AI Replaced Me

YOUR COMPLIANCE QUESTION

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Two weeks ago, you wrote an article titled Will AI Replace Me? When I read it, I was still employed. Well, it's two weeks later, and I have been fired and replaced by an AI bot. I am still in shock. I really did not think my job was in jeopardy. Other people in my company were also fired and replaced by AI bots.

 

Yours is the only compliance firm I have come across that explains the positives and negatives of artificial intelligence. I guess, for me, it is a big negative. I have been in the mortgage world for over twenty years. My main positions were in underwriting, processing, and closing. I have looked around for work, and nobody's hiring. I'll bet those positions are now using AI bots.

 

I don't know what to do next. I'm only forty-five. I have limited savings and a small family. I feel like I'm getting squeezed out of the mortgage industry. A group of us met with our company's COO, and she said the company is moving rapidly toward AI across its origination process. So, it looks like I'm heading for a dead end. It feels like I'm being thrown on a trash heap.

 

What is happening with these AI bots? 

Is it Us (the humans) against Them (the AI bots)?

 

Signed,

Jobless

 

OUR COMPLIANCE SOLUTION

AI POLICY PROGRAM FOR MORTGAGE BANKING™  

Our AI Policy Program aligns with Freddie Mac's AI governance requirements for Freddie Mac Sellers/Servicers. Responsible AI practices can help align AI system design, development, and use with applicable legal and regulatory guidelines. 

Our AI Policy Program consists of the following policies:  

1.      Artificial Intelligence Governance Policy

2.      Artificial Intelligence Use Policy

3.      Artificial Intelligence Workplace Policy

4.      Artificial Intelligence Credit Underwriting Policy

5.      Artificial Intelligence Do & Do Not Policy

6.      Artificial Intelligence Ethics Policy

7.      Artificial Intelligence Vendor Management Policy  

Contact us for the presentation and pricing! 

 

RESPONSE TO YOUR QUESTION

 

This is a scary time as the world embarks on this new era of AI technology. Unfortunately, unemployment will increase as AI replaces human workers. The change will not be one-for-one. In some cases, it will be far worse, as one AI bot can replace hundreds of humans on a task, especially in loan processing, underwriting, and other operational roles. I'm going to be brutally honest with you: underwriters are among the more commonly cited "at risk" roles in mortgage banking.

 

WILL AI REPLACE YOU

 

In the March 19^th article you cited, Will AI Replace Me?, the concern expressed was from a loan officer. However, I stated the following AI automations that, as implemented, would adversely affect the need for humans, as follows: 

·       AI underwriting engines can now complete the entire initial underwriting process autonomously, approving loans days faster than traditional methods. This process is probably the clearest current example of loan origination being removed entirely from human hands. 

·       Unfortunately, loan processors, underwriting assistants, compliance analysts, escrow coordinators, closing personnel, and data entry clerks are at the intersection I described above, where humans and mimicking humans reside. 

In the March 25^th article, Will AI Reduce Fair Lending Violations?, I noted, in pertinent part, that "AI can streamline underwriting, reduce operational costs, and identify creditworthy applicants that traditional credit scoring methods might overlook." 

SYSTEMIC CHANGE 

The transition is systemic, not particularized to just your company, loan products and services, region, or institutional type. From point of sale to securitization, AI is quickly becoming embedded. AI is already doing a lot of what junior underwriters used to do. And, as you know, Fannie Mae's Desktop Underwriter and similar automated systems have been handling straightforward loan approvals for years. That trend is accelerating due to artificial intelligence.

Will AI Reduce Fair Lending Violations?

YOUR COMPLIANCE QUESTION 

Our company is building an AI engine to monitor for fair lending violations. The AI system is extensive and includes chatbots. It will be integrated into our LOS and several other systems. We are a large mortgage originator and servicer. We use one of the most well-known platforms for loan originating and servicing. The system offers several new AI features. But we ran our own test against the LOS and found that our AI engine is identifying more fair lending issues than the one embedded in the LOS. 

As the company's General Counsel and Chief Risk Officer, I was shocked that building our own AI system could produce better results than a highly rated, well-established LOS. Granted, our AI system is proprietary and reflects our unique compliance needs. Full disclosure: We have been a client of yours for over 15 years, and we have discussed these and other AI findings with your team in order to mitigate compliance risk. 

