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

Impact. Fannie Mae is mandating comprehensive AI/ML governance frameworks for all seller/servicers, requiring formal policies within 120 days of the August effective date, designated policy owners, annual reviews, and extension of governance requirements to all vendors and subcontractors. This creates new cross-functional coordination requirements spanning compliance, risk management, technology, and operations with mandatory disclosure capabilities to Fannie Mae upon request.

Risk. Examination focus will concentrate on policy completeness and vendor oversight gaps, particularly where AI/ML systems lack clear ownership or where third-party relationships operate without appropriate governance extensions. Institutions using AI/ML through vendors without formal governance frameworks face the highest exposure for GSE compliance failures.

Recommended Action. Inventory all current AI/ML usage across origination and servicing operations, including vendor-provided systems, and assign a cross-functional project team to develop the required governance framework. Legal should review existing vendor contracts to identify amendment needs for AI/ML governance requirements before the 120-day policy deadline.

Watch. Monitor for Fannie Mae implementation guidance on disclosure requirements and vendor governance standards, particularly regarding what constitutes adequate AI/ML oversight for third-party relationships.