Feds Barr raises concerns about AI redlining | Orrick, Herrington & Sutcliffe LLP
Publish date: 2024-07-26
On July 18, Federal Reserve Vice Chair for Supervision Michael Barr delivered a speech on adjusting the Fair Housing Act and ECOA in response to the increasing relevance of artificial intelligence. Barr explained how the digital economy offers many great utilizations, such as accessing the creditworthiness of individuals without credit history and facilitating wider access to credit for those who may otherwise be excluded. Along with a digital economy, Barr cautioned, comes negative implications where technologies can potentially violate the fair lending laws and may perpetuate existing disparities and inaccuracies, among other things. Barr highlighted Special Purpose Credit Programs as a tool to address discrimination and bias in mortgage credit transactions. In addition, Barr highlighted two recent initiatives taken by the Fed to tackle appraisal discrimination and bias in housing mortgage credit transactions—one involved inviting public feedback on a proposed rule to uphold credibility and integrity in automated valuation models, and the other sought input on guidance addressing risks related to deficient home appraisals, emphasizing "reconsiderations of value" in the process. (Covered by InfoBytes here and here.) Barr also commented that through the Fed’s supervisory process, it is evaluating whether firms have proper risk management and controls, including with respect to these new technologies.ncG1vNJzZmivp6x7q7DSrqermV6YvK57y56emqSemsS0e8Wem2arXZeus76Mq5iiq5WoeqS7zZycq6ajYq6ju9StZJqhXW6DeIWXam9o