Six federal regulatory agencies are seeking public comment on a proposed rule that looks to ensure the integrity of real estate valuation models used by mortgage originators and secondary market issuers.
The proposed rule would implement quality control standards for automated valuation models (AVMs) that are used in valuing real estate collateral securing mortgage loans. Specifically, 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.
This would help ensure the credibility and integrity of valuations, protect against the manipulation of data, and avoid conflicts of interest. They would also promote compliance with applicable nondiscrimination laws.
The regulators acknowledge that advances in AVM technology and data availability have the potential to contribute to lower costs and reduce loan cycle times. However, they added that institutions using AVMs must take appropriate steps to ensure the credibility and integrity of their valuations.
Comments must be received within 60 days of the proposed rule’s publication in the Federal Register.
The six federal regulatory agencies that put forth this proposed rule are the Federal Reserve, Consumer Financial Protection Bureau, Federal Deposit Insurance Corporation, Office of the Comptroller of the Currency, National Credit Union Administration, and the Federal Housing Finance Agency.