Regulators issue AVM proposal, WH addresses appraisal bias efforts

June 1, 2023

NCUA and other federal financial regulators issued a proposed rule regarding Automated Valuation Models (AVMs) Thursday, part of several efforts announced by the Biden administration to address racial bias in home valuations.

The proposed rule would require institutions that engage in covered transactions to adopt policies, practices, procedures, and control systems to ensure that AVMs adhere to quality control standards designed to ensure the credibility and integrity of valuations.

The proposed standards are designed to ensure a high level of confidence in the estimates produced by AVMs; help protect against the manipulation of data; seek to avoid conflicts of interest; require random sample testing and reviews; and promote compliance with applicable nondiscrimination laws.

The White House fact sheet also notes:

  • Federal banking agencies are developing guidance about how regulated institutions can incorporate reconsiderations of value (ROV) into their valuation processes when consumers may experience inaccurate or biased appraisals.
  • The Department of Housing and Urban Development (HUD) and Federal Housing Finance Agency (FHFA) are creating a working group to develop consistent standards for ROVs for Federal Housing Administration (FHA), Fannie Mae, and Freddie Mac lenders.
  • FHFA is updating the Uniform Appraisal Dataset (UAD) Aggregate Statistics, and HUD is committing to making FHA appraisal data available.
  • The Property Appraisal and Valuation Equity (PAVE) Task Force created a dashboard on barriers to entry in the market for appraisers in each state.

CUNA has noted in numerous letters to Congress that systemic bias in home appraisals undermines long-term U.S. financial security, and noted credit unions rely on appraisals for accurate and unbiased opinions on home market values.