WHAT THIS BILL REGULATES · 3 REQUIREMENT TYPES
How Is This Bill Enforced
Verbatim statutory text on the left; plain-language analysis and a per-section checklist on the right. Numbered markers cross-link to the matching checklist row.
As used in this act: "Artificial intelligence mortgage loan toolArtificial intelligence mortgage loan tool"Artificial intelligence mortgage loan tool" or "A.I. mortgage loan tool" means a generative artificial intelligence tool designed to: (1) assist mortgage loan originators, registered mortgage loan originators, residential mortgage lenders, or residential mortgage loan underwriters with residential mortgage loan origination; or (2) make decisions concerning residential mortgage loan approvals or interest rates.Section 1" or "A.I. mortgage loan tool" means a generative artificial intelligenceGenerative artificial intelligence"Generative artificial intelligence" means a technology system that: (1) is trained on data; (2) is a designed to simulate human connection through text, audio, or visual communication; and (3) generates non-scripted outputs with limited or no human oversight.Section 1 tool designed to: (1) assist mortgage loan originators, registered mortgage loan originators, residential mortgage lenders, or residential mortgage loan underwriters with residential mortgage loan originationResidential mortgage loan origination"Residential mortgage loan origination" means a comprehensive, step-by-step process of approving, processing, and funding a residential mortgage loan, from initial pre-approval of a residential mortgage loan application to closing.Section 1; or (2) make decisions concerning residential mortgage loan approvals or interest rates. "Bias auditBias audit"Bias audit" means an impartial evaluation conducted by an independent auditor, including but not limited to: (1) rigorous assessment of an A.I. mortgage loan tool to determine its impact on persons of any category; (2) identification and documentation of any biases, risks, or potential discriminatory outcomes that arise from the use of an A.I. mortgage loan tool, including design and implementation; and (3) clear, actionable recommendations to avoid, manage, or mitigate identified biases and risks and to ensure the safe, secure, and trustworthy use of an A.I. mortgage loan tool.Section 1" means an impartial evaluation conducted by an independent auditorIndependent auditor"Independent auditor" means a person or group that can exercise objective and impartial judgment on all issues within the scope of a bias audit of an A.I. mortgage loan tool. An auditor shall not be considered independent if the auditor: (1) is or was involved in using, developing, or distributing an A.I. mortgage loan tool; (2) at any point during the bias audit, has an employment relationship with an employer that seeks to use or continue to use an A.I. mortgage loan tool or with a vendor that developed or distributes an A.I. mortgage loan tool; or (3) at any point during the bias audit, has a direct financial interest or a material indirect financial interest in an employer that seeks to use or continue to use an A.I. mortgage loan tool or in a vendor that developed or distributed an A.I. mortgage loan tool.Section 1, including but not limited to: (1) rigorous assessment of an A.I. mortgage loan tool to determine its impact on persons of any categoryCategory"Category" means race, creed, color, national origin, ethnicity, sex, gender identity, sexual orientation, age, religion, marital or familial status, or disability.Section 1; (2) identification and documentation of any biases, risks, or potential discriminatory outcomes that arise from the use of an A.I. mortgage loan tool, including design and implementation; and (3) clear, actionable recommendations to avoid, manage, or mitigate identified biases and risks and to ensure the safe, secure, and trustworthy use of an A.I. mortgage loan tool. "CategoryCategory"Category" means race, creed, color, national origin, ethnicity, sex, gender identity, sexual orientation, age, religion, marital or familial status, or disability.Section 1" means race, creed, color, national origin, ethnicity, sex, gender identity, sexual orientation, age, religion, marital or familial status, or disability. "Generative artificial intelligenceGenerative artificial intelligence"Generative artificial intelligence" means a technology system that: (1) is trained on data; (2) is a designed to simulate human connection