuations — or automated valuation models. However, the CFPB said algorithmic appraisals might be susceptible to bias and inaccuracy without appropriate safeguards.
“It is tempting to think that machines crunching numbers can take bias out of the equation, but they can’t,” CFPB Director Rohit Chopra said. “This initiative is one of many steps we are taking to ensure that in-person and algorithmic appraisals are fairer and more accurate.”
Inaccurate valuations, whether they are too high or too low, can pose risks to consumers. Thus, the Dodd-Frank Wall Street Reform and Consumer Protection Act tasked the CFPB and other regulators with implementing rules on these models.
The CFPB is weighing several options to strengthen the oversight of these automated valuation models.
Specifically, the CFPB, in conjunction with other federal regulators, is looking to ensure a high level of confidence in the estimates produced by automated valuation models; protect against the manipulation of data; seek to avoid conflicts of interest; require random sample testing and reviews; and account for any other such factor that the agencies determine to be appropriate.