That includes where companies market, how they market and how they target their audiences, Pompan says. The regulators are on high alert for anything that signals exclusion, he adds, where marketing practices might focus on one group to the exclusion of others. Those actions are now being viewed as a form of redlining. Enforcement efforts will be led by the DOJ Civil Rights Divisions’ Housing and Civil Enforcement Section, which will partner with U.S. Attorney offices nationwide, as well as financial regulatory agencies, including the CFPB. One key takeaway, according to Venable, is that the U.S. Attorneys’ offices will tap the local expertise and state attorneys general on housing markets and credit needs. Another takeaway is that the effort will extend the DOJ’s analyses of potential redlining to non-depository institutions, which the DOJ notes originate most mortgage loans. Those efforts will include a focus on AI and so-called digital redlining, according to the panelists. While AI might appear to take human bias out of the equation when marketing to various neighborhoods, the algorithms might be set up where bias exists. That dynamic is something that the panel says Rohit Chopra, CFPB director, has explicitly warned against in comments since taking office in 2021. The panelists note that companies might not be aware of how the AI system for a marketing campaign is created, so an algorithm might use a data point that correlates strongly with a protected class in fair lending laws. “It’s definitely a focus of the CFPB going forward,” Pompan says. “And the real challenge that we see for the industry is that, oftentimes, the folks who are using an AI model or machine-based learning don’t really know what inputs are going in.” He explains that companies might have purchased a product that was developed with a proprietary algorithm that might be predictive of the credit model or the participant they want to target, but the fair lending implications haven’t been thought through. “The bureau is viewing that very skeptically,” Pompan says. “And we expect that those models will receive a whole lot more attention.” Bresnick says programs can be written that meet lending rules, but the underlying information needs to be presented to lawyers and enforcement agents so they can clearly understand how the algorithms work. Partner Andrew Bigart agrees, saying that companies use the programs because they are creative and effective. “The problem is that the developers don’t understand in some cases that the inputs they are using can be proxies for protective-class status and the outcomes can become skewed,” he says. Lenders using the tools must analyze their loan data to ensure there is no disparate impact on protected classes, Bigart adds. New Agency Heads Pompan notes that the CFPB “is not the only sheriff in town” and that industry observers should monitor the Federal Trade Commission, which is now chaired by Lina M. Kahn. Among its duties is consumer protection, and the FTC and CFPB are expected to work closely together. At the CFPB, Chopra will oversee an enforcement agenda that will include payment systems, housing insecurity and repeat offenders, in addition to fair lending, according to the presentation. Gordon and Pompan say that Chopra is an “ideas person” who strongly believes in the bureau’s mission. Bresnick says some regulators believe that fair lending had been ignored in the previous administration, which is another reason why it is a priority. Chopra’s new enforcement director, Eric Halperin, is well respected by those in and out of government but can be expected to be aggressive with enforcement matters, says Bresnick, who worked with Halperin at DOJ. “Eric is collaborative, cooperative but aggressive,” Bresnick says. “He will work hard to advance the mission of the bureau, especially fair lending matters.” Some CFPB staff members have not been in favor of some of the consent orders that have been issued in recent years, and it will be interested in going after nonbank lenders, Pompan says. As far as previous consent orders are concerned, the CFPB staff will be aggressive with ensuring compliance, the panelists also point out. Gordon suggests that Chopra has shown that he is more apt to go to court and not compromise on cases, and observers should monitor whether he continues that trend this year or works to build consensus. Regulators continued from page 29 30 REVERSE MORTGAGE / MARCH-APR I L 2022
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