To assess and manage the risks resulting from a residential mortgage portfolio, lenders require reliable (re)valuations of the properties collateralizing the loans. Automated Valuation Models (AVMs) provide such valuations and are used by many financial institutions. AVMs are typically not internal models. Specialized companies build the AVM and supply the model output as a service to their clients. The company Calcasa has developed such an AVM for the Netherlands. Based on this model, Calcasa has already for several years successfully
provided real estate valuations to many financial institutions in the Netherlands. Our presentation introduces Calcasa, AVMs and the benefits of using AVMs within financial
institutions. We then discuss some model risk management challenges specific to model output as a service, and how these can be overcome by professional cooperation between (model / data) supplier and client. We believe that most of our recommendations are relevant not only for AVMs but also for third-party models from other categories.

Tim Mexner has been Senior Expert on Model Risk Management at ABN AMRO since 2019. Prior to his current role, he worked for nine years at the same institution as Team Lead in Model Validation, and before that as a (Senior) Quantitative Risk Analyst.