Automated valuation models (AVMs) have been a fixture in our industry for decades. These workhorse products, largely invisible to most consumers, are used to originate home equity products, test appraisal quality, value portfolios, and make servicing decisions. But, given new federal guidelines and changes in testing methodology, AVMs are about to get more attention — and possibly more scrutiny — from regulators and lenders.
By next July, lenders will be required to demonstrate the steps they are taking to track and maintain standards for accuracy and prevent bias in the AVMs they use. At the same time, new AVM testing methods are already providing more targeted insights into how various AVMs are performing.
The increasing volume of new AVM products coming to market and widening industry use of AVMs mean preparing to comply with the new guidelines takes on added importance.