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How Will Artificial Intelligence Shape Mortgage Lending?
Thursday, October 11, 2018 6:40 AM

Businesses are increasingly leveraging digital technologies to reduce errors and costs, speed up transactions, and drive richer and better customer service. Over the past couple of years, artificial intelligence (AI), including machine learning (ML), has gained traction with businesses that deal with large amounts of data to reduce human error and improve operational efficiency. Major areas of AI or ML application to the mortgage industry may include identifying anomalies, assessing risk, exploring non-credit bureau data to enhance prediction of loan performance, and answering customer questions (e.g., search tools and chatbots).

As part of its quarterly Mortgage Lender Sentiment Survey, Fannie Mae's Economic & Strategic Research Group (ESR) surveyed senior mortgage executives in August to better understand lenders' views about AI/ML technology and, specifically, to gauge their interest in various AI/ML application ideas.

The study revealed the following key findings:

  • Most lenders (63 percent) say they are familiar with AI/ML technology, but only about a quarter (27 percent) have used or tried AI tools for their mortgage business. Nearly three-fifths of lenders (58 percent) say they expect to adopt some AI solutions in two years.
  • Lenders who currently use AI/ML technology report using it primarily to improve operational efficiency or enhance the consumer/borrower experience. Use cases center around loan application, origination, and underwriting.
  • Among lenders who have not used AI/ML technology, the biggest challenges cited include integration complexity with current infrastructure, high costs, and lack of proven record of success.
  • AI/ML applications related to improving operational efficiency are most appealing to lenders. Enabling machines to process data from various sources to identify fraud or detect defects ("Anomaly Detection Automation") was the most appealing idea to lenders, followed by "Borrower Default Risk Assessment."

A few industries like healthcare and transportation have already begun exploring AI technology, allowing them to monitor health through wearables/personal devices and to better predict and detect traffic accidents. AI appears to be gaining traction in the mortgage industry, as well, as our study shows that about one-quarter of lenders surveyed say they have started using it for their mortgage businesses. Based on our industry knowledge and experience, if lenders are interested in exploring AI/ML, we recommend starting in areas where they can measure the benefits without costly integration. Small projects using existing historical data can help teams gain comfort with AI on a practical level and inform further exploration or investment decisions.

Learn more about the findings Fannie Mae's Perspectives blog, view an infographic, and read the full report.