Rule detail : 174937

Agencies Automated Valuation Models

Published on: Aug 9, 2024

On Jun. 1, Fed proposed rule to ensure fair real estate valuations.

Agencies proposed rule on quality controls for Automated valuation models (AVM).
The six federal regulatory agencies include Fed, NCUA, CFPB, OCC, FDIC, and FHFA.
Proposal aims to ensure credibility, integrity of models used in real estate valuations.
Would implement quality control standards for AVMs used by mortgage originators and secondary market issuers in valuing real estate collateral securing mortgage loans.
Applies to AVMs used in relation to making a credit decision, not monitoring value.
Part of Property appraisal and valuation equity (PAVE) task force action plan, #13314.
Background on AVMs
AVMs are used as part of the real estate valuation process, driven in part by advances in database and modeling technology and the availability of larger property datasets.
AVM technology has potential to contribute to lower costs and reduce loan cycle times.
However, such technology may lead to systemic biases in valuations, either too low or too high, hurt neighborhoods, distort the housing market, and impact the tax base.
It is important to take appropriate steps to ensure credibility, integrity of valuations.
AVMs Quality Control Standards Proposal
Require institutions that use AVMs to determine collateral value for certain mortgage-related transactions, to adopt certain policies, practices, procedures, control systems.
Ensure high level of confidence in estimates issued, protect against data manipulation.
Also, avoid conflicts of interest, and require random sample testing and reviews.
As well as ensure systems promote compliance with applicable nondiscrimination laws.
Proposal would not set specific requirements for structuring these policies, systems.
Would set expectations for institutions to tailor their approaches as appropriate to the risk and complexity of transactions for which AVMs will be used, size of the institution.
Proposal focuses on mortgage, securitization transactions where value of collateral is typically determined; defines credit decision and covered securitization determination.
AVMs used to monitor collateral value of loans after origination would not be covered by proposal as monitoring of such value is not a new credit decision or determination.
Consultation
Comments must be received within 60 days of proposal publication in federal register.
Jun. 21, 2023 Agencies Fed Reg Proposal
On Jun. 21, 2023, Agencies published in federal register, comments by Aug. 21, 2023.
Jun. 20, 2024 Agencies Final Rule
On Jun. 20, 2024, FDIC and OCC reported final rule on automated valuation models.
In addition, FDIC issued memorandum and statement by Chairman Martin Gruenberg.
Supported Acting Comptroller priority to reduce inequality, elevate fairness in banking.
Agencies finalizing largely as proposed; final rule effective first day of calendar quarter following date 12 months after date of pending publication in the federal register.
Made clarifying edits to mortgage originator, added definition of person per comments.
Inserted words seek to in third quality control factor to match Section 1125 language.
Amends 12 CFR 34, 12 CFR 225, 12 CFR 323, 12 CFR 722, 12 CFR 741, 12 CFR 1026.
Jun. 24, 2024 CFPB Final Rule
On Jun. 24, 2024, CFPB reported rule approved re AI, algorithms in home appraisals.
Jul. 17, 2024 Agencies Final Rule
On Jul. 17, 2024, Fed, OCC, NCUA, FDIC, CFPB, and FHFA published AVM final rule.
OCC also issued Bulletin 2024-17, CFPB also issued fast facts related to the final rule.
Effective first day of calendar quarter following 12 months after fed reg publication.
Jul. 22, 2024 FDIC Letter on Final Rule
On Jul. 22, 2024, FDIC issued FIL-43-2024, on final rule to implement quality control standards for use of AVMs by mortgage originators and secondary market issuers.
Aug. 2024 Fed Quality Control
On Aug. 7, 2024, Fed Agencies published final rule re quality control standards for use of AVMs in the federal register; the final rule becomes effective on Oct. 1, 2025.
On Oct. 7, 2024, CFPB issued guide for non-depositories on final rule, see #229139.

Regulators

CFPB; FDIC; Fed; FHFA; NCUA; OCC

Entity Types

Bank; CNSM; CU; MG Orig; Servicer; Thrift

Reference

OCC: 88 FR 40638, 6/21/2023; Info, PR 2024-78, Bul 2024-17, 7/17/2024; PR 2024-66, RF OCC-2023-0002, 6/20/2024; PR 2023-51, RF RIN 1557-AD87, 6/1/2023; Fed: 89 FR 64538, 8/7/2024; Docket R-1807, PR, 7/17/2024; PR, Memo, RF RIN 7100-AG60, 6/1/2023; FDIC: FIL-43-2024, 7/22/2024; PR PR-56-2024, 7/17/2024; Sp, Memo, RF, Mt, 6/20/2024; FIL-26-2023, PR PR-45-2023, RF RIN 3064-AE68, 6/1/2023; NCUA: PR, 7/17/2024; PR, RF NCUA-2023-0019, RIN 3133-AE23, 6/1/2023; CFPB: PR, Gd, 7/17/2024; Bl, RF, 6/24/2024; Bl, PR, RF CFPB-2023-0025, RIN 3170-AA57, 6/1/2023; FHFA: PR, 7/17/2024; PR, RF RIN 2590-AA62, 6/1/2023; Citation: *12 CFR* 34, 225, 323, 722, 741, 1026;

Functions

Compliance; Financial; Legal; Operations; Product Administration; Reporting; Risk; Technology; Treasury

Countries

United States of America