Mortgage stakeholders are applauding President Trump's latest executive order seeking to curb state-level regulation around artificial intelligence.
The Trump Administration will target state laws and challenge them in court, and withhold certain grant funding for states with AI laws it deems onerous, according to
The EO also claims those laws are requiring companies to embed ideological bias within their models, specifically referring to a Colorado statute banning "algorithmic discrimination." The mortgage industry has contested accusations of
The Mortgage Bankers Association praised the order Friday, and said it will work with lawmakers on a clear federal framework for AI use.
"Technology does not stop at a state border," said MBA President and CEO Bob Broeksmit in a press release. "We believe strongly that a unified federal approach is necessary to avoid a confusing patchwork of state laws and regulations that would stifle innovation and raise compliance and borrower costs."
The Community Home Lenders of America lauded Trump's move, and noted how it advocated this summer for a federal 10-year moratorium on state laws limiting the use of AI.
"Individual mortgage banks are already gaining efficiencies through the use of AI — and avoiding a patchwork of 50 different state laws is crucial to those efforts," said CHLA Executive Director Scott Olson in a statement Friday.
What did President Trump say?
The executive order doesn't impose any immediate, outright ban on state AI laws but suggests swift actions. Trump directed his administration to work with Congress to develop a "minimally burdensome national standard" rather than 50 state laws.
Feds were given 30 days to create an AI Litigation Task Force, and 90 days to publish an evaluation of existing state laws the Administration deems onerous. The government will also withhold from states employing certain AI laws funding from various discretionary grant programs.
A federal AI framework won't interfere with certain state laws relating to child safety, data center infrastructure and other undefined topics.
What it could mean for mortgage lenders
Industry players have already raised awareness, and questions, about complying with certain looming state-level, AI-specific legislation. Mortgage companies this year also indicated to National Mortgage News their hesitancy around developing AI because of a lack of clear guidelines.
Brian K. Stucky, CEO of Decision-X and senior advisor to the Mortgage Industry Standards Maintenance Organization, said lenders today are dealing with AI regulation that has intertwined in data privacy and documentation laws.
"The really impactful (regulations) would have already been covered under fair lending laws," he said. "So no matter how we render a decision on underwriting, lending laws are in effect if we use AI."
Wendy Lee, managing partner at the LOGS Legal Group, said the EO won't settle what mortgage stakeholders need to grapple with in terms of compliance, just yet. But she echoed the MBA's stance.
"Servicers and many in mortgage are used to the framework of 50 state compliance in certain areas," she said. "Adding technology patchwork at a state level onto what's needed in lending and servicing and default management, is just a step too far in the wrong direction."
The attorney said she doesn't believe consumers will be at any greater risk following the EO, as state attorneys general still have safety nets.
"I'm really concerned though that the cost to actually innovate in mortgage and the cost to do more streamlined customer service using technology is really hampered by the uncertainty around what this federal policy is going to look like," she said.