through text, audio, or visual communication; and (3) generates non-scripted outputs with limited or no human oversight.Section 1" means a technology system that: (1) is trained on data; (2) is a designed to simulate human connection through text, audio, or visual communication; and (3) generates non-scripted outputs with limited or no human oversight. "Independent auditorIndependent auditor"Independent auditor" means a person or group that can exercise objective and impartial judgment on all issues within the scope of a bias audit of an A.I. mortgage loan tool. An auditor shall not be considered independent if the auditor: (1) is or was involved in using, developing, or distributing an A.I. mortgage loan tool; (2) at any point during the bias audit, has an employment relationship with an employer that seeks to use or continue to use an A.I. mortgage loan tool or with a vendor that developed or distributes an A.I. mortgage loan tool; or (3) at any point during the bias audit, has a direct financial interest or a material indirect financial interest in an employer that seeks to use or continue to use an A.I. mortgage loan tool or in a vendor that developed or distributed an A.I. mortgage loan tool.Section 1" means a person or group that can exercise objective and impartial judgment on all issues within the scope of a bias audit of an A.I. mortgage loan tool. An auditor shall not be considered independent if the auditor: (1) is or was involved in using, developing, or distributing an A.I. mortgage loan tool; (2) at any point during the bias auditBias audit"Bias audit" means an impartial evaluation conducted by an independent auditor, including but not limited to: (1) rigorous assessment of an A.I. mortgage loan tool to determine its impact on persons of any category; (2) identification and documentation of any biases, risks, or potential discriminatory outcomes that arise from the use of an A.I. mortgage loan tool, including design and implementation; and (3) clear, actionable recommendations to avoid, manage, or mitigate identified biases and risks and to ensure the safe, secure, and trustworthy use of an A.I. mortgage loan tool.Section 1, has an employment relationship with an employer that seeks to use or continue to use an A.I. mortgage loan tool or with a vendor that developed or distributes an A.I. mortgage loan tool; or (3) at any point during the bias auditBias audit"Bias audit" means an impartial evaluation conducted by an independent auditor, including but not limited to: (1) rigorous assessment of an A.I. mortgage loan tool to determine its impact on persons of any category; (2) identification and documentation of any biases, risks, or potential discriminatory outcomes that arise from the use of an A.I. mortgage loan tool, including design and implementation; and (3) clear, actionable recommendations to avoid, manage, or mitigate identified biases and risks and to ensure the safe, secure, and trustworthy use of an A.I. mortgage loan tool.Section 1, has a direct financial interest or a material indirect financial interest in an employer that seeks to use or continue to use an A.I. mortgage loan tool or in a vendor that developed or distributed an A.I. mortgage loan tool. "Residential mortgage loan originationResidential mortgage loan origination"Residential mortgage loan origination" means a comprehensive, step-by-step process of approving, processing, and funding a residential mortgage loan, from initial pre-approval of a residential mortgage loan application to closing.Section 1" means a comprehensive, step-by-step process of approving, processing, and funding a residential mortgage loan, from initial pre-approval of a residential mortgage loan application to closing.
Section 1 defines the scope terms for the act. The pivotal term is A.I. mortgage loan tool, which captures any generative AI tool that either assists loan personnel with residential mortgage origination or directly makes approval or interest-rate decisions — meaning both back-office assistants and autonomous decision engines fall within scope.
The bias audit definition sets the substance of the act's core compliance regime, requiring an impartial impact assessment, documentation of discriminatory risks, and actionable mitigation recommendations by an independent auditor with no development, employment, or financial ties to the tool. Category enumerates the protected characteristics that both the audit and the input-restriction rule turn on.
