DOEREN MAYHEW and renewing , increasing , or terminating a home equity line of credit ( HELOC ).”
This definition expressly excludes the use of AVMs in monitoring the quality or performance of mortgages or mortgage-backed securities . Furthermore , the CFPB determined the usage of AVMs solely to monitor a creditor ’ s mortgage portfolio would not be a credit decision under the rule because lending institutions have already made the credit decision . By focusing on determinations of value made in connection with credit decisions and excluding the coverage of AVM usage in portfolio monitoring , the agency argues this rule will reduce the compliance costs associated with a broader application of the quality control standards .
Secondary Market Issuers
Under this rule , secondary market issuers are defined as “ any party that creates , structures , or organizes mortgagebacked security transactions ” and uses AVMs to make determinations regarding securitizations . Subsequently , the CFPB labeled the relevant secondary market issuer activity as “ covered securitization determinations ,” which are defined as determinations regarding :
1 . Whether to waive an appraisal requirement for a mortgage origination in connection with its potential sale or transfer to a secondary market issuer ; or
2 . Structuring , preparing disclosures for or marketing initial offerings of mortgage-backed securitizations .
Other Practices Not Encompassed by the Rule
Significantly , certain AVM uses are not covered by the rule , including usage by a certified or licensed appraiser in developing an appraisal . This is reflective of the fact that appraisers , despite utilizing AVMs in their appraisal preparations , are nonetheless obligated to produce credible results in accordance with the Uniform Standards of Professional Appraisal Practice and its interpretative opinions . As such , these valuation conclusions must be supportable independently and appraisers cannot rely exclusively on an AVM to determine the value of the underlying collateral .
Additionally , the final rule does not encompass AVMs utilized in the review of completed valuation determinations , given the value of the collateral is determined by the underlying appraisal or evaluation , not the review of them .
When This Rule Will Take Effect
This rule will take effect the first day of the calendar quarter following 12 months from the date of publication in the Federal Register . However , despite the CFPB issuing a press release announcing the finalization of the rule , it has yet to be published in the Federal Register as of early July . Therefore , to maintain regulatory compliance , financial institutions should start monitoring the process of this rule ’ s publication and prepare for its inevitable impact on AVMs in the coming year .
VIEWPOINTS : REGULATORY COMPLIANCE EDITION | 05