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WASHINGTON – The U.S. Federal Reserve, the Federal Deposit Insurance Corp., Consumer Financial Protection Bureau, the Federal Housing Finance Agency, the Office of the Comptroller of the Currency and the National Credit Union Administration issued a final rule to address potential abuses related to the use of artificial intelligence and other technologies that are gaining prevalence in mortgage lending.
Regulators said that lenders have a responsibility to ensure their outsourced artificial-intelligence tools don’t violate consumer protection and fair lending laws. The rule requires home mortgage lenders to meet new standards to ensure automated valuation models don’t build in flaws that might produce faulty estimates or discriminate against borrowers.
Regulators said the rule is intended to “help ensure the credibility and integrity” of home valuation models through quality-control standards for mortgage originators and secondary-market issuers.
Lenders have increasingly relied upon these automated valuation models to reduce expenses and turnaround times, but regulators said that lenders need to ensure valuations are accurate and not discriminatory.
Source: Bloomberg (07/17/24) Johnson, Katanga
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