Real estate finance standards organization MISMO announced new Automated Valuation Model (AVM) standards and guidance Thursday.
The AVM Common Confidence Score Standard and Guidance will help mortgage originators and other stakeholders evaluate risk more effectively, the organization said.
“The AVM Common Confidence Score provides a standardized way to communicate the reliability of AVM-generated property valuations. This enables lenders to make more informed, risk-based decisions and fosters greater trust in AVM usage,” MISMO Acting President Rick Hill said. “The standard also supports AVM quality control standards finalized last year as mandated by the Dodd-Frank Act.”
Officials with MISMO said the guidance was developed through collaboration with industry stakeholders and encourages preventive self-regulation in anticipation of future enforcement. The organization said that even though regulatory uncertainty remains, lenders have told MISMO there is a strong interest in adopting standards to improve efficiency and reduce costs.
Benefits of the AVM Confidence Score Standard include improved risk communication that will allow stakeholders to evaluate AVM reliability on a common scale; regulatory alignment supporting fair lending laws and the Dodd-Frank AVM rule; and standardized testing framework that promotes validation of AVM confidence scores across the industry.