The Countdown to Compliance: What Lenders Need to Know About the 2025 AVM Rule
The mortgage lending industry is preparing for significant regulatory changes as the Automated Valuation Model (AVM) Quality Control Standards Rule takes effect on October 1, 2025. This new rule will fundamentally alter how financial institutions manage and validate automated property valuation technology, extending its reach beyond traditional mortgage lending to include closed-end second mortgages, home-equity lines of credit (HELOCs), and even home-equity investment contracts.
Who's Affected?
The rule casts a wide net across the financial services industry, including:
Banks and credit unions originating or servicing second liens and HELOCs
Non-bank mortgage originators and servicers
Home-equity investment firms using AVMs for property valuations
Residential mortgage-backed securities issuers and underwriters
Third-party AVM developers providing services to covered institutions
Regulatory Framework
The AVM Quality Control Standards Rule implements requirements originally mandated by Section 1125 of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, as amended by the Dodd-Frank Wall Street Reform and Consumer Protection Act. It establishes minimum standards for AVMs used to estimate collateral value for consumer credit transactions secured by a primary residence.
Supervision and Enforcement
Compliance will be supervised by various regulatory bodies depending on institution type:
Office of the Comptroller of the Currency for national banks
Federal Reserve for member banks
Federal Deposit Insurance Corp. for state non-member banks
National Credit Union Administration for credit unions
Consumer Financial Protection Bureau for non-bank lenders and servicers
Scope of Application
The rule applies to any financial institution using AVMs for credit decisions on residential mortgage loans, including origination, modification, or termination of loans, as well as securitization transactions where AVMs inform collateral valuation.
Unlike some financial regulations, the AVM Quality Control Rule doesn't currently provide explicit exemptions based on institution size, though examiners may apply proportionality principles when assessing compliance programs at smaller institutions (under $850 million in assets).
Compliance Timeline
With the October 1, 2025 deadline approaching, establishing comprehensive compliance frameworks has become an urgent priority for affected institutions. Organizations need to review their current AVM practices and develop robust quality control processes to meet the new standards.
Meeting the New Standards
New Vista Solutions is well-positioned to help lending institutions navigate these regulatory changes. As part of its comprehensive suite of settlement services, New Vista Solutions provides AVMs that are fully compliant with the upcoming AVM Quality Control Standards Rule. By partnering with New Vista, financial institutions can ensure their automated valuation processes meet regulatory requirements while maintaining efficiency in their lending operations.