On June 1, the Consumer Financial Protection Bureau (CFPB) and five other agencies invited comment on a proposed rule to implement the quality control standards mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act for the use of automated valuation models (AVMs) by mortgage originators and secondary market issuers in determining the collateral worth of a mortgage secured by a consumer’s principal dwelling.
The CFPB, Office of the Comptroller of the Currency (OCC), Treasury; Board of Governors of the Federal Reserve System (FRB); Federal Deposit Insurance Company (FDIC); National Credit Union Administration (NCUA), and the Federal Housing Finance Agency (FHFA) outlined its specific requirements.
Under the proposal, the agencies would require institutions that engage in certain credit decisions or securitization determinations to adopt policies, practices, procedures, and control systems to ensure that AVMs used in these transactions to determine the value of mortgage collateral adhere to quality control standards.
Additionally, they must be designed to ensure a high level of confidence in the estimates produced by AVMs; protect against the manipulation of data; seek to avoid conflicts of interest; require random sample testing and reviews; and comply with applicable nondiscrimination laws.
Comments on the proposed rule will be accepted for 60 days after publication in the Federal Register.
Valuation Review will stay on top of these updates, interviewing people at the heart of these appraisal proposals. Be sure to check www.valuationreview.com for these stories.