On August 7, 2024, federal regulators from six agencies including the Federal Reserve, FHFA, and others finalized a new rule establishing quality control standards for automated valuation models (AVMs). Effective October 1, 2025, these changing regulations are designed to improve the accuracy, integrity, and fairness of AVMs used in mortgage lending and securitization. This decision marks a pivotal shift for mortgage originators and secondary market issuers who rely on AVMs.
Read on to learn how the guidelines are changing and how ClearAVM™ is ready to meet a changing market.
How AVM guidelines are changing
These new AVM guidelines apply to mortgage originators who use AVMs for credit decisions and secondary market issuers who deploy AVMs for securitization determinations or appraisal waivers. The guidelines do not apply to those who use AVMs to monitor a property’s value over time or to validate an existing valuation.
Under the new rule, institutions using AVMs must adopt policies and controls to ensure AVMs used in applicable transactions meet the following five standards:
- Ensure a high level of confidence in the estimates produced
- Protect against data manipulation
- Avoid conflicts of interest
- Require random sample testing and reviews
- Comply with applicable nondiscrimination laws
A significant enhancement within this regulation is the explicit mandate for compliance with nondiscrimination laws. This addition builds upon the foundational Dodd-Frank Act, reinforcing a clear commitment to fostering equitable and unbiased lending practices across the entire financial ecosystem.
How ClearAVM delivers on every requirement
ClearAVM™ is built to align with regulatory standards, providing lenders and investors with the confidence they need to make reliable, informed lending decisions.
Ensuring high levels of confidence
Each ClearAVM is accompanied by interpretable Confidence Scores — including “Confidence within 10%” metrics and Forecast Standard Deviation (FSD). Clear Capital empowers lenders to set risk-based thresholds of confidence to ensure policies are met consistently. Our scores are tested, calibrated, and monitored so that users can trust ClearAVM’s lending-grade predictions.
Protecting against data manipulation
Clear Capital employs strict governance over the data used in ClearAVM, sourcing from high-quality, trusted providers and enforcing multi-stage controls. With API integrations, every API call is digitally signed so clients can verify that the data is authentic and untouched.
Avoiding conflicts of interest
Clear Capital helps clients structure AVM workflows that eliminate value shopping and mitigate conflicts of interest. Internally, we separate model development, testing, and deployment teams to ensure no one group can influence the outcome. And because Clear Capital isn’t involved in mortgage transactions, our valuations stay unbiased by default.
Continuous random sample testing and reviews
ClearAVM undergoes routine internal testing and participates in third-party validation. We test against both standard benchmarks (such as actual sales and appraisals) and “blind” evaluations — measuring a version of ClearAVM that excludes listing information to simulate real-world conditions and reliably measure accuracy.
Compliance with applicable nondiscrimination laws
ClearAVM excludes any data tied to protected classes or their proxies. We run quarterly disparate impact tests to verify fair outcomes across geographies and demographics. Our modeling approach intentionally avoids reinforcing historical biases like redlining, and we engage directly with regulators and industry groups to advance fair valuation practices.
Leading the industry into a new era
These landmark new AVM rules signal a turning point for AVM valuations — and ClearAVM is ready. It is built to meet and exceed industry standards, providing lenders and investors with the confidence they need to make confident, informed decisions. More than just checking the compliance box, we’re committed to building trust, transparency, and fairness into the foundation of every valuation we deliver.