For AVM uses covered by the federal interagency AVM quality-control rule, which policy objective is one of the required quality-control factors?
Correct Answer
D) Complying with applicable nondiscrimination laws
For covered uses, policies, practices, procedures, and control systems must address confidence in estimates, protection against data manipulation, avoidance of conflicts, random-sample testing and review, and compliance with applicable nondiscrimination laws. The rule does not impose the other three universal requirements. Its coverage is specific; it excludes AVMs used by certified or licensed appraisers in developing an appraisal.
Why This Is the Correct Answer
Option D is correct because compliance with applicable nondiscrimination laws is one of the quality-control factors the rule requires for covered AVM uses. It sits alongside high confidence in estimates, protection against data manipulation, avoidance of conflicts of interest, and random-sample testing and review.
Why the Other Options Are Wrong
Option A: Requiring a manual appraisal review of each AVM estimate
Option A, requiring a manual appraisal review of each AVM estimate, is not a factor in the rule. The rule calls for random-sample testing and review, not a manual review of every single estimate.
Option B: Ensuring each estimate is within five percent of a sale price
Option B, ensuring each estimate is within five percent of a sale price, is not a requirement of the rule. The rule addresses confidence in estimates through policies and controls rather than a fixed five percent accuracy standard.
Option C: Rebuilding models on a fixed annual date
Option C, rebuilding models on a fixed annual date, is not among the required factors. The rule does not set a fixed model rebuild schedule.
Five AVM quality-control factors
Remember the five factors as Confidence, Data protection, Conflicts, random Sampling, and Nondiscrimination.
How to use: Use this list to check whether an option is actually one of the rule's required factors.
Exam Tip
Options that add precise numbers or schedules, such as five percent or an annual date, are often invented; check them against the actual list of factors.
Common Mistakes to Avoid
- -Believing the rule requires a manual review of every AVM estimate
- -Assuming the rule sets a numeric accuracy tolerance
- -Thinking the rule covers AVMs used by appraisers developing an appraisal
Concept Deep Dive
Analysis
This question tests knowledge of the quality-control factors in the federal interagency AVM rule. For covered uses, policies and controls must address confidence in estimates, protection against data manipulation, avoidance of conflicts of interest, random-sample testing and review, and compliance with applicable nondiscrimination laws. Match the option to that list and reject requirements the rule does not impose.
Background Knowledge
The interagency AVM quality-control rule applies to covered uses of AVMs, such as certain mortgage origination and securitization decisions. It excludes AVMs used by certified or licensed appraisers in developing an appraisal. Covered institutions must adopt policies, practices, procedures and control systems addressing the listed factors.
Real-World Application
A lender using an AVM for mortgage origination decisions updates its control policy to include random-sample testing, conflict-of-interest safeguards, and a fair lending review of how the model performs across neighborhoods. The fair lending review addresses the nondiscrimination factor.
More Emerging Methods Questions
A loan is eligible for Fannie Mae's value acceptance + property data option, and the lender elects that option. What does the lender obtain in place of an appraisal?
An appraiser uses a building-permit file to investigate an addition. What is an important limitation of that source?
A real estate salesperson, acting solely in a brokerage role, prepares a CMA to help a listing client choose an asking price. Which statement is best?
An appropriately credentialed appraiser is offered a desktop assignment on an unfamiliar property type. A necessary competency gap is known before agreement. If the appraiser elects to proceed, what is required?
How should an appraiser identify potentially distressed transactions in a data set?
Why should an appraiser identify the data sources used in the report?
How should an appraiser treat a value estimate found on a consumer real estate website?
An appraiser builds a spreadsheet regression to support adjustments. How is it treated?
May an appraiser use data from a prior assignment for a different client?
The intended lender’s applicable assignment conditions require an interior inspection. The client asks the appraiser to deliver a desktop appraisal instead, and the inspection condition has not been authorized for modification. What should the appraiser do?
People Also Study
Real Estate Market
13.6% of exam
Property Description
11.8% of exam
Land or Site Valuation
4.5% of exam
Sales Comparison Approach
16.4% of exam
Cost Approach
13.6% of exam