What the federal AVM rule asks of lenders
Since October 1, 2025, lenders that use automated valuation models in mortgage decisions must hold them to five quality control standards. An appraiser using a model is outside the rule.
What is the AVM quality control rule?
It is a final rule from six federal agencies that sets quality control standards for automated valuation models used in mortgage decisions on a consumer's principal dwelling.
The agencies are the OCC, the Federal Reserve Board, the FDIC, the NCUA, the CFPB and FHFA. They announced the rule on July 17, 2024. It was published in the Federal Register on August 7, 2024, and it took effect on October 1, 2025.
The definition is broad: any computerized model that mortgage originators and secondary market issuers use to determine the value of a principal dwelling that secures a mortgage. It says nothing about the technique inside. A regression, a gradient boosted ensemble and a neural network all count if the output is a value used in a covered decision.
What do the five quality control factors require?
Covered institutions must keep policies, practices, procedures and control systems so that the models they rely on meet five standards.
- Ensure a high level of confidence in the estimates produced.
- Protect against the manipulation of data.
- Seek to avoid conflicts of interest.
- Require random sample testing and reviews.
- Comply with applicable nondiscrimination laws.
The rule names no method, vendor or accuracy threshold. The agencies call it a flexible approach. Each institution sets controls to suit its size, complexity and risk profile, and updates them as modeling changes. So if you build models, you have to show control. There is no published number to hit.
The fifth factor traces back to the federal PAVE task force. Its March 2022 action plan committed the agencies writing this rule to include a nondiscrimination quality control standard.
Which decisions does the rule cover?
It covers models used in credit decisions and in covered securitization determinations by mortgage originators and secondary market issuers.
A credit decision is a decision about whether and on what terms to originate, modify or terminate a mortgage, including changes to a credit line. A covered securitization determination includes deciding whether to waive an appraisal requirement for a loan headed to the secondary market.
Watch the second piece. If a model's number is the reason no appraiser is sent, the model falls under the rule.
What does the rule leave out?
Three uses fall outside it: monitoring loans or securities already on the books, reviewing valuations that are already complete, and an appraiser's use of a model while developing an appraisal.
The agencies gave two reasons for the appraiser exclusion. First, an appraiser who uses a model must still reach credible results under USPAP, so the value has to be supportable without the model. Second, it would be impractical for lenders to police the tools used by many independent appraisers.
In effect, the rule restates the difference between a model and an appraisal. A model gives an estimate the institution must govern. An appraisal is a conclusion a person must support.
Common questions
Does the rule ban any particular AVM?
Does an appraiser who uses an AVM have to follow the rule?
When did the rule take effect?
- Where AI fits in property valuationThe homepage overview of what models do well and where they stop.
- Can AI sign an appraisal?Why the signature still belongs to a credentialed person.
- Where AI helps an appraiser todayPhoto review, data checks and comparable search, with the appraiser deciding.
- Bias and fairness in automated valuationWhat federal agencies have said about models and fair housing.
Sources
- Quality Control Standards for Automated Valuation Models, final rule, Federal Register Vol. 89, No. 152 (August 7, 2024). OCC, Federal Reserve Board, FDIC, NCUA, CFPB and FHFA, via GovInfo.
- Agencies Issue Final Rule to Help Ensure Credibility and Integrity of Automated Valuation Models (July 17, 2024). Consumer Financial Protection Bureau.
- Agencies issue final rule to help ensure credibility and integrity of automated valuation models (July 17, 2024). Board of Governors of the Federal Reserve System.
- Action Plan to Advance Property Appraisal and Valuation Equity (March 2022). Interagency Task Force on Property Appraisal and Valuation Equity, HUD archives.