Mortgage stakeholders are applauding President Trump's latest executive order seeking to curb state-level regulation around artificial intelligence. 

The Trump Administration will target state laws and challenge them in court, and withhold certain grant funding for states with AI laws it deems onerous, according to the order signed Thursday. The directive suggests existing state laws are hindering innovation, and describes existing state legislation as a patchwork of cumbersome rules. 

The EO also claims those laws are requiring companies to embed ideological bias within their models, specifically referring to a Colorado statute banning "algorithmic discrimination." The mortgage industry has contested accusations of racial bias in AI decisioning for years, a topic which has gained more visibility with the rise of large language models.

The Mortgage Bankers Association praised the order Friday, and said it will work with lawmakers on a clear federal framework for AI use. 

"Technology does not stop at a state border," said MBA President and CEO Bob Broeksmit in a press release. "We believe strongly that a unified federal approach is necessary to avoid a confusing patchwork of state laws and regulations that would stifle innovation and raise compliance and borrower costs."

The Community Home Lenders of America lauded Trump's move, and noted how it advocated this summer for a federal 10-year moratorium on state laws limiting the use of AI.

"Individual mortgage banks are already gaining efficiencies through the use of AI — and avoiding a patchwork of 50 different state laws is crucial to those efforts," said CHLA Executive Director Scott Olson in a statement Friday. 

What did President Trump say?

The executive order doesn't impose any immediate, outright ban on state AI laws but suggests swift actions. Trump directed his administration to work with Congress to develop a "minimally burdensome national standard" rather than 50 state laws. 

Feds were given 30 days to create an AI Litigation Task Force, and 90 days to publish an evaluation of existing state laws the Administration deems onerous. The government will also withhold from states employing certain AI laws funding from various discretionary grant programs.

A federal AI framework won't interfere with certain state laws relating to child safety, data center infrastructure and other undefined topics. 

What it could mean for mortgage lenders

Industry players have already raised awareness, and questions, about complying with some state-level AI legislation in California and Colorado. While the effective date for Colorado's AI Act was pushed to next summer, a California bill regarding the safety of big AI systems goes into effect in January. 

Leaders like the Mortgage Industry Standards Maintenance Organization have mulled their own AI guardrails, as the term is not clearly defined. Experts have cited automated underwriting as an example of a technology that may or may not fit the definition of AI. Mortgage companies this year indicated to National Mortgage News their hesitancy around developing AI because of a lack of clear guidelines and fear of noncompliance.

Freddie Mac also addressed AI this week in updating its own guidelines which next year will require companies to establish clear frameworks regarding their internal AI use.