Black Knight Inc. has released a complimentary white paper that addresses the considerations organizations must take when they are seeking to apply artificial intelligence (AI) and machine learning (ML) solutions in the mortgage industry.
Black Knight says these technologies operate much differently than traditional software solutions and demand new management disciplines. Given its role as a provider of AI/ML solutions that functionally improve the mortgage process, Black Knight issued the 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,” says Rich Gagliano, president of Black Knight Origination Technologies.
“In an industry as tightly regulated as ours, we can’t trust important lending decisions to magic. hat’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,” he adds.
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.
“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,” Gagliano continues. “This paper attempts to bridge this gap for our industry.”
The white paper, “Management of AI and ML in the Residential Mortgage Industry,” can be accessed here.