Black Knight White Paper Explores Strategies for Managing Artificial Intelligence and Machine-Learning Solutions Within the Mortgage Industry

• While AI/ML is increasingly being used to solve problems in the mortgage industry, as a relatively new technology domain for financial institutions, these tools also present new – and different – risk and challenges, including when to apply them and how to address compliance requirements
• Lenders using AI/ML require new management disciplines to meet these challenges
• The white paper explains how AI/ML has recently been subject to heightened concern by regulators and other stakeholders – particularly in matters of fair lending; focuses on model explainability and transparency; and outlines potential processes to respond
• Lenders must avoid bias that could harm consumers when using lending AI/ML applications, a problem often hidden by so-called “black box” algorithms
• As a leader in developing functional AI/ML that improves and enhances the mortgage process, combined with unmatched industry expertise, Black Knight is uniquely positioned to help lenders adapt to these new technologies
• This complimentary white paper is intended to assist mortgage industry managers and executives as they consider how to safely benefit from AI/ML

Black Knight, Inc. announced the release of a complimentary white paper addressing the many considerations that must be made by managers and executives seeking to apply artificial intelligence (AI) and machine learning (ML) solutions in the mortgage industry. The technology operates much differently than traditional software solutions and demands new management disciplines. Given its role as an industry leader and provider of AI/ML solutions that functionally improve the mortgage process, Black Knight issued this paper to assist industry managers and executives as they consider how to safely benefit from AI/ML.

“Science fiction author Arthur C. Clarke once wrote that ‘Any sufficiently advanced technology is indistinguishable from magic.’  That certainly applies to many applications of AI/ML, particularly so-called ‘black box’ algorithms,” said Rich Gagliano, president of Black Knight Origination Technologies. “In our daily lives in the digital world, AI is making things happen behind the scenes, with decisions being made and events triggered – all as if by magic. But in an industry as tightly regulated as ours, we can’t trust important lending decisions to magic. That’s why we’re offering this white paper to everyone in our industry. Regulators have justifiable concerns, particularly in matters of fair lending, that consumers are not harmed by bias in the application of AI/ML in the lending process. That is what makes model explainability and transparency so critical.”

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The paper addresses the many challenges and industry-specific concerns that must be considered when bringing AI/ML into the mortgage process. It also details when AI/ML is the right approach, and when it is not. For example, traditional business rule management software remains the appropriate technology for meeting most mortgage origination requirements since inputs must be directly traceable to precise expected outputs – otherwise known as a deterministic solution. AI/ML technology is appropriate for addressing business problems that do not yield to deterministic approaches (i.e., where inputs are varied or a range of possible outcomes exists), and therefore a probabilistic approach is required.

“Mortgage industry executives face a challenge,” Gagliano continued. “Existing accounting rules, government regulations, business process standards and auditing methods designed to assess traditional software are not viable when it comes to AI/ML, and yet there are no well-established standards to fix that. This paper attempts to bridge this gap for our industry, with a deep exploration of the things lenders should consider as the technology – and its oversight – progresses.”

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