On 2/23/2022, the CFPB outlined options to ensure that computer models used to help determine home valuations are accurate and fair. The options will now be reviewed to determine their potential impact on small businesses.
From CFPB Director Rohit Chopra’ statement:
“It is tempting to think that machines crunching numbers can take bias out of the equation, but they can’t. This initiative is one of many steps we are taking to ensure that in-person and algorithmic appraisals are fairer and more accurate.”
According to the CFPB’s release, automated valuation models can pose fair lending risks to homebuyers and homeowners. The CFPB is particularly concerned that without proper safeguards, flawed versions of these models could digitally redline certain neighborhoods and further embed and perpetuate historical lending, wealth, and home value disparities. Thus, the bureau has prepared the Outline of Proposals and Alternatives Under Consideration to provide background to the small entity representatives (SERs) and to facilitate the SBREFA Panel process.
The CFPB’s options will strengthen oversight of these automated valuation models models. Specifically, the CFPB, along with its federal partners, intends to:
Ensure a high level of confidence in the estimates produced by automated valuation models;
Protect against the manipulation of data;
Seek to avoid conflicts of interest;
Require random sample testing and reviews; and
Account for any other such factor that the agencies determine to be appropriate.
The CFPB will accept written feedback from SERs and other stakeholders on this Outline. Written feedback from SERs will be considered and incorporated into the Panel Report.
Read the CFPB’s full release here.
See the Outline here.