I wonder if a one-size-fits-all AI integration in the LOS can really be effective, given that fair lending involves many state and federal regulations. We are testing and monitoring our AI integration, but many companies lack the resources we have and will rely on their LOS provider's results. 

Do you think a generic AI system can reduce fair lending violations? 

Signed, 

Risk Averse 

OUR COMPLIANCE SOLUTION 

AI POLICY PROGRAM FOR MORTGAGE BANKING™ 

Our AI Policy Program aligns with Freddie Mac's AI governance requirements for Freddie Mac Sellers/Servicers. Responsible AI practices can help align AI system design, development, and use with applicable legal and regulatory guidelines. 

Our AI Policy Program consists of the following policies: 

1.      Artificial Intelligence Governance Policy

2.      Artificial Intelligence Use Policy

3.      Artificial Intelligence Workplace Policy

4.      Artificial Intelligence Credit Underwriting Policy

5.      Artificial Intelligence Do & Do Not Policy

6.      Artificial Intelligence Ethics Policy

7.      Artificial Intelligence Vendor Management Policy 

Contact us for the presentation and pricing.  

RESPONSE TO YOUR QUESTION 

Let me begin with my conclusion: there is currently no one-size-fits-all, generic AI system that can be thoroughly relied on to reduce fair lending violations. 

Most companies will rely on originating and servicing platforms that integrate AI into fair lending analytics. Unfortunately, companies are generally liable for AI errors, particularly when AI causes financial losses, safety issues, or provides consumers with false information. Legal responsibility typically falls on the business deploying the technology, even if it properly monitors, tests, or ensures that the AI is fit for fair lending detection. 

Legal and Regulatory Risk 

Put another way, your business is responsible for any misinformation provided by your AI chatbots. As you likely know, there are certain aspects of tort law, like duty of care, that require individuals and entities to act with reasonable care to avoid causing foreseeable harm to others. It forms the basis of negligence claims; if this duty is breached and causes injury, the responsible party may be held liable. 

I have repeatedly said that companies must ensure AI systems are properly trained and monitored to avoid liability for errors caused by biased AI. Although developers may be liable for inherent defects, the business deploying the AI is often responsible for how the system is used. 

If you are going to use AI to detect fair lending, you must be able to identify disparate impact patterns across demographic groups, monitor for "redlining" analogs in digital lending, flag outlier decisions that deviate from modeled norms, and generate audit trails for regulatory review. 

AI is rapidly transforming the mortgage industry, promising increased efficiency, faster decision-making, and improved risk assessment. Still, its integration poses significant challenges related to fair lending compliance, data bias, and transparency. While AI can expand credit access by utilizing alternative data, it risks perpetuating historical biases if models are trained on biased data or utilize "black box" algorithms that make decisions hard to explain.

Will AI Replace Me?

YOUR COMPLIANCE QUESTION 

I have been a loan officer for fifteen years. I am a single mother of two wonderful teenagers. I have also been the breadwinner for 15 years since my husband passed away. I keep reading how AI is going to replace me. 

In the last few weeks, I've read a few articles about how AI is transforming the mortgage world. Part of that transformation looks like I am going to lose my job and be replaced by a computer program. This is so unfair. I have spent all these years building my professional life, and now I feel it is all going to be trashed. 

I heard you speak at a conference recently. You spoke about your new AI Policy Program and answered many audience questions. One of them was about how loan officers, processors, and underwriters are worried about being replaced by AI. I would like you to share your remarks in your newsletter. 

Will AI replace loan officers like me? 

Signed, 

A Human Being 

OUR COMPLIANCE SOLUTION 

AI POLICY PROGRAM FOR MORTGAGE BANKING™ 

Our AI Policy Program aligns with Freddie Mac's AI governance requirements for Freddie Mac Sellers/Servicers. Responsible AI practices can help align AI system design, development, and use with applicable legal and regulatory guidelines.

Our AI Policy Program consists of the following policies: 

1.      Artificial Intelligence Governance Policy

2.      Artificial Intelligence Use Policy

3.      Artificial Intelligence Workplace Policy

4.      Artificial Intelligence Credit Underwriting Policy

5.      Artificial Intelligence Do & Do Not Policy

6.      Artificial Intelligence Ethics Policy

7.      Artificial Intelligence Vendor Management Policy 

Contact us for the presentation and pricing.  

