AI Replaced Me

YOUR COMPLIANCE QUESTION

YouTube

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.

Staying Ahead of Regulatory Changes

YOUR QUESTION 

We are a small broker in the West. There are only four people in our company. We are licensed in three states. Every year, we get slammed with new compliance requirements from state and federal agencies. It's too much! Sometimes I think compliance is first and sales are second. Every year it gets worse and worse. 

Surely there is a way to keep track of these regulations without spending a ton of money on search engines and lawyers. I don't know what I don't know, and that is the problem. You don't have to give me every chapter and verse about what to do. I just need some advice on what I can do, given my limited means and staff. 

I need to get back to sales, but too much of my day is consumed by compliance. 

So, please let me know how to stay ahead of changing regulations. 

A Frustrated Broker 

OUR COMPLIANCE SOLUTION 

We recommend: 

BROKERS COMPLIANCE GROUP, the first full-service, mortgage risk management firm in the United States, specializing exclusively in outsourced mortgage compliance and offering a full suite of services to mortgage brokers, mini-correspondents, and independent mortgage professionals. 

OUR ANSWER 

I understand how you feel. It's the main reason why I started Lenders Compliance Group twenty years ago. 

Our Brokers Compliance Group supports the unique compliance needs of mortgage brokers. We have hundreds of brokers who let us handle their compliance so they can focus on sales and operations. 

Let me say this: there was a time, ages ago, when sales and compliance were separate activities, though they continually overlapped and coalesced. Now sales and compliance are cemented together. I know that's not what you want to hear, but it's true. 

Our industry is highly regulated, but given the tally of federal and state restrictions, it is not as regulated as others. Mortgage banking is categorically grouped within the finance and banking industries. It is certainly amongst the most highly regulated industries in the country. 

So, you will need to stay alert and proactive. However, there are several things you can do to reduce the time you give to monitoring and implementing regulations. It may seem daunting, but once you build momentum, you will be able to focus much more on sales. 

To prepare for regulatory changes, you should develop a proactive framework. By "framework," I mean a plan to closely monitor regulatory changes and, where needed, assess their impact on your origination processes. This plan should include feedback to update policies, provide training, test the loan flow process, maintain documentation, use methods to track changes, and audit ongoing compliance. You'll continually tweak the plan over the years. 

I'm going to break it down for you so that you get a feel for what I'm suggesting.

 

MONITOR

 

Develop a means to monitor court cases, enforcement actions, and regulatory bulletins. Because you have a small office, designate colleagues to track these early signals.

 

RESEARCH

 

Join, subscribe, or partner with industry associations and compliance advisors, such as Brokers Compliance Group. These resources usually provide content, updates, and specialized training.

 

TECHNOLOGY

 

Reduce research costs by using a cloud-based platform to alert you to regulatory changes. If you do not have the resources, you can partner with our compliance firm to get real-time feedback.

 

ASSESS & EVALUATE

 

Determine which business areas (for instance, lending, technology, operations) are affected by new rules (such as digital signage and AVMs). Identifying the impact strengthens compliance.

 

CONDUCT AUDITS

 

Perform internal audits or external audits to review your compliance management system. For a close look at a department, function, or regulation, use our inexpensive Compliance Tune-up.

Morrie the Mortgage Mavin - A Thanksgiving Moral

Audio Podcast

Substack Audio & Article

QUESTION 

On Thursday, we will celebrate Thanksgiving – everywhere else in this country but not at my company. We are still having hard times, even if the news says otherwise. Sometimes, I need some perspective on why we get up each morning and do what we do, even when times are rough. I have always felt the mortgage industry is essential to the country's economy. However, I have friends who have been laid off. I am worried about my future and theirs. 

Still, I am committed to my work. I am thrilled every time an applicant is approved for a loan. It makes my dedication all the more meaningful. I'm nearing retirement, and I want to believe that the next generation will feel as I do about the importance of our work. I want them to have hope. We may need some coaching from you about why our work is so important. 

You can be our Morrie the Mortgage Mavin! 

Please give us some hope on this Thanksgiving.

