A new Biden Executive Order will influence the development of artificial intelligence (AI). The Executive Order will both steer and facilitate the use of AI in many aspects of our lives.
So, is any of it relevant to how deeds change hands, and homes are bought and sold? The answer is yes — especially where financing is involved. Let’s take a look.
AI Thrives on Big Data. Including Loan Applicants’ Data.
The Executive Order does many things. Most don’t involve home titles. The thrust of the EO is standard-setting, to know that AI tools can be trusted before the public has access to them, or is impacted by them. The Biden administration isn’t taking the matter lightly. It directs a new AI Safety and Security Board to start up within the Department of Homeland Security.
Companies that value personal data want to make more of it. All that data is useful for training the firms’ AI systems. So, the EO calls for privacy-protection technology.
And this has relevance to borrowers’ personal identity and the information they submit to companies.
The Pros, the Cons, and the AI-Generated Stuff
The administration does not spend time forecasting a parade of AI horrors in the new Executive Order. The White & Case law firm notes that the EO puts “near-equal emphasis” on AI’s potential benefits and its potential problems. (Make no mistake: people who work in AI are concerned about emerging risks.)
So, in an effort to see AI “make Americans better off,” the EO sets a July 2024 deadline for the National Institute of Standards and Technology to come up with:
- Sets of best practices.
- A protocol for rigorous “red-team testing” to identify flaws in AI systems.
One big question involves potential confusion when people receive AI-generated text and images. The federal government will use watermarks for its own AI-generated content. This, says the Executive Order, will make it easy to know if government materials are “authentic” — and will “set an example” for companies and other governments.
AI in Mortgages: Preventing and Reversing Discrimination?
The White House knows that AI learns from information that humans have generated. Some of that information reflects biased decisions. AI could repeat and multiply the bias. So, the administration has already moved to prevent “algorithmic discrimination” in a number of ways. One involves confronting bias in appraisal tech. This new Executive Order continues that trend, by requiring landlords and federal actors to keep AI algorithms compliant with civil rights.
Investor-owners take note: The federal Fair Housing Act does apply to you. Find out more in our article about choosing potential renters.
Under the new Order, the FHA and the Consumer Financial Protection Bureau must create fairness-related AI rules for advertising homes and loans. Fannie Mae and Freddie Mac must apply automation to prevent appraisal bias.
At the end of the day, AI has the positive potential to actually improve the fairness of the approval process. That’s a win-win. When banks use AI to help manage risk while increasing the number of people who qualify for a loan, people buy homes, and banks earn more. In short, well-trained AI could improve creditworthiness vetting, meaning more loans and less risk. Bring it on?
Please note: This article is general information, not advice. Readers with individualized legal questions should consult with an attorney.
Supporting References
U.S. President Joseph Biden, EO 14110: Safe, Secure, and Trustworthy Development and Use of Artificial Intelligence (Oct. 30, 2023). See the White House Fact Sheet – President Biden Issues Executive Order on Safe, Secure, and Trustworthy Artificial Intelligence.
Hope Anderson and Emma Kurose of White & Case, LLP: Biden Executive Order Seeks to Govern the “Promise and Peril” of AI (Nov. 3, 2023).
Mohar Chatterjee and Rebecca Kern for Politico, LLC via Politico.com: Sweeping New Biden Order Aims to Alter the AI Landscape (Oct. 27, 2023).
Deeds.com: Black Homeownership and Housing – Amid Persistent Discrimination, New Potential for Change (Nov. 2, 2020).
Deeds.com: Is the FICO Score Obsolete? Seeking Inclusivity and Fairness Through AI (Aug. 16, 2021; internal citations omitted).
And as linked.
More on topics: Cybersecurity, Artificial Intelligence (AI)
Photo credits: Pixabay, via Pexels.