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NAFCU sent a letter to the NCUA in response to a joint agency proposed rule implementing the Dodd-Frank mandated quality control (QC) standards for the use of automated valuation models (AVMs) by mortgage originators and secondary market issuers when making credit decisions or securitization determinations.

“NAFCU is strongly supportive of all efforts to eliminate bias and ensure equity in the home appraisal process, while simultaneously fostering an environment that supports modernizing and streamlining the process, especially for historically disenfranchised communities and demographics,” wrote Senior Regulatory Affairs Counsel James Akin.

Additionally, Akin urged the agency to take “a principles-based approach” for the first four quality control factors – specified in the Dodd-Frank Act – but exclude a separate fifth QC factor for compliance with applicable nondiscrimination laws for mortgage originators. Akin argued the burden of ensuring nondiscrimination compliance should fall on the third-party AVM provider, rather than credit unions, and urged the agencies to support the creation of a standards setting organization (SSO) for AVM providers that would certify adherence to QC standards.

“[I]t is imperative for regulatory bodies, tasked with safeguarding the reliability of algorithmic valuation models, to exercise caution while formulating regulations. These rules should not dampen the spirit of innovation or act as a deterrent for smaller community financial institutions from adopting cutting-edge technology because of prohibitive compliance costs,” said Akin.

Stay tuned to NAFCU Today as more information on AVM regulations becomes available.