United States of America: Announced CFPB Quality Control Standards Rule for Automated Valuation Models

On 1 June 2023, the Consumer Financial Protection Bureau (CFPB), alongside the US Office of the Comptroller of the Currency, the US Board of Governors of the Federal Reserve System, the US Federal Deposit Insurance Corporation, the US National Credit Union Administration and the US Federal Housing Finance Agency proposed a Quality Control Standards for Automated Valuation Models Rule implementing the standards mandated by the 2 Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act). The Rule would be applicable when artificial intelligence is used to determine the worth of a mortgage. The proposed Rule entails that institutions involved in specific credit decisions or securitisation determinations must establish policies, practices, procedures, and control systems. The measures are aimed at ensuring that automated valuation models utilised in these transactions to assess the value of mortgage collateral adhere to quality control standards. The Rule aims to ensure a high level of confidence in the estimates generated by these models, prevent data manipulation, avoid conflicts of interest, conduct random sample testing and reviews, and comply with relevant nondiscrimination laws. The public consultation on the proposed Rule will open following its publication in the Federal Register.