Why is the mortgage industry important to the country? 

SOLUTION 

We recommend our AI Policy Program for Mortgage Bankers. 

We are the first compliance firm in the United States to issue a policy program for Artificial Intelligence (AI) for mortgage banking entities.  

While there are myriad standards and best practices to help organizations mitigate the risks of traditional software or information-based systems, the dangers posed by AI systems are in many ways unique. With appropriate controls, AI systems can mitigate and manage compliance risks. 

RESPONSE 

I have been called many things, but never Morrie the Mortgage Mavin. I laughed heartily when I read my new title. Our column goes back almost 20 years, and it has been a labor of love. I am grateful that it is embraced by so many thousands of readers and subscribers. 

Albert Einstein once said that we should 'strive not to be a success, but rather to be of value.' The mortgage industry consists of two main markets: the primary market, where loans are originated by residential financial institutions and issued by lenders like institutional investors, banks, and credit unions, and the secondary market, where these loans are sold to investors. Professionals in this industry perform tasks like underwriting, loan origination, and loan servicing to facilitate property ownership and investment. And, these market participants strive to be of value. 

Think of it! You are part of an immense economic endeavor encompassing, among other things, the primary and secondary mortgage markets, GSEs, loan origination and underwriting, loan servicing, and specialized lenders. If that is not a major financial sector that influences broad economic conditions and government policies, I don't know what is. 

Let me put it this way:

You would like the next generation to have hope about their importance. 

I believe you need not worry about them, because their hope for the future will lead them to develop new ways to grow the mortgage market, whatever the challenges. The same human nature that moved you to seek value also moves them.

 

It’s best to appreciate what you have rather than wanting what you do not have. The future is theirs to shape!

 

As Epicurus said, 'Do not belittle what you have by desiring what you have not; remember that what you now have was once among the things you only hoped for.' (My translation.) 

If your colleagues want to know the important of the mortgage industry, tell them that it enables homeownership. Mortgages allow individuals to purchase homes without paying the full price up front, which is essential for most people to become homeowners. 

Tell them that the mortgage market and the broader housing market it supports are a major financial sector in the U.S. Activity in the housing market, such as new home sales and construction, has ripple effects throughout the economy, influencing household spending and employment. Thus, the work they do drives economic activity. 

The U.S. mortgage market, with over $13.5 trillion in debt, is the largest and most important credit market for American households, accounting for over 70% of total consumer debt.

The Comeback of Portable Mortgages

AUDIO

SUBSTACK

QUESTION 

Our loan committee wants to originate portable mortgages. I am an old school guy! Is this the new gimmick to generate sales? I don't know, but it doesn't make much sense to me. When I was with Chase back in the eighties, there was a rollout similar to a portable mortgage. Well, it crashed and burned! Yet, now it's back. 

The whole deal mostly rests on the lock-in effect. You should explain it to your readers. And, contrary to the hype I'm hearing, the portable mortgage can lead to increased risk, and prices can go up. On top of that, there's no secondary market. 

Are portable mortgages yet another gimmick to generate sales? 

SOLUTIONS 

We recommend our Compliance Reviews. 

Comprehensive and responsive compliance reviews provide a deep dive understanding of strengths and weaknesses in the implementation of state and federal banking laws, rules, regulatory guidelines, investor expectations, and Best Practices. 

RESPONSE 

I understand your concerns, but I would not assert that private enterprises and government entities are concocting some grand scheme in considering a comeback of portable mortgages. As usual, market histrionics are fluttering about like untethered balloons. 

Granted, many features of portable mortgages pose risks for both homeowners and investors. 

Your memory of the portable mortgage offered by Chase Home Mortgage in the late eighties is correct. So, the basic structure of the portable mortgage goes back to that time. Chase viewed it as experimental in the sense that it was more of a prototype; that is, it was notionally a portable fixed-rate mortgage. 

