Banking Agencies Set Comment Deadline on Proposal to Require Quality Control Standards for Automated Valuation Models
The banking agencies set a comment deadline of August 21, 2023 for a proposed to require mortgage originators and secondary market issuers to ensure that "automated valuation models ("AVMs") used in certain credit decisions or covered securitization determinations adhere to quality control standards." The comment deadline was published in the Federal Register.
As previously covered, the agencies - which include the OCC, the Federal Reserve Board, FDIC, National Credit Union Administration, CFPB and Federal Housing Finance Agency - proposed that mortgage originators and secondary market issuers enforce quality control standards that:
- ensure a "high level of confidence" in AVM estimates;
- prevent manipulation of data and conflicts of interest;
- mandate random sample testing and reviews of the standards; and
- comply with nondiscrimination laws.
The proposal includes guidance on establishing policies and procedures aimed at ensuring the "accuracy, reliability, and independence of an AVM." However, the proposed rule does not prescribe specific requirements. The agencies stated that the proposal allows for institutions to set quality controls proportionate to the size and complexity of transactions.