Mortgage lenders using artificial intelligence in home appraisals must adopt policies that protect against manipulation, avoid conflicts of interest, and comply with nondiscrimination laws under a final rule from federal regulators.
Some lenders and secondary market issuers use AI or other automated software to estimate a home’s value. A rule from the Consumer Financial Protection Bureau and five other regulators aimed at reducing bias would require those companies to adopt procedures “designed to ensure a high level of confidence” in home value estimates.
The CFPB approved the final rule Monday, according to a blog post from Director Rohit Chopra and Deputy Director Zixta Martinez.
The Office of the Comptroller of the Currency, Federal Reserve, Federal Deposit Insurance Corp., National Credit Union Administration, and Federal Housing Finance Agency joined the CFPB to propose the rule last year. It was part of the Biden administration’s broader efforts targeting racial bias in the appraisal industry.
The rule will take effect about a year after all the agencies approve it.
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