However, true portability has never been achieved in this country. This is because of the prevalence of "due-on-sale" clauses that require the loan to be paid off when a home is sold. I remember that E-Trade offered a version in the early 2000s as a portable "option." Around that time, my firm provided compliance guidance to E-Trade in its development of mortgage banking compliance, but a compliance review of the portable "option" was not in our remit. The fact is, portable mortgages have remained niche products, at best. And for good reason, which I will explain shortly. 

One reason it did not catch on is obvious: the U.S. mortgage industry's structure, in which loans are often sold to investors or entities like Fannie Mae and Freddie Mac, has historically not supported portability. 

No portable mortgages are currently allowed by Fannie Mae and Freddie Mac, but the Federal Housing Finance Agency (FHFA) is now actively evaluating whether to implement them in the future. Current news reports that the FHFA is working with Fannie Mae and Freddie Mac to determine how to make these loans possible in a safe and sound way, which strikes me as quite a heavy lift. Currently, Fannie and Freddie only allow fixed-rate loan transfers in limited situations, such as due to the death or divorce of the original borrower. 

The "hype" you are hearing concerns the GSE approval of portable mortgages, based on the claim that they could make it easier for homeowners to move and keep their lower interest rates, thereby unlocking more homes for sale. Maybe so. Then again, maybe not. 

Let's tack down a few important details about the structure of portable mortgages. 

A portable mortgage is a home loan that allows a homeowner to transfer their existing interest rate and terms to a new property when they move. In theory, this can save the homeowners money on closing costs and help them avoid taking out a new loan at a potentially higher interest rate. Nevertheless, the new property must meet the lender's criteria, and the homeowner must requalify financially. 

PORTABLE MORTGAGE TRANSACTIONS 

Here is a brief outline of how the portable mortgage works: 

·       Transferring the Loan 

When selling one home and buying another, the existing mortgage is "transferred" to the new property.

AI Credit Score Underwriting

QUESTION 

Thank you for your recent columns on artificial intelligence in mortgage banking. I want to know how to handle credit scores using AI. I am the SVP Operations of a large wholesale lender. We want to include AI in our underwriting. In particular, we want to use it to evaluate a borrower's creditworthiness. However, our legal department has advised us that there are huge privacy issues. 

We do not want to be dependent on the credit reporting agencies for AI information. And we do not want to outsource AI in our credit score underwriting. The AI evaluation methods we discussed with legal have been shut down due to potential privacy violations. 

What are the privacy risks in using AI to determine a borrower's credit score? 

COMPLIANCE SOLUTION 

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 (AI). AI risk management is a key component of responsible development and use of AI systems. Responsible AI practices can help align the decisions about AI system design, development, and use with intended aims and values.

RESPONSE 

The privacy challenges associated with artificial intelligence are enormous, and the risks will only become more and more difficult to mitigate. In our recently issued AI Policy Program for Mortgage Banking, we sought to provide a comprehensive policy framework for using AI in mortgage banking. Indeed, one of the policies in the Policy Program is titled "Artificial Intelligence Credit Underwriting Policy." 

If you need a policy framework for AI, please request information about our Policy Program. 

AI credit score underwriting is an uncharted legal and regulatory territory! 

You will find that most of your legal department's concerns about AI in mortgage lending involve the collection and potential misuse of vast amounts of sensitive personal data, heightened cybersecurity vulnerabilities, and a lack of transparency that can lead to a loss of consumer trust and potential regulatory non-compliance. 

Broadening this out, AI in credit score underwriting stems from the extensive collection of sensitive, alternative data, the potential for unauthorized access and data breaches, and the difficulty in ensuring transparency and consumer control over how personal information is used. 

Whatever you do, you will need to be in lockstep with your legal advisors. This "territory" is dotted with legal minefields! Let's consider these risks. 

AI models require vast amounts of data, often going beyond traditional financial information to include "alternative data" such as geolocation, social media activity, online behavior, transaction histories, and even biometric data. The sheer volume and sensitive nature of this extensive data collection increase the overall risk to consumer privacy. 

Zero in on that data! It can be collected for one purpose but might be used for other, unforeseen purposes without the user's explicit consent. This lack of control over how personal data is processed raises significant privacy issues. From the legal perspective, this amounts to unauthorized use and repurposing. 

