No Defendant Found, Quality Control Standards Proposed, Washington …

WASHINGTON, D.C. — In a move to bolster the credibility and integrity of mortgage loan valuations, six federal regulatory agencies have issued a call for public comment on proposed quality control standards for automated valuation models (AVMs). The proposed rule aims to ensure that AVMs used by mortgage originators and secondary market issuers meet stringent standards in valuing real estate collateral.

Under the proposed rule, institutions engaging in covered transactions would be required to adopt policies, practices, procedures, and control systems to guarantee that AVMs adhere to quality control measures. These measures are designed to instill confidence in AVM estimates, safeguard against data manipulation, mitigate conflicts of interest, demand random sample testing and reviews, and promote compliance with nondiscrimination laws.

AVMs have become integral to the real estate valuation process due to advancements in database and modeling technology and the accessibility of larger property datasets. While these advancements can lower costs and expedite loan cycles, it is crucial that institutions employing AVMs ensure their valuations are reliable. Additionally, adherence to quality control standards is vital for compliance with nondiscrimination laws.

The proposed rule emphasizes the importance of maintaining high-quality valuation estimates as part of a robust mortgage lending framework. Comments on the proposed rule must be submitted within 60 days of its publication in the Federal Register.

Jointly issued by the Board of Governors of the Federal Reserve System, Consumer Financial Protection Bureau, Federal Deposit Insurance Corporation, Federal Housing Finance Agency, National Credit Union Administration, and Office of the Comptroller of the Currency, the proposed rule underscores the agencies’ commitment to protecting consumers and ensuring fair and transparent mortgage lending practices.

For further information and details on how to submit comments, please refer to the attached notice of proposed rulemaking.

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