WASHINGTON, D.C. — Six federal regulatory agencies have announced a crucial new rule aimed at bolstering the credibility and integrity of automated valuation models (AVMs) used in mortgage valuations. This regulatory measure, a mandate of the Dodd-Frank Wall Street Reform and Consumer Protection Act, targets mortgages secured by a consumer’s primary home.
The directive requires financial institutions to adopt comprehensive policies, practices, and control systems. These measures are designed to ensure high confidence in valuation estimates, safeguard against data manipulation, and prevent conflicts of interest. Additionally, the rule mandates random sample testing and compliance with nondiscrimination laws.
With advances in technology and expanded property datasets, AVMs are increasingly utilized in real estate valuations. These automated systems have the potential to cut costs and reduce the time required for property appraisals. However, the widespread use of AVMs necessitates stringent quality control to maintain the reliability of the valuations they produce.
The final rule, which aligns closely with a proposal issued in June 2023, emphasizes the importance of maintaining high standards in the valuation process. By doing so, the agencies aim to protect consumers and ensure fair practices in the housing market.
Support the local news that supports Chester County. MyChesCo delivers reliable, fact-based reporting and essential community resources—free for everyone. If you value that, click here to become a patron today.