The FDIC is inviting public comments on proposed rules for automated valuation models (AVMs) used in determining the value of real estate properties for mortgage loans

 The Federal Deposit Insurance Corporation (FDIC), along with several other government agencies, is inviting public comments on proposed rules for automated valuation models (AVMs) used in determining the value of real estate properties for mortgage loans. This initiative aims to implement quality control standards mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act.

The agencies involved in this effort include the FDIC, the Board of Governors of the Federal Reserve System, the Office of the Comptroller of the Currency, the National Credit Union Administration, the Federal Housing Finance Agency, and the Consumer Financial Protection Bureau. By seeking public input, these organizations aim to gather valuable feedback from stakeholders and ensure the rules reflect the needs and concerns of the public. The proposed rules would require mortgage originators and secondary market issuers to adhere to quality control standards when using AVMs to determine the collateral value of a mortgage secured by a consumer's primary residence. These standards are designed to promote confidence in the accuracy of AVM estimates, prevent data manipulation, avoid conflicts of interest, and include random sample testing and reviews. Additionally, the proposed rules would introduce a new quality control factor to ensure compliance with applicable nondiscrimination laws.

Under the proposed rules, institutions engaging in credit decisions or covered securitization determinations would need to establish policies, practices, procedures, and control systems to ensure AVMs used in these transactions meet the prescribed quality control standards. This would help mitigate discrimination risks and foster well-functioning AVMs that produce reliable estimates. It's important to note that the proposed rules specifically apply to AVMs used in making credit decisions or covered securitization determinations, rather than other uses like ongoing value monitoring or validating completed valuations. Secondary market issuers would be subject to these rules when using AVMs for covered securitization determinations or appraisal waivers. AVMs used solely for collateral value monitoring would not be subject to the quality control factors.

The agencies are welcoming public comments on the proposed rules, which will be accepted for a period of 60 days after publication in the Federal Register. This public input is crucial for the agencies to gain insights, perspectives, and suggestions from individuals and organizations involved in the real estate and mortgage industries. The FDIC, an independent agency established by Congress, plays a vital role in maintaining stability and public confidence in the country's financial system. The agency insures deposits, oversees financial institutions for safety and consumer protection, resolves complex financial institutions, and manages receiverships. By actively seeking public input, the FDIC and other government agencies aim to ensure fair and transparent practices in the valuation of real estate properties for mortgage loans, benefitting both consumers and the financial industry as a whole.

Source:https://www.fdic.gov/news/financial-institution-letters/2023/fil23026.html?source=govdelivery&utm_medium=email&utm_source=govdelivery