ABA urges CFPB to balance concerns, benefits of AVMs in rulemaking

The American Bankers Association today offered feedback to the CFPB on a recent outline of proposals under consideration for a joint agency rulemaking to develop quality control standards for the use of computer models, known as automated valuation models. 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.”

In the letter, ABA questioned the benefits of a quality control factor for fair lending, noting that banks’ use of AVMs is already heavily regulated by the banking agencies and that banks are subject to regular supervision for fair lending compliance. ABA also urged the CFPB to keep the scope of the rule tailored only to AVMs used for underwriting decisions, exempt banks’ use of AVMs for appraisal waivers and otherwise ensure that regulatory burden is minimized so as not to discourage banks from using AVMs.

ABA also urged the CFPB to balance concerns about AVMs with the benefits, emphasizing that “AVMs provide benefits to consumers and the industry by reducing origination costs, easing issues caused by appraiser shortages, including in rural areas, and providing objectivity that may address concerns about individual appraisers’ bias.”