The interagency quality control standards for automated valuation models apply directly to which parties?
Correct Answer
C) Mortgage originators and secondary market issuers
The federal interagency AVM quality-control rule applies to mortgage originators and secondary-market issuers using AVMs in the covered collateral-worth determinations for consumer principal dwellings, subject to the rule’s definitions and exclusions. It is distinct from the earlier interagency appraisal/evaluation guidance. It expressly excludes AVM use by certified or licensed appraisers in developing an appraisal; those appraisers still have applicable professional obligations.
Why This Is the Correct Answer
Option C is correct because the AVM quality-control standards apply directly to mortgage originators and secondary market issuers using AVMs in covered collateral-worth determinations. The statutory definition of an AVM is tied to use by those parties. The rule expressly excludes AVM use by certified or licensed appraisers in developing an appraisal.
Why the Other Options Are Wrong
Option A: Individual appraisers using models in assignments
Option A is wrong because it names individual appraisers using models in assignments. The rule excludes AVM use by certified or licensed appraisers in developing an appraisal, although those appraisers still have their own professional obligations.
Option B: State appraiser regulatory agencies and their boards
Option B is wrong because it names state appraiser regulatory agencies and their boards. The rule's quality-control standards are directed at covered mortgage originators and secondary market issuers, not state regulators.
Option D: Property data collectors gathering field information
Option D is wrong because it names property data collectors gathering field information. Data collectors do not use AVMs to determine collateral worth as the statute defines, so the rule does not apply directly to them.
Lenders and issuers, not appraisers
The AVM rule follows the money: those who originate or securitize the mortgage. Appraisers using AVMs to develop appraisals are carved out.
How to use: Use this when a question asks who the AVM quality-control rule directly governs.
Exam Tip
Remember the appraiser exclusion; an answer naming individual appraisers is the most common trap on this topic.
Common Mistakes to Avoid
- -Believing the AVM rule applies directly to appraisers developing appraisals
- -Confusing the AVM rule with the Interagency Appraisal and Evaluation Guidelines
- -Assuming the rule covers every use of an AVM
Concept Deep Dive
Analysis
This question tests the scope of the federal interagency AVM quality-control rule. The statute defines an AVM as a computerized model used by mortgage originators and secondary market issuers to determine collateral worth of a mortgage secured by a consumer's principal dwelling. The rule therefore applies directly to those parties, not to individual appraisers, regulators or data collectors.
Background Knowledge
Federal law directs quality-control standards for AVMs used by mortgage originators and secondary market issuers in determining collateral worth for loans on consumers' principal dwellings. This rule is distinct from the earlier interagency appraisal and evaluation guidance.
Real-World Application
A mortgage lender using AVMs to decide whether a home-equity loan needs an appraisal must have quality-control policies meeting the rule. An appraiser who consults an AVM while developing an appraisal is instead governed by USPAP and other applicable obligations.
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