The large datasets used to train AI models are attractive targets for cyber attackers. Inadequate security measures or vulnerabilities in third-party vendor systems can lead to data breaches, exposing sensitive personal and financial information and increasing the risk of identity theft or fraud. Data security must be failsafe. 

AI algorithms can analyze seemingly innocuous data to infer highly personal attributes, such as health status, political views, or ethnic origin (a "predictive harm"). From a regulatory perspective, this risk arises from the inference of sensitive Information. In other words, this capability to derive sensitive insights can lead to potential discrimination and privacy infringements. 

Complex AI algorithms can be difficult to explain, even for their developers, creating a Black Box where it is unclear exactly how a specific credit decision was reached. This opacity, its lack of transparency, deprives consumers of understanding why they were denied credit and of exercising their right to an explanation or an appeal. I have written here about the Black Box "model" or "problem". 

Do not assume that so-called "anonymized" data effectively mitigates risk. Even when data is "anonymized," AI can sometimes de-anonymize individuals by cross-referencing various data points, compromising individual privacy.

The 50-Year Mortgage – Pros & Cons

The 50-Year Mortgage – Pros & Cons

QUESTION 

I am the underwriting manager for a mid-sized regional lender. Recently, an investor asked us if we would be interested in originating 50-year mortgages. This mortgage loan has been in the news a lot recently because the president has been pushing it. 

Yesterday, our loan committee met and decided to look into the pros and cons of 50-year mortgages. Next week, we have to present a report to senior management, and they will decide if it should be brought to the board for discussion. 

I do not want to parrot the mortgage news. Some of this news media seems more interested in driving sales than in what might be good for borrowers or the risks to lenders. I am asking you to share your perspective with us. I know you do not mix words. 

What are the pros and cons of 50-year mortgages for borrowers and lenders?  

COMPLIANCE SOLUTION 

We recommend our Compliance Library. 

A dynamic, digital compliance library consisting of master policies and procedures, reflecting a financial institution's size, complexity, and risk profile, ensuring conformance with primary regulatory guidelines and federal and state mortgage and consumer loan originations. 

RESPONSE 

The promoting of this loan product, such as it is, has been stirred up recently by the president's remarks and massive news coverage. In my opinion, the president is recommending a flawed loan that is detrimental to a consumer's long-term financial interests, and the news media, as usual, is chasing a shiny object that supposedly highlights sales over substance. 

A 50-year residential mortgage is a home loan with a repayment period of 50 years (600 months!), significantly longer than the standard 30-year term. Its primary benefit is lower monthly payments, which can make homeownership more accessible. Fair enough! However, this comes at the cost of paying substantially more in total interest over the life of the loan, and it results in much slower equity accumulation. 

I suppose that stretching the loan over a longer period reduces the monthly principal and interest payments. To that extent, it could help some first-time buyers qualify for a mortgage or afford a more expensive home. The term "affordability" has become quite a hobby horse these days, given that monthly payments could open up homeownership to more people, especially in expensive housing markets. Ultimately, it will not beneficially resolve the affordability issues that consumers face today. 

But a 50-year mortgage seems like a form of indentured servitude. Over 50 years, the total amount of interest paid on the loan can be hundreds of thousands of dollars more compared to a 30-year mortgage. A central pillar of building equity in our society, home ownership, is seriously derailed because of slower equity growth. A much larger portion of early payments goes toward interest, meaning you accumulate equity much more slowly. It could take 30 years or more to build up significant equity, compared to about 12-13 years for a 30-year mortgage (excluding appreciation and down payment). 

Plus, the interest rates are higher. Lenders will charge a higher interest rate on a 50-year mortgage to compensate for the increased risk of lending for a longer period. Thus, mortgage originations would tread into uncharted territory. This is a new product, and lenders may be uncertain about the long-term risks, which could impact its availability and cost. 

