WASHINGTON—NCUA has joined with five other federal regulatory agencies in requesting public comment on a proposed rule designed to ensure the “credibility and integrity” of models used in real estate valuations.
In particular, the proposed rule would implement quality control standards for automated valuation models (AVMs) used by mortgage originators and secondary market issuers in valuing real estate collateral securing mortgage loans, the regulators stated in a joint release.
Under the proposed rule, the agencies would require institutions that engage in covered transactions to adopt policies, practices, procedures, and control systems to ensure that AVMs adhere to quality control standards designed to ensure the credibility and integrity of valuations.
Goal of Standards
According to the agencies, the proposed standards are designed to ensure a “high level of confidence in the estimates produced by AVMs; help protect against the manipulation of data; seek to avoid conflicts of interest; require random sample testing and reviews; and promote compliance with applicable nondiscrimination laws.
“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,” a joint statement from the agencies said. “While advances in AVM technology and data availability have the potential to contribute to lower costs and reduce loan cycle times, it is important that institutions using AVMs take appropriate steps to ensure the credibility and integrity of their valuations. It is also important that the AVMs institutions use adhere to quality control standards designed to comply with applicable nondiscrimination laws.”
60 Day Comment Period
Comments must be received within 60 days of the proposed rule’s publication in the Federal Register.
In addition to NCUA, other agencies issuing the statement include the Federal Housing Finance Agency, Treasury, Federal Reserve, FDIC, NCUA and the CFPB jointly issued the proposal.
To read the proposed rule, go here.