By KIMBERLEY HAAS
Leaders at Fannie Mae and Freddie Mac say they are using artificial intelligence to improve operational efficiencies.
Fannie Mae CEO Priscilla Almodovar and Freddie Mac President Mike Hutchins talked about the benefits of using AI during an on-stage conversation last week at the Mortgage Bankers Association’s annual convention and expo in Philadelphia.
Moderator Mark Jones, president of Union Home Mortgage and 2024 MBA Chairman, asked how the government-sponsored enterprises are thinking about using AI and what opportunities could arise as a result.
Hutchins said they have embraced the use of AI for quite a while.
“It’s an important part of our operations and we’re probably at the forefront of embedding AI into our models and into our automated underwriting processes. It’s allowed us to consume vast amounts of information more efficiently and effectively and come up with models that are more predictive and more accurate,” Hutchins said.
Hutchins said they have seen great success in terms of coming up with a fair process for buying loans.
Hutchins said going forward, it’s equally as important that they use AI to not only build models but to challenge those models as part of their fair lending process.
“So, we’ll build a model using AI. We’ll use other new AI tools and techniques to challenge those models,” Hutchins said.
— Mortgage Bankers Association (@MBAMortgage) October 16, 2023
Almodovar said that like Freddie Mac, Fannie Mae has been using AI in their models for years. They are interested in using the technology to find potential borrowers and to improve the appraisal process.
“We’ve done incredible work in terms of this text scanning to take out some of the bias in appraisal. But our next iteration is also looking at images, and can we take in the many images that are in appraisals,” Almodovar said.
AI will be useful to Fannie Mae in tackling climate change concerns as well, Almodovar said.
“For us, climate, front and center, is risk management. So using data and different data sets to really understand the risks of climate at the property level. What does it mean for our portfolio from a risk management perspective? It’s work we’re just starting,” Almodovar said.
Fannie Mae has surveyed mortgage lenders to assess their perceptions of the use of artificial learning and machine learning.
According to Peter Ghavami, vice president of modeling and data science at Fannie Mae, mortgage lenders cite improving operational efficiency as the primary motivation behind adopting artificial intelligence and machine learning.
Ghavami said 73% of the lenders they surveyed in 2023 want to use the technology to improve operational efficiencies.
Ghavami said using AI systems to automate compliance review was the most appealing to lenders, especially for depository institutions. The second-most appealing idea was anomaly-detection automation to help identify fraud or defects early in the underwriting process.
The biggest barriers to adoption include integration complexity with current infrastructure, lack of a proven record of success, and high costs. Data security and privacy also remain concerns.
“When asked to recommend AI application ideas for the GSEs to develop for the mortgage industry, lenders pointed to appraisal automation, borrower income/employment verification, data/documentation reconciliation and standardization, and compliance management,” Ghavami wrote.
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