RESPONSE TO YOUR QUESTION 

REVOLUTION AND EVOLUTION 

There have been many technological revolutions in human history. We are now at the advent of another revolution: the onset of artificial intelligence (AI) technology, a massive, incremental, worldwide expansion of knowledge in computer science dedicated to creating systems capable of performing complex tasks that typically require human intelligence. Each revolution has brought about profound changes in civilizations. Surges in technological development have characterized each revolution. 

From stone-age tools to learning to control fire, from foraging for food to the first agricultural revolution, from replacing bronze with iron, each stage of technical knowledge enabled widespread human development at the cost of some trade-off in the human social experience that had evolved heretofore. The printing press brought about mass production of books, democratizing knowledge and literacy; the scientific revolution shifted knowledge from philosophy to evidence-based insights; new farming techniques led to increased food output, population growth, and urbanization. 

And, of course, we all know of the industrial revolution, where machine-based manufacturing shifted society away from manual labor; this was then followed by the technical revolution, where mass production became deeply entrenched in lived experience, such as the creation of assembly lines, steel-making methodologies, and the application of electricity, internal combustion, and telecommunications. Over the last 100 years, the green revolution has introduced high-yielding crops, industrial fertilizers, and new agricultural technologies, thereby increasing global food production. 

Which Revolution Are We In Now? 

So, where are we now in the scheme of things? 

In my view, we are currently living in the information and digital revolution, but rapidly transitioning to the artificial intelligence revolution. We are living at a time when computers and transistors, the Internet, personal computing, and smartphones are being rapidly replaced by the artificial intelligence revolution, characterized by discoveries such as gene editing, advanced robotics, and nanotechnology.

Freddie Mac Deadline: March 3, 2026 – AI Governance Framework

YOUR COMPLIANCE QUESTION 

We are using your AI Policy Program. Upon receipt, we had it reviewed by our AI committee to determine whether it complies with Freddie's requirements for establishing a comprehensive AI governance framework for AI and Machine Learning. 

I am pleased to report that your AI Policy Program received the committee's approval. It met our checklist based on Freddie's requirements. 

As a Freddie Mac Seller/Servicer, we want to know what the effect would be on us if we had relationship partners that are not in compliance with the AI governance framework.   

What restrictions will Freddie Mac impose on us if our relationship partners do not comply with their AI requirements as of March 3, 2026? 

Signed,

An Anxious Compliance Manager 

OUR COMPLIANCE SOLUTION 

AI POLICY PROGRAM FOR MORTGAGE BANKING™ 

Our AI Policy Program aligns with Freddie Mac's AI governance requirements for the Freddie Mac Seller/Servicer (or "Lender"). Our well-constructed AI Policy Program is a proactive means designed to avoid and mitigate risks associated with Artificial Intelligence and Machine Learning. Responsible AI practices can help align AI system design, development, and use with applicable legal and regulatory guidelines. 

Our AI Policy Program consists of the following policies: 

1.      Artificial Intelligence Governance Policy

2.      Artificial Intelligence Use Policy

3.      Artificial Intelligence Workplace Policy

4.      Artificial Intelligence Credit Underwriting Policy

5.      Artificial Intelligence Do & Do Not Policy

6.      Artificial Intelligence Ethics Policy

7.      Artificial Intelligence Vendor Management Policy 

Discount offer available until March 3, 2026! 

Contact us for the presentation and pricing. 

OUR RESPONSE TO YOUR QUESTION 

Thank you for using our AI Policy Program. Since its release on October 30, 2025, it has been in considerable demand. 

Our AI Policy Program for Mortgage Banking™, which meets Freddie Mac's AI Governance Framework ("AI Framework"), is the first to provide a set of AI policies dedicated to mortgage banking. 

We had been tracking the GSE formulation of AI requirements for several months. 

On March 11, 2025, Freddie released a formal AI/ML governance framework in its Seller/Servicer Guide ("Guide"), introducing a comprehensive AI Framework for Sellers and Servicers that requires formal policies for the use of artificial intelligence ("AI") and machine learning ("ML"). This update mandated that any AI/ML used in the origination or servicing of Freddie Mac-eligible loans be governed by strict policies. 

On December 3, 2025, Bulletin 2025-16 was issued, clarifying timelines and expectations and stating that AI is no longer optional. In effect, Freddie asserted that implementation is a mission-critical, governed enterprise function. 

The compliance effective date is March 3, 2026. 

