The Consumer Financial Protection Bureau released an outline of options to strengthen oversight of computer models used to help determine home valuations.
Appraisal Models: The CFPB said both in-person appraisals and automated valuation models that use data to value homes appear to be susceptible to bias and inaccuracy without regulatory safeguards.
CFPB Concerns: Automated valuation models can pose fair lending risks, particularly if flawed versions of these models digitally redline certain neighborhoods and further perpetuate disparities, the agency said.
Regulatory Focus: The CFPB said it is working to ensure confidence in automated estimates, protect against data manipulation, avoid conflicts of interest, require random sample testing and reviews, and address any other relevant factors.
Background: The Dodd-Frank Act tasked the CFPB and other regulators with implementing rules on appraisal models. The Biden administration last year launched an interagency task force to address appraisal inequities.
Next: The CFPB said it will convene a Small Business Review Panel under the Small Business Regulatory Enforcement Fairness Act to collect advice and recommendations from small entities that would be affected by a proposed rulemaking, which ultimately will be issued jointly with other regulators.
ICBA Position: An ICBA community banker will participate in the SBREFA panel, and ICBA staff will stay engaged with the CFPB and other agencies as the rulemaking proceeds.
