Automated Valuation Model (AVM) Validation for a major US bank
- Risk Management
The accurate valuation of a residential property in mortgage lending is important to ensure proper LTV and maintain sufficient collateral value on loans. Prescio was requested to validate a regional bank’s employment of a cascade Automated Valuation Model (AVM). The AVM was a vended model limiting access to proprietary methods and data. Prescio assessed the available technical information evaluating the appropriateness of the modeling methodology as well as assessing appropriateness of employment by the bank. Prescio performed a backtest utilizing bank provided contract prices, appraised values, and AVM valuations assessing the accuracy and precision of the model. Prescio further assessed the AVM by comparing the selection of comparable properties by the model to an alternate AVM available from the market.