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Regulatory Roundup: Agencies collaborate on AVM quality control standards, AI competition

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Banking, Industry Regulation
Tuesday, July 23, 2024

Collaboration is a major theme in the real estate finance industry. Federal regulators charged with its oversight are busy coordinating measures aimed at improving policies and procedures designed to enhance and preserve healthy competition, security, and integrity within the financial space shared by mortgage lenders and other financial institutions.

Get caught up on some of these collaborative undertakings in this regulatory roundup:

Agencies adopt quality control standards for AVMs

Six federal regulatory agencies issued a final rule implementing quality control standards for automated valuation models (AVMs) used by mortgage originators and secondary market issuers in valuing those homes, as required by the Dodd-Frank Act. The rule is designed to help ensure the credibility and integrity of models used in valuations for certain mortgages secured by a consumer’s principal dwelling. Financial institutions that engage in these types of transactions will need to adopt policies, practices, procedures, and control systems designed to: ensure a high level of confidence in estimates; protect against data manipulation; seek to avoid conflicts of interest; require random sample testing and reviews; and comply with nondiscrimination laws. The final rule will become effective on the first day of the calendar quarter 12 months after its publication in the Federal Register. Learn more here and read about the new guidance about reconsideration of value (ROVs) published by federal regulators, which also applies to financial institutions.

AML/CFT proposal published for public comment

Four federal financial institution regulatory agencies are seeking stakeholder feedback on a proposed rule to update requirements for supervised institutions governing the establishment, implementation, and effective maintenance of programs reasonably designed in compliance with laws and regulations on anti-money laundering and countering the financing of terrorism (AML/CFT). The amendments are intended to align with changes concurrently proposed by the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN), most of which result from the Anti-Money Laundering Act of 2020 (AML Act). The proposed amendments would require supervised institutions to identify, evaluate, and document the regulated institution’s money laundering, terrorist financing, and other illicit finance activity risks, as well as consider, as appropriate, FinCEN’s published national AML/CFT priorities. Comments will be due 60 days following the proposal’s publication in the Federal Register. Find out more here.

FTC, DOJ release joint statement with international enforcers on AI competition

Leaders at the Federal Trade Commission (FTC) and the Department of Justice (DOJ) issued a joint statement with the U.K. Competition and Markets Authority and the European Commission affirming the agencies’ commitment to protecting competition across the artificial intelligence (AI) ecosystem, providing fair and honest treatment for both consumers and businesses. While AI could prove to be one of the most significant technological developments in recent decades, the agencies said it also raises competition risks that should be addressed. All four antitrust enforcers pledged to remain vigilant for potential competition issues and expressed determination to use available powers to safeguard against tactics that would undermine fair competition or lead to unfair or deceptive practices in the AI ecosystem. Get more details here.

SEC launches interagency enforcement council

The Securities and Exchange Commission’s (SEC) Division of Enforcement launched its Interagency Securities Council (ISC), inviting federal, state, and local regulatory and law enforcement professionals to meet quarterly to discuss the latest in scams, trends, frauds, and mitigation strategies. The council’s objective will be to strengthen the cohesion between federal, state, and local agencies, as well as to enhance collaboration opportunities on certain types of cases. The ISC has representatives from more than 100 departments and agencies, including federal agencies, state offices of attorneys general and state police, and local police departments and sheriff’s offices, according to the SEC. Learn more here.

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