On April 8, Fannie Mae issued a Lender Letter establishing a governance framework for seller/servicers’ use of AI and machine learning (AI/ML) in mortgage origination and servicing practices. The framework, which takes effect 120 days from publication, requires seller/servicers that use AI/ML in connection with originating loans sold to or guaranteed by Fannie Mae, or servicing loans on Fannie Mae’s behalf, to comply with applicable laws and the Lender Contract. Seller/servicers must maintain policies and procedures governing AI/ML systems, including for risk management. At a minimum, such policies must: (i) be transparent and communicated to appropriate personnel; (ii) incorporate the characteristics of trustworthy and ethical AI/ML; (iii) reflect an understanding of legal and regulatory requirements; (iv) align with the lender’s risk tolerance; and (v) be reviewed at least annually to ensure compliance with applicable law and consistency with industry best practices.

Additionally, seller/servicers must comply with Fannie Mae’s Information Security and Business Resiliency Supplement and ensure that subcontractor and vendor use of AI/ML is subject to governance “no less protective” than the framework’s requirements. The Lender Letter further provides that, upon request, seller/servicers must promptly disclose to Fannie Mae the types of AI/ML used, the purpose and manner of such use, any safeguards implemented to mitigate AI/ML-related risks, and any other information Fannie Mae may require.