After considerable review, research, and drafting, we issued our AI Policy Program on October 30, 2025, thirty-four days before Freddie issued Bulletin 2025-16 on December 3, 2025, and Bulletin 2025-17 issued on December 10, 2025. 

On December 10, 2025, Freddie issued Bulletin 2025-17, which introduced revisions to AI Tools relating to servicing, information security, and Seller/Servicer insurance, with most changes effective on March 3, 2026. 

In the context of the AI Framework, "AI Tools" are any artificial intelligence or machine learning tools used in the loan lifecycle. 

BULLETINS 

Bulletin 2025-16 solidifies the compliance effective date of March 3, 2026, requires Lenders to have a comprehensive governance framework for AI/ML Tools used in loan origination or servicing, and, effective January 1, 2026, Lenders must ensure executive oversight, document AI use cases, ensure fairness, mitigate bias, and manage vendor risk.

Shadow AI in Mortgage Banking

Podcast | Substack

QUESTION 

Everyone in our company received a message from management warning us about the use of Shadow AI. Most of us have never heard of Shadow AI. Next week, a company-wide video session is taking place to learn about it. Attendance is mandatory. 

So, I started reading about it. I found that it involves going to websites like ChatGPT. The management notice says that some of us are going online to AI websites and using them to replace our own knowledge and experience. Until further notice, we have been told not to use ChatGPT and other AI websites. 

A few of us got together to find out how this could affect us. We are underwriters, processors, loan officers, and quality control people. It's just a small group. You have written articles on AI and have AI policies. Please tell us how Shadow AI affects mortgage banking.

How does Shadow AI affect mortgage banking? 

Our Compliance Solution 

We recommend our AI Policy Program for Mortgage Banking. 

A well-constructed AI Policy Program is a proactive means designed to avoid and mitigate risks associated with Artificial Intelligence. Responsible AI practices can help align AI system design, development, and use with applicable legal and regulatory guidelines. 

RESPONSE TO YOUR QUESTION 

Shadow AI is not as spooky as it sounds, but it can adversely impact mortgage banking entities. Our AI Policy Program for Mortgage Banking addresses Shadow AI and many other features of artificial intelligence. Keep in mind that the pace of AI development is brisk, somewhat unstable, and rapid. Updates to policies and procedures are necessary for the foreseeable future. You should expect to see more alerts, notices, updates, and training. 

If you want to learn more about AI and mortgage banking, consider our recent articles on artificial intelligence. 

Shadow AI 

What is Shadow AI? Essentially, it is the unauthorized use of artificial intelligence tools, apps, or features by employees within an organization, bypassing official IT and security oversight, often for productivity gains. Unfortunately, it introduces significant risks, including data leaks, compliance failures, bias, regulatory non-compliance, and intellectual property loss. 

Shadow AI is not "Shadow IT," which is quite a bit different, but, in a way, it is adjacent, because Shadow IT manifests where any technology (for instance, software, hardware, cloud services, and apps) is used by employees without the company's IT department approving it. 

COMPONENTS OF SHADOW AI 

Shadow AI refers to the unauthorized use of AI tools like ChatGPT, Midjourney, Claude, Bard, Microsoft 365 Copilot, Salesforce Einstein, or AI plugins, which create vulnerabilities because these tools are not vetted for corporate security or data policies. In other words, employees may be using these AI tools for various purposes – such as summarizing documents, drafting emails, generating content, providing knowledge, and so forth – although IT has not formally approved their use by employees. 

Sometimes, employees use workarounds by accessing AI tools from their personal accounts. Employees may even use their personal logins for AI services that process company data. 

UNAUTHORIZED USE OF AI 

The potential adverse consequences of unauthorized use of AI tools include data leakage, compliance issues, regulatory and legal problems, lending practices, security vulnerabilities, a lack of control and oversight, and inaccurate or biased output. Shadow AI, therefore, can really hobble a company's risk profile. 

Assuming the best of intentions in using Shadow AI tools, I can understand an employee wanting to be more efficient, but such use bypasses crucial safeguards, turning productivity tools into major security and governance risks for the business. 

Rather than outright banning Shadow AI tools, most organizations address Shadow AI by establishing clear governance, monitoring usage, and providing secure, approved AI alternatives. The focus is usually on striking a balance between innovation and essential security and compliance standards. 

ADVERSE RISKS OF SHADOW AI 

Depending on the Shadow AI tool used, there are numerous risks to mortgage banking, among which are surely the following, as I have mentioned in the aforementioned articles.