CFPB Approves Interagency Rule Regulating Automated Valuation Models

The CFPB recently approved a final rule implementing quality control standards mandated by Dodd-Frank for the use of automated valuation models (AVMs) by mortgage originators and secondary market issuers in determining the value of mortgage collateral when making certain credit decisions or securitization determinations.   

The rule requires institutions to adopt and maintain policies and procedures to ensure that AVMs adhere to quality control standards designed to (i) ensure a high level of confidence in the estimates produced by AVMs; (ii) protect against the manipulation of data; (iii) seek to avoid conflicts of interest; (iv) require random sample testing and reviews; and (v) comply with applicable nondiscrimination laws.  The rule does not regulate the use of AVMs by licensed appraisers, who are already subject to USPAP standards, in developing appraisals.

The rule was promulgated collectively by the OCC, Fed, FDIC, NCUA, CFPB, and FHFA and becomes effective one year after publication in the Federal Register.