Let's discuss these primary factors involved in 50-year mortgages: 

·       Feasibility

·       Alternatives

·       Legislative and Regulatory Changes

·       Impact on the Housing Market

·       Impact on the Economy

·       Inflationary Risk 

FEASIBILITY 

The 50-year mortgage is currently an idea under consideration, not an approved policy. But ideas often have a way of working themselves somehow into politics and policies. I am skeptical that certain key issues can be disposed of through politically palatable, economically viable, and financially responsible policies, even by way of legal and regulatory compliance. I'll mention but a few that come to mind.

AI Policy Program for Mortgage Banking

QUESTION 

We need guidance on using artificial intelligence in our mortgage banking and servicing operations. Unfortunately, we have not found anything of much value. As the President and CEO of our company, I have met with our Board for almost a year to discuss governance and the utilization of AI. Being present in all states and territories, we require guidance on both state and federal requirements nationwide. 

Our lawyers provide us with white papers and legal guidance, but we have yet to receive policies based on mortgage banking experience and expertise. The last policy we got from them was basically useless. I'm a lawyer myself, but I don't need citations or case law. Why is it taking so long for professionals to provide us with the guidance we need to ensure compliance with AI-related issues? 

We need your help. For years, we have been following you. Recently, we decided to use your firm to support our compliance department. I spoke to you recently about this AI challenge, and you told me that your team is working on a comprehensive AI policy. I believe you said it would be published this month. Please share your AI policy with the mortgage community. 

What is the policy on artificial intelligence you are offering? 

COMPLIANCE SOLUTION 

Artificial Intelligence Policy Program for Mortgage Banking

ANSWER 

I enjoyed our call. We look forward to working with your compliance personnel. Indeed, we assembled a team of our compliance experts to develop policies and procedures for artificial intelligence. It quickly became clear that one policy would not do. In fact, several policies are needed. We realized that a comprehensive policy program was required, rather than just a single policy. A programmatic structure best meets the compliance demands. 

Today, we are issuing the first set of AI policies and procedures specifically designed for the mortgage banking industry. Consistent with its comprehensive approach, we have structured it as a policy program. Thus, there is a cost-effective base policy, as well as several supporting policies. At no additional cost, we maintain and expand the policy program for the first twelve months, as needed, and extensions are available. Updating is necessary in response to the rapidly changing regulatory environment associated with artificial intelligence. 

A few days ago, we conducted a demonstration for several regulators, examiners, and our money center bank clients. The feedback was enormously encouraging, and we were grateful for their interest. 

Order as soon as possible. There is already considerable demand! We will schedule collaborative support! 

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New Issuance 

Here is the Press Release! 

Outline 

Artificial Intelligence Policy Program for Mortgage Banking™

1.     Artificial Intelligence Policy Program for Mortgage Banking – Overview

2.     Artificial Intelligence Policy – Foundational Guidelines

3.     Artificial Intelligence Workplace Policy

4.     Artificial Intelligence Credit Underwriting Policy

5.     Artificial Intelligence - Do & Do Not Policy

6.     Artificial Intelligence - Ethics Policy

Each of these policies interacts with and complements the others.

It is essential to work with our LCG Compliance Managers to conform the texts to ensure the policies accurately reflect the financial institution's actual use of Artificial Intelligence in its operations.

• Policies are reviewed as stand-alone documents. A consolidated version of the policies is available.

• LCG Compliance Manager support is included in the purchase price of the policy documents.

• LCG will maintain the subject policies and procedures for 12 months from the purchase date.

Every effort will be made to conform the policies to the institution's compliance management system.

Upon reaching the final version, the Master is kept in our encrypted extranet for your use. The Master version is retained in the extranet and updated for substantive changes in applicable laws and Best Practices.

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For additional support or information, please email compliance@lenderscompliance group.com. 

Contact Us via our website.

For more articles on this topic, please visit: Artificial Intelligence.

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This article, Artificial Intelligence Policy Program for Mortgage Banking, published on October 30, 2025, is authored by Jonathan Foxx, PhD, MBA, the Chairman & Managing Director of Lenders Compliance Group, the first and only full-service, mortgage risk management firm in the United States, specializing exclusively in residential mortgage compliance.