AI in Mortgage Lending: The New Compliance and Governance Battleground

Brody | Gapp LLP, a national law firm specializing in mortgage banking compliance, litigation, and AI governance, has launched its Mortgage AI Governance Audit Practice. The announcement, made on May 15, 2026, at the MBA Secondary & Capital Markets Conference in New York, addresses the increasing need for oversight as artificial intelligence adoption accelerates within mortgage lending workflows.

As part of the practice’s debut, Friday Harbor has become the first mortgage technology provider to complete the firm’s Limited Attestation. Friday Harbor is a Seattle-based AI pre-underwriting platform that was named to the HousingWire 2026 Tech100 Mortgage list.

The compliance engagement with Friday Harbor was initiated by the platform prior to any regulatory mandate. The evaluation assessed the platform’s operations across several critical regulatory and operational categories:

• Fair lending
• Adverse action under Regulation B §1002.9
• Model governance
• Vendor risk management
• Data governance
• Internal controls
• Examination readiness

Regulatory Requirements for AI Governance

The launch of the audit practice occurs as new regulatory frameworks for artificial intelligence are being implemented in the mortgage sector. Freddie Mac’s AI risk management requirements, specifically under §§1302.2 and 1302.8, are currently in effect.

Fannie Mae Lender Letter LL-2026-04 is scheduled to become effective on August 6, 2026. This directive requires lenders to ensure that any vendors operating AI systems on their behalf are subject to controls that are no less protective than the lender’s own internal controls.

Upcoming Industry Guidance

In conjunction with the new audit practice, Brody | Gapp LLP has announced plans to publish The Mortgage Bankers AI Governance Guide™ in the third quarter of 2026. The guide was conceived by the firm’s Founding and Managing Partner, James W. Brody, and co-authored with Founding Partner Ronald Gapp, Jr.