Fitch Ratings Taps Red Bell’s automated valuation model For RMBS Ratings

Red Bell Real Estate, a wholly owned Radian subsidiary, has been named among a select group of automated valuation model (AVM) providers by credit rating agency, Fitch Ratings, to supply AVMs in support of Fitch’s rating of residential mortgage-backed securities (RMBS) transactions.

The selection of Red Bell’s proprietary AVM illustrates how high-quality AVMs are rapidly becoming more widely used in real estate valuations and related transactions. Red Bell said that based on testing results, its AVM has been one of the most accurate products in the market with nationwide coverage.

“Red Bell is proud to offer an exceptional quality AVM that meets the high standards of Fitch Ratings,” said Eric Ray, senior executive vice president, technology and transaction services, Radian. “It is exciting that Fitch has recognized Red Bell’s AVM offering, among its peers and we are thrilled that they are leading the way toward increased acceptance of AVMs in the marketplace. This recognition is also a testament to Red Bell, a subsidiary of Radian, as a unique company that uses proprietary technology, data and analytics to disrupt the real estate value chain.”

Fitch’s expanded use of AVMs corresponds with growing industry acceptance of and confidence in AVMs in a variety of contexts. In recent years, Fannie Mae and Freddie Mac have both initiated programs that leverage AVMs in determining waivers for full appraisals. In addition, last month, federal banking regulators including the Federal Deposit Insurance Corporation (FDIC), the Office of the Comptroller of the Currency (OCC) and the Federal Reserve Bank, approved a change to banking regulation to allow AVMs to be used in mortgage lending on loans up to $400,000, an increase from the prior $250,000 de minimis limit. These actions by informed market oversight entities provide additional confirmation that the reduction of bias and improvement in accuracy of AVMs over manual products creates opportunity to help consumers achieve their dream of homeownership more quickly and more cost effectively.

Fitch’s announcement of Red Bell as one of its approved vendors for RMBS came as it published new RMBS rating criteria and a report, AVMs Can Play a Helpful Role in US RMBS. Fitch will now allow AVMs to be used as secondary valuations for due diligence where a full appraisal is already present. AVMs may also be used as the primary valuation for second liens and seasoned performing loans.

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