CFPB Seeks Your View on Algorithmic Bias in Home Valuations

Written By Troy Garris

On February 23, the CFPB released a proposal laying out a number of options for ensuring that automated valuation models (AVMs) establish fair and accurate home values when used for appraisal purposes. The proposals are designed to ensure that the computer algorithms use unbiased data and that appropriate controls are in place to protect against risks related to the creation and use of AVMs.  

Failure to ensure that homes are accurately appraised and valued can result in significant fair lending risk.  Undervaluing homes could result in failed home sales or inability to refinance mortgages.  Overvaluing homes could create real estate bubbles and perpetuate difficulties in purchasing homes.  These risks are magnified when a faulty AVM is used.  The CFPB has noted a specific concern relating to the potential use of inaccurate AVMs and the creation and preservation of redlined neighborhoods.

The CFPB requests comments from small entity representatives by April 8, 2022 and written feedback from other stakeholders no later than May 13, 2022.  Comments can be emailed to the CFPB at 2022-SBREFA-AVM@cfpb.gov.

Please contact me at troy@garrishorn.com if you would like to discuss any of these issues. 

Troy Garris

Troy is a business owner’s lawyer, priding himself on a results-oriented, pragmatic approach to addressing legal issues in the financial services world. In his words, “I find out what the business wants, what it needs. If I start there, I can often find a way to get them to the result wanted, or very close to it, in a legal and compliant way.”

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