Data and Analytics
What you need to know: New federal guidelines for AVMs
Damien Weldon, Vice President of Valuation and Collateral Solutions, and John Holbrook, Vice President of Digital Valuation Solutions at ICE, were featured in MBA NewsLink where they discussed the new federal quality control standards for AVMs. These standards focus on preventing and removing bias in AVMs in addition to emphasizing the continuing importance of AVM credibility and transparency. Below is an excerpt, with a link to the full article following.
Decades after the first fair lending laws started to address discrimination in residential lending, regulators continue to be laser-focused on eliminating bias in the real estate valuation process.
That’s why it’s important for lenders to have transparent, objective and credible valuation processes and solutions that can not only address regulatory concerns but also support the borrower’s right to nondiscriminatory lending.
The evolution of AVMs and regulatory oversight
Recent advancements in technology and greater access to richer insights about the condition of a property have created new opportunities to improve property valuation efficiency and credibility. As automated valuation models (AVMs) became more readily available and more widely accepted over the years, federal regulators began to scrutinize their use. As a result, the Dodd-Frank Act (Dodd-Frank Wall Street Reform and Consumer Protection Act) of 2010, which amended the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA), codified four AVM quality control standards:
- Accuracy
- Data integrity
- Objectivity
- Random testing and review
In 2021, a created federal interagency task force released the Action Plan to Advance Property Appraisal and Valuation Equity (PAVE). Following that effort, the OCC, the Federal Reserve Board of Governors, FDIC, NCUA, CFPB and FHFA published a proposed rule to implement the quality control standards mandated by Dodd-Frank for the use of AVMs by mortgage originators and secondary market issuers. The proposed rule scopes using AVMs to determine the value of the real property being utilized as the collateral for a mortgage transaction.
The new rule and its implications
On June 30, the final rule was published by the individual federal agencies, and its subsequent publication in the Federal Register started the clock on the rule’s implementation. The rule directs institutions that engage in certain credit decisions or securitization determinations to:
Adopt policies, practices, procedures and control systems to ensure that AVMs used in these transactions to determine the value of mortgage collateral adhere to quality control standards designed to ensure a high level of confidence in the estimates produced by AVM
- Protect against the manipulation of data
- Seek to avoid conflicts of interest
- Require random sample testing and reviews
- Comply with applicable nondiscrimination laws
The rule goes into effect on Oct. 1, 2025.
Read the full article to hear key takeaways on what the new standards mean for lenders, service providers and consumers.
Related resources
Follow us on Linkedin
Access Mortgage Monitor reports
2025 Borrower Insights Survey report