State Artificial Intelligence Law and the Real Estate Finance Industry

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In the absence of Congressional action, states have begun debating how to regulate artificial intelligence (AI) in earnest with legislative efforts broadly aimed across industries. In May 2024, Colorado became the first state to enact a statute governing these tools. MBA and its partner state and local associations are engaged in advocacy to ensure the specific needs of the real estate finance industry are considered in these debates and incorporated into any final policy. MBA created a report exploring AI in the Mortgage Industry and a document outlining Myths vs. Facts about the industry's use of AI. Educating state legislator's on the use and purpose of these technologies is key to ensuring these policies do not interfere with the overall mortgage market.

For example, member companies often rely on AI tools they do not own nor control in order to extend sustainable mortgage credit to low- and moderate-income families through the affordable housing programs of the federal government. This includes AI tools developed or required by Fannie Mae, Freddie Mac, the Federal Housing Administration, the Department of Agriculture's Rural Housing Service, and the Veterans Administration's Loan Guarantee Program.

Given the reliance on federal tools, it is vital that state policy makers continue to allow their federal counterparts to manage these systems and not create any unintended consequences through a patchwork of state laws.

ENACTED

Colorado: Consumer Protections for Artificial Intelligence (May 17, 2024)

Rulemaking Updates: https://coag.gov/ai/

All Activity Related to State Artificial Intelligence Legislation

November 22, 2024: California's Consumer Privacy Protection Agency (CPPA) published proposed regulations regarding cybersecurity and automated decisionmaking technology (ADMT). Comments are due January 14th, 2025.
November 2024: MBA releases AI in the Mortgage Industry Report to explore the current use of artificial intelligence in the mortgage industry and outline principles for lawmakers.
October 28, 2024: Texas releases draft legislative text for the Texas Responsible Artificial Intelligence Governance Act (TRAIGA) to be introduced in the 2025 legislative session.
October 2024: The Critical Role of State Regulators in Shaping AI Policy for the Mortgage Industry, from the American Association of Residential Mortgage Regulator's quarterly newsletter, by MBA's Liz Facemire, MBA Director of State Government Affairs,
August 31, 2024: Due to remaining opposition and the end of session, California AB 2930 was withheld from a final vote and did not pass. California is likely to pick this issue back up next year. MBA will continue to support California MBA in further discussions on the impact to the mortgage industry.
August 28, 2024: Montana pre-files title only legislation, LC 68, Establishing Consumer Protections related to artificial intelligence, awaiting full legislative text.
August 15, 2024: California Senate Appropriations Committee passes AB 2930 after amending the bill. These amendments limited the scope of the bill to only employment related decisions (hiring/firing, pay, promotion, etc.) - no longer includes mortgage transaction decision technology
May 17, 2024: Colorado Governor Jared Polis signs first in the nation legislation to regulate artificial intelligence (Consumer Protections for Artificial Intelligence). Read Governor Polis' signing statement expressing his reservations but also urging changes to the language before the February 1, 2026 effective date.
May 16, 2024: MBA and the Colorado Mortgage Lenders Association send a veto request to Governor Polis noting that SB 24-205 fails to consider the totality of the real estate finance system.
May 6 & 7, 2024: The General Counsel of the Federal Housing Finance Agency writes to the governors and legislative leaders of Connecticut and Colorado to express FHFA's regulatory authority over Fannie Mae and Freddie Mac and also explained the GSEs’ underwriting tools used by mortgage lenders.
April 24, 2024: MBA background memorandum to the Connecticut Mortgage Bankers Association on industry use of artificial intelligence.
April 9, 2024: MBA and California MBA send coalition letter with CA Bankers, CA Community Banking Network, and CA Credit Union League expressing opposition to AB 2930
March 22, 2024: Rhode Island introduces SB 2888, which would require risk assessments on certain high-risk artificial intelligence systems
March 18, 2024: Washington enacts AI Task Force bill, SB 5838, by request of the Attorney General. SB 5838 allows the task force to return with recommendations on legislation to regulate artificial intelligence
March 7, 2024: New York introduces S8755 to create a New York Artificial Intelligence Commission, the Commission would provide ethical standards for businesses operating in New York
February 27, 2024: MBA’s comments to a working session of the Washington House of Representative’s Consumer Protection and Business Committee regarding the industry’s use of automated valuation models and property data collectors.
February 15, 2024: California introduces AB 2930, related to the use of automated decision tools - including an opt-out provision.
February 9, 2024: Illinois introduces HB 5322, which would create the Illinois Commercial Algorithmic Impact Assessments Act
February 8, 2024: Illinois introduces HB 5116, the Automated Decision Tools Act
February 7, 2024: Connecticut proposes SB 2, An Act Concerning Artificial Intelligence
February 7, 2024: Rhode Island introduces H 7521, creating requirements for developers and deployers of artificial intelligence with a private right of action
February 5, 2024: Oklahoma introduces HB 3835, the Ethical Artificial Intelligence Act
January 31, 2024: California introduces AB 2013, related to artificial intelligence and training data transparency
January 19, 2024: Hawaii introduces SB 2524, which "would prohibit algorithmic decision-making from utilizing algorithmic eligibility determinations in a discriminatory manner"
January 12, 2024: New York introduces S8209, a companion to the A8129, New York Artificial Intelligence Bill of Rights, introduced in October 2023
January 9, 2024: Georgia introduces HB 890, to protect against discrimination by artificial intelligence and automated decision tools
January 9, 2024: Virginia pre-files HB 747, Artificial Intelligence Developer Act
January 9, 2024: Vermont introduces H 710 and H 711, creating oversight and liability standards for developers and deployers of high-risk artificial intelligence systems
December 28, 2023: MBA & California MBA send a coalition letter with California Bankers Association & California Credit Union League conveying concerns over draft regulations under the California Privacy Protection Act relating to regulation of automated decision making technology
December 14, 2023: Washington pre-files for introduction HB 1951, Promoting ethical artificial intelligence by protecting against algorithmic discrimination.
October 9, 2023: MBA provides memorandum to the Washington Mortgage Bankers Association on the industry use of artificial intelligence and consideration of a draft proposed bill in the state

Related MBA Events

William Kooper Discusses State Artificial Intelligence Advocacy Efforts

Join MISMO's Artificial Intelligence (AI) Community of Practice (CoP)

MISMO's AI CoP aims to bring together experts and practitioners to collaborate on advancing artificial intelligence standards in the mortgage industry. The AI CoP will also be a forum for industry professionals to stay informed on the latest AI trends and advancements that are transforming the mortgage landscape. Access MISMO Connect to join.