Gao Calls On Fhfa To Address Fair Lending Risks In Mortgage Technology

The Government Accountability Office (GAO) called on the Federal Housing Finance Agency (FHFA) to provide guidance to Fannie Mae and Freddie Mac regarding fair lending requirements for property technology deployed in the homebuying process.

In a report released Thursday, the GAO concluded that online real estate platforms, automated valuation models (AVMs), underwriting systems and electronic closing products can simplify homebuying and reduce costs, but they also pose risks due to the use of artificial intelligence (AI).

“GAO recommends that FHFA provide written direction to the enterprises clarifying how they are to comply with fair lending requirements and how FHFA will supervise their compliance,” the report states. 

According to the document, FHFA neither agreed nor disagreed with the recommendation. The agency did not immediately respond to HousingWire’s request for comment.

The report responds to a request from Rep. Maxine Waters (D-Calif.) and Sen. Elizabeth Warren (D-Mass.) to investigate the effects that AI and property technology may have on fair and affordable housing.

The document is based on a literature review, industry and government reports, and interviews with officials and industry experts, and it was examined through the lens of relevant federal laws.

Fair lending risks

The GAO concluded that fair lending laws can be violated when chatbots or advertising algorithms steer consumers in protected classes toward certain listings, or when AVMs rely on historic home-price data that may perpetuate the effects of past discrimination. 

The same can happen with underwriting tools, it added. Based on studies and industry group interviews, the GAO said that although AI is not widely used to make credit decisions on mortgages, its use may still perpetuate bias.

“Data used to train AI-powered algorithmic models may reflect past underwriting decisions and lending practices influenced by discriminatory practices such as redlining,” the report stated. 

The GAO said it identified fewer potential risks associated with e-closing tools than with other product types, with no relevant studies found in its literature search. But according to officials at the Federal Trade Commission (FTC) and Consumer Financial Protection Bureau (CFPB), these tools can pose risks related to wire fraud.

The report also said that while the FHFA has conducted examinations specifically focused on products such as underwriting and valuation systems, other agencies — including the CFPB, FTC and the U.S. Department of Housing and Urban Development — have not taken a product-focused approach.

In addition, FHFA implemented new priorities in 2025 and changed policies and programs, including those related to fair lending oversight. It changed its examination approach, waived components of its fair lending rule and rescinded related guidance, the GAO said.

“Given the extent of FHFA’s changes, providing additional written direction for the enterprises on the changes would help ensure the enterprises clearly understand FHFA’s compliance requirements and its supervisory expectation,” the report concluded. 

Christopher Bosland, deputy director of the FHFA’s division of enterprise regulation, noted in a letter attached to the report that the regulator reminded Fannie and Freddie this year of their responsibilities to comply with all statutory requirements, including fair lending rules. Bosland referenced a 2019 advisory bulletin outlining expectations for compliance risk management.