Getting Started with AI in Mortgage Processes

Artificial Intelligence (AI) is rapidly emerging as a game-changer in the mortgage industry. For lenders facing high costs, tight regulations, and rising borrower expectations, AI offers a path to greater efficiency and accuracy across key mortgage processes … but it also raises new questions.

This article provides a high-level overview of what AI is (and isn’t), how it compares to traditional automation, and why your compliance radar should still be turned all the way up.

We’ll save the deep-dive examples for follow-up articles, where we talk directly to the folks in the trenches: LOs, underwriters, processors, funders, and compliance pros.

AI vs. Traditional Automation: What’s the Difference?

Many lenders already use automation, often through rule-based systems like Robotic Process Automation (RPA). Think of RPA as similar to basic chatbots—they follow set instructions and respond in predictable ways.

These tools complete repetitive tasks by following specific rules. They’re fast but rigid—if something changes, the system usually breaks or needs reprogramming.

AI works differently. It doesn't just follow rules—it learns from data. It adapts to new inputs, finds patterns, and makes decisions based on what it has learned. AI can process unstructured data (like scanned documents or handwritten notes) and adjust as new patterns emerge.

In short: automation follows instructions. AI interprets, adapts, and improves.

Where AI Is Being Used in Mortgage ProcessesToday

AI is already being explored and adopted across many parts of the mortgage process. While we’ll go into detail in future articles, here are a few areas where AI is showing promise:

• Loan origination: streamlining applications and borrower communication

• Underwriting: analyzing documents and calculating income

• Processing: classifying and verifying large sets of data

• Funding and post-closing: checking for document accuracy

• Compliance: scanning for risks and ensuring consistent disclosure

You may have already heard of platforms like Blend, Candor, or Ocrolus. These tools apply AI to different stages of the loan cycle, helping lenders save time and reduce errors. In future posts, we’ll break down exactly how these tools work—and how to tell if they’re right for your team.

What to Ask Before Choosing an AI Tool

AI can be powerful, but it can also go off track. General-purpose AI models can sometimes produce inaccurate information or statements that are wildly inappropriate. This is known as "hallucination"—when the AI generates content that sounds confident but isn’t grounded in fact. In a regulated industry like mortgage lending, that’s not just embarrassing—it’s risky.

That’s why we strongly recommend choosing mortgage-specific AI tools that are designed with lending data, terminology, and compliance needs in mind. These tools are far more likely to produce reliable results and support your operational goals.

Before adopting an AI tool, lenders and compliance professionals should ask:

1. What does it actually do?

Be clear on what problem it solves. Is it reviewing documents? Flagging fraud? Generating disclosures?

2. Can I see how it made its decisions?

Look for systems with explainable AI. You need to be able to verify and audit its logic.

3. What data is it using?

Good AI requires good data. Understand the data sources and whether they meet your quality and privacy standards.

4. Does it comply with mortgage regulations?

The AI should support your ability to meet federal and state requirements—not create new risks.

5. Who is accountable if it makes a mistake?

Ultimately, your organization is responsible. Choose a vendor that supports transparency and stands behind their product.

By weighing these factors, lenders can choose AI tools that not only boost efficiency but also uphold the high standards of accuracy, fairness, and accountability that our industry demands.

Approach AI with Curiosity and Clarity

AI isn't here to replace your team—it's here to support them. Rather than fearing AI as some “black box,” think of it as an opportunity to modernize and improve every facet of your operations.

Start small: 

• Pilot an AI tool in one department, measure the results, and build comfort.

• Engage your compliance team early and often.

• Choose reputable partners and insist on transparency.

By taking these steps, you can harness AI’s benefits while steering clear of pitfalls.

Used correctly, it can reduce manual tasks, improve consistency, and even support fair lending efforts. However, it must be implemented thoughtfully, with oversight and a clear understanding of how it integrates into your process.

Want a deeper look at the risks, responsibilities, and regulatory considerations? Check out: AI in Mortgage Lending: Balancing Innovation with Compliance.

Need Help Getting Started?

Curious about how AI in mortgage processes could support your team—but not sure where to begin?

Contact Loan Risk Advisors to schedule a discovery call – we’re here to help you navigate the journey to an AI-enhanced future in lending.