CUNA urges NCUA to reconsider the scope of the AVM QC NPRM

August 22, 2023

CUNA filed a comment letter with National Credit Union Administration (NCUA) in response to the interagency NPRM on Quality Control Standards for Automated Valuation Models (AVMs) Monday. CUNA urged the NCUA to consider better aligning the rule with existing regulations and guidance that cover appraisals, evaluations, and AVMs. 

The NPRM is intended to implement the quality controls standards in section 1125 of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA). Section 1125 requires quality control standards that are designed to 

  • Ensure a high level of confidence in the estimates produced by [AVMs]; 
  • Protect against the manipulation of data; 
  • Seek to avoid conflicts of interest; 
  • Require random sample testing and reviews; and 
  • Account for any other such factor that the agencies determine to be appropriate.  

The agencies used the discretion provided by the statute to require a fifth quality control factor: Compliance with non-discrimination laws like the Equal Credit Opportunity Act. 

“Credit unions, especially small credit unions, are concerned that the regulatory burden of requiring a non-discrimination quality control standard through the proposed rule will preclude them from being able to use AVMs in the origination of a mortgage loan,” the letter reads. “To the extent that the quality control standards and the control systems expected to be implemented by a mortgage originator require fair lending testing of AVM values, credit unions worry that they may not have large enough data sets to be able to do meaningful, statistically significant testing with their AVM results.” 

The letter asks NCUA and the agencies to limit the scope of covered AVM uses under the rule to align with the agencies’ rules and guidance related to appraisals, AVMs, and risk management. The letter also requests that NCUA and the agencies refrain from including the nondiscrimination quality control standard in the final rule because the potential consumer benefits may not outweigh the increased regulatory burden it would place on credit unions.