The New AVM Compliance 2025 Rule is Here - Are You Ready?
The AVM Quality Control Rule took effect on October 1, 2025, requiring lenders to document, test, and monitor how they use Automated Valuation Models (AVMs). The goal: ensure valuations are accurate, unbiased, and well-controlled. Many lenders still aren’t ready, but compliance is now mandatory. This blog explains what the rule means, what regulators will look for, and how CSS can help lenders close gaps quickly and stay confident in their AVM programs.
Why This Rule Matters
If you work in lending, you’ve probably heard about the new AVM Quality Control Rule for 2025, which officially took effect on October 1. It might sound like another technical regulation, but at its core, it’s about one thing—trusting the data that powers your valuations.
Automated Valuation Models have become indispensable tools for lenders, especially in home equity lending. They help you move faster, lower costs, and improve the borrower experience. But as these models have grown more powerful, regulators want to ensure they’re also accurate, unbiased, and well-controlled.
That’s where the new rule comes in. It requires lenders to establish formal policies, testing, and oversight to make sure AVMs are performing fairly and reliably. It’s not just a compliance checkbox; it’s an opportunity to strengthen the foundation of your valuation process.
What the New AVM Quality Control Rule Requires
The rule, finalized by the CFPB, OCC, Federal Reserve, FDIC, NCUA, and FHFA, applies broadly to mortgage originators, secondary market participants, banks, credit unions, non-bank lenders, and vendors that use AVMs in credit decisions or covered securitizations.
These entities must adopt and maintain policies, practices, procedures, and control systems to ensure their AVMs meet five quality control standards:
- High confidence in the estimates produced
- Protection against data manipulation
- Avoidance of conflicts of interest
- Random sampling and testing to monitor performance
- Compliance with applicable nondiscrimination laws, including fair lending
The first four should feel familiar, as they mirror existing model risk guidelines. The notable change is the fifth requirement — compliance with nondiscrimination laws — which introduces new governance and monitoring expectations.
What Regulators Have (and Haven’t) Said
To date, regulators have offered limited direction on how to evidence compliance with the nondiscrimination standard. The rule itself allows flexibility in how lenders approach it, and it’s still unclear how exam teams will evaluate programs in early reviews.
In the absence of concrete guidance, examiners are expected to focus first on whether lenders have a thoughtful, documented AVM program aligned with fair lending principles. In other words: if you can show your work, you’re on the right track.
Managing Bias Risk: Inputs vs. Outputs
The nondiscrimination requirement centers on bias risk—and there are two key places to address it:
1. Regulating Inputs – AVM providers should prohibit use of variables tied to protected classes. According to AVMetrics, a leading independent AVM testing authority, most credible providers already do this.
AVMetrics’ semi-annual questionnaires include fair-lending items, and their findings show that AVM inputs generally exclude racial demographics and buyer/seller identifiers, reducing intentional bias at the data level.
2. Testing Outputs – Even with clean inputs, unintentional bias can arise from underlying market data. To monitor this, AVM providers—or lenders—can compare AVM outcomes to appraisal benchmarks and analyze valuation differences by racial demographics at the census-tract level.
There’s not yet a universal standard for this testing, but AVMetrics is currently developing a standardized bias-testing framework that providers could adopt in the future.
In the meantime, lenders with HMDA data can run internal analyses comparing AVM estimates to appraisal results on recent purchase or refinance files, segmented by protected-class proxies and tract demographics.
Documentation and Governance Essentials
At minimum, lenders should maintain documentation that covers:
- Why, when, and where AVMs are used across products and geographies
- Model inventory and selection logic, including fallback models and tradeoffs
- Vendor due diligence and data governance, including fair-lending attestations
- Ongoing monitoring and exception handling, and when to escalate to alternate valuations
Where Regulators Will Look First
Regulators aren’t expecting a perfect program on day one, but they do expect a defensible one. Early exams will likely focus on:
- Written AVM policies and procedures
- Testing records, including sampling and fair lending reviews
- Vendor oversight documentation (due diligence, QC reports, and attestations)
- How AVM controls are integrated into broader compliance frameworks
Flexibility doesn’t mean inaction. Examiners will look for evidence of effort and progress, not perfection.
