CFPB Outlines Automated Valuation Model Rulemaking Proposals

The CFPB today announced the next step in a joint agency rulemaking to develop quality control standards for the use of computer models, known as automated valuation models, used to help assess home valuations.

The Dodd-Frank Act requires the bureau, the banking agencies, National Credit Union Administration and the Federal Housing Finance Agency to write a rule to strengthen oversight of the models to “ensure a high level of confidence in the estimates; protect against the manipulation of data; avoid conflicts of interest and require random sample testing and reviews.”

The CFPB said the computer models and algorithms improve valuation accuracy for mortgage lenders and appraisers, but the bureau is concerned that automated valuation models can pose fair-lending risks to buyers and sellers.

The next step, the bureau said, is to review the options to determine their potential impact on small banks and businesses through initiation of the Small Business Regulatory Enforcement Review Act review process required for all CFPB rulemakings.