Lender Letter LL-2026-04 Governance framework on use of artificial intelligence and machine learning

Impact. This lender letter establishes mandatory AI/ML governance requirements that restructure how you manage algorithmic decision-making across your mortgage operations. You must implement board-level oversight, comprehensive model inventories, validation protocols, and vendor management specifically for AI/ML systems used in underwriting, pricing, servicing, or customer interactions.

Risk. Model risk management faces the highest exposure, particularly if your current framework treats AI/ML systems as standard models rather than requiring specialized validation approaches. Examination teams will scrutinize whether your board receives adequate AI/ML reporting and whether you can demonstrate ongoing monitoring of algorithmic bias and performance drift in GSE-eligible lending.

Recommended Action. Conduct an immediate gap analysis between your existing model risk management policies and the new AI/ML requirements, then prioritize expanding your model inventory to capture all AI/ML applications touching GSE business. Your Model Risk Management function should lead this effort with direct support from Technology and Data Governance teams.

Watch. Monitor for Fannie Mae's anticipated examination procedures focusing on AI/ML governance implementation, likely to emerge within the next quarter as they begin assessing lender compliance with this framework.