“Many lenders have written policies but haven’t yet put those policies into practice,” says Ashley Jelinek, CEO of Corporate Settlement Solutions. “It’s not that they’re ignoring the rule, the industry is still figuring out what good looks like. But examiners will expect to see movement, even if you’re still in early stages.”
What Lenders Should Do Now
If your AVM compliance program isn’t fully operational, now is the time to act. CSS recommends:
- Review AVM policies with your compliance team as soon as possible.
- Confirm vendor attestations on input-level controls and fair-lending exclusions.
- Decide on an output-testing approach—whether provider-led, internal HMDA-based, or both.
- Document everything: your models, sampling logic, testing, and oversight steps.
These foundational moves help you show examiners that you take compliance seriously—even if your testing framework is still evolving.
How CSS Helps Lenders Stay Compliant
CSS is actively coordinating with AVM providers and AVMetrics to stay ahead of evolving examiner expectations and bias-testing methodologies.
Our AVM and valuation solutions help lenders:
- Use property data tools that meet regulatory expectations
- Automate sampling, testing, and bias reviews
- Manage vendor oversight and documentation in one platform
- Integrate with LOS platforms like Encompass, MeridianLink, and Empower for seamless compliance within existing workflows
CSS can also review your current AVM usage and make recommendations tailored to your risk profile, including providing escalation options for alternate valuation products that can be used in place of AVMs as needed.
AVM Compliance Rule:
Frequently Asked Questions
1. What is the AVM Quality Control Rule?
It’s a new federal regulation that took effect on October 1, 2025. It requires lenders and other market participants to have documented policies, testing, and vendor oversight in place to ensure AVMs produce accurate, fair, and unbiased results.
2. Who does the rule apply to?
The rule applies to banks, credit unions, non-bank lenders, and secondary market participants that use AVMs to support credit decisions or securitizations. If you use an AVM to help determine a property’s value for a home equity loan, refinance, or second mortgage, you’re covered.
3. What do regulators expect to see?
Regulators want to see that your AVM program is active and documented. That means written policies, evidence of testing and bias reviews, and records showing you’re monitoring your vendors. In short: they want proof that you trust—but also verify—your valuation tools.
4. How does the nondiscrimination standard fit in?
Lenders must ensure their AVMs comply with fair lending laws. That means understanding how data is used, validating inputs to avoid bias, and monitoring outcomes for unintended disparities. CSS and AVMetrics are working together to help lenders navigate these requirements.
5. What happens if we’re not compliant yet?
You’re not alone; many lenders are still catching up. But the rule is now in effect, and examiners may start asking questions soon. The best step is to document what you have, start testing, and fill any gaps quickly. Even partial progress shows regulators you’re taking compliance seriously.
6. How can CSS help?
CSS offers a variety of best-in-class AVM and hybrid valuation products that can help lenders comply with existing regulations, and establish a comprehensive home equity valuation program.
The Rule Is Here—Be Ready
The AVM Quality Control Rule isn’t theoretical anymore, it’s here.
Lenders that move quickly now will avoid regulatory findings, reduce risk, and build stronger, more efficient valuation programs.
CSS is here to help.
We’ll keep you informed as standards mature and can help ensure your AVM program meets the letter—and spirit—of the rule.
Contact CSS to talk about your AVM and home equity valuation strategy.
Ashley is the CEO of CSS and oversees all aspects of the company’s strategy and operations.
Lender Insight
“There isn’t a massive explosion of originations—the housing market is still pretty slow. Things have started to pick up, but only a little this year, so there is light at the end of the tunnel. Home equity is the brighter spot because there’s so much built-up equity in the U.S. and more borrowers want to keep their first-mortgage rate.”
– Ashley Jelinek, CEO of Corporate Settlement Solutions (CSS)
