AI Frontier Institute

Regulates use of artificial intelligence in certain mortgage lending tools to minimize discrimination in lending.

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New Jersey Assembly Bill 5496 (introduced September 14, 2026 and referred to the Assembly Science, Innovation and Technology Committee) has not been enacted. If enacted, it would regulate generative AI tools used in residential mortgage lending, with the aim of minimizing discrimination. It would supplement P.L.2009, c.53 (C.17:11C-51 et seq.). Definitions (section 1): An "A.I. mortgage loan tool" is a generative AI tool designed to assist mortgage loan originators, lenders or underwriters with residential mortgage loan origination, or to make decisions on residential mortgage loan approvals or interest rates. A "bias audit" is an impartial evaluation by an independent auditor. It must assess the tool's impact on persons of any "category" (race, creed, color, national origin, ethnicity, sex, gender identity, sexual orientation, age, religion, marital or familial status, or disability). It must document biases, risks, or discriminatory outcomes. It must give actionable recommendations. An auditor is not independent if they are or were involved in using, developing, or distributing the tool, or if they have an employment relationship or a direct or material indirect financial interest tied to the user or vendor. Requirements (section 2): - Subsection a. makes it a violation to sell, develop, use, or offer for sale an A.I. mortgage loan tool in New Jersey unless four conditions are met. - A bias audit was done within the past year. - The sale includes, at no extra cost, an annual bias audit service that gives the purchaser the results and a written plan to monitor implementation of the recommendations. - The tool carries a notice that it is subject to the act. - The developer has implemented the recommendations of the most recent bias audit. - Subsection b. requires lenders and originators that use such a tool to post a summary of the most recent bias audit on their website. - Subsection c. requires them to tell every loan applicant, before the application is submitted, that an A.I. mortgage loan tool will be used. - Subsection d. requires them to input only quantifiable metrics, such as income or credit score, and never any protected "category" of person. Penalties and enforcement (section 3): - Violating section 2(a) carries a civil penalty of up to $1,500 for the first and each subsequent violation. The penalty increases by two percent for each subsequent day the violation continues, and violations accrue daily for each tool. - Violating section 2(b), (c), or (d) carries a civil penalty of up to $500 per violation. - Penalties are payable to the department and recoverable in a summary proceeding by the commissioner under the Penalty Enforcement Law of 1999. - The department, in consultation with the Division on Civil Rights, would adopt implementing rules under the Administrative Procedure Act. Effective date (section 4): The act takes effect on the 90th day after enactment. The commissioner may take anticipatory administrative action beforehand. The act applies to mortgage loan applications received on or after the enactment date.

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