a. 1 It shall be a violation of this act to sell, develop, use, or offer for sale an artificial intelligence mortgage loan toolArtificial intelligence mortgage loan tool"Artificial intelligence mortgage loan tool" or "A.I. mortgage loan tool" means a generative artificial intelligence tool designed to: (1) assist mortgage loan originators, registered mortgage loan originators, residential mortgage lenders, or residential mortgage loan underwriters with residential mortgage loan origination; or (2) make decisions concerning residential mortgage loan approvals or interest rates.Section 1 in this State unless: (1) the A.I. mortgage loan tool is the subject of a bias auditBias audit"Bias audit" means an impartial evaluation conducted by an independent auditor, including but not limited to: (1) rigorous assessment of an A.I. mortgage loan tool to determine its impact on persons of any category; (2) identification and documentation of any biases, risks, or potential discriminatory outcomes that arise from the use of an A.I. mortgage loan tool, including design and implementation; and (3) clear, actionable recommendations to avoid, manage, or mitigate identified biases and risks and to ensure the safe, secure, and trustworthy use of an A.I. mortgage loan tool.Section 1 conducted in the past year prior to selling, using, or offering for sale the A.I. mortgage loan tool in this State; (2) the sale of the A.I. mortgage loan tool includes, at no additional cost, an annual bias auditBias audit"Bias audit" means an impartial evaluation conducted by an independent auditor, including but not limited to: (1) rigorous assessment of an A.I. mortgage loan tool to determine its impact on persons of any category; (2) identification and documentation of any biases, risks, or potential discriminatory outcomes that arise from the use of an A.I. mortgage loan tool, including design and implementation; and (3) clear, actionable recommendations to avoid, manage, or mitigate identified biases and risks and to ensure the safe, secure, and trustworthy use of an A.I. mortgage loan tool.Section 1 service that provides the results of that audit to a purchaser and a written plan to monitor the implementation of the recommendations in the audit report; (3) the A.I. mortgage loan tool is sold, developed, used, or offered for sale with a notice stating that the A.I. mortgage loan tool is subject to the provisions of this act; and (4) the developer of the A.I. mortgage loan tool has implemented the recommendations of the most recent bias auditBias audit"Bias audit" means an impartial evaluation conducted by an independent auditor, including but not limited to: (1) rigorous assessment of an A.I. mortgage loan tool to determine its impact on persons of any category; (2) identification and documentation of any biases, risks, or potential discriminatory outcomes that arise from the use of an A.I. mortgage loan tool, including design and implementation; and (3) clear, actionable recommendations to avoid, manage, or mitigate identified biases and risks and to ensure the safe, secure, and trustworthy use of an A.I. mortgage loan tool.Section 1 conducted prior to selling, using, or offering the A.I. mortgage loan tool in this State.
b. 2 Any residential mortgage loan lender or mortgage loan originator in the State that uses an A.I. mortgage loan tool shall provide on its Internet website a summary of the most recent bias audit of the A.I. mortgage loan tool.
c. 3 A residential mortgage loan lender, registered mortgage loan originator, or mortgage loan originator that uses an A.I. mortgage loan tool shall notify every individual applying for a residential mortgage loan that an A.I. mortgage loan tool will be used in connection with the individual's application, prior to the individual submitting the residential mortgage loan application.
d. 4 When using an A.I. mortgage loan tool to evaluate a prospective mortgagor, a residential mortgage loan lender, registered mortgage loan originator, or mortgage loan originator shall only input quantifiable metrics, which may include but shall not be limited to income or credit score, into the A.I. mortgage loan tool and shall not input any category of person into the tool.
Section 2 is the operative heart of the act. Subsection (a) makes it a violation to sell, develop, use, or offer an A.I. mortgage loan tool in New Jersey unless four conditions are met: the tool has undergone an independent bias audit within the past year; its sale bundles a free annual bias audit service that delivers results to the purchaser plus a written monitoring plan; it carries a notice stating it is subject to the act; and the developer has implemented the most recent audit's recommendations. This effectively imposes an independent-audit-and-remediation gate on developers and vendors before any market activity.
Subsections (b) through (d) impose separate duties on the lenders and originators who use these tools: publishing a summary of the most recent bias audit on their website, notifying every applicant before application submission that an AI tool will be used, and restricting inputs to quantifiable metrics such as income or credit score while categorically prohibiting entry of any protected category of person into the tool.
a. A person that sells, develops, uses, or offers an artificial intelligence mortgage loan toolArtificial intelligence mortgage loan tool"Artificial intelligence mortgage loan tool" or "A.I. mortgage loan tool" means a generative artificial intelligence tool designed to: (1) assist mortgage loan originators, registered mortgage loan originators, residential mortgage lenders, or residential mortgage loan underwriters with residential mortgage loan origination; or (2) make decisions concerning residential mortgage loan approvals or interest rates.Section 1 and is found to violate subsection a. of section 2 of this act shall be liable for a civil penalty of not more than $1,500 for the person's first violation and each subsequent violation. The civil penalty shall increase by two percent for each subsequent day the person remains in violation of this act. Violations shall accrue daily for each A.I. mortgage loan tool that is sold, developed, used, or offered in violation of this act.
b. All penalties assessed under this section shall be payable to the department and may be recovered with costs in a summary proceeding commenced by the commissioner pursuant to the "Penalty Enforcement Law of 1999," P.L.1999, c.274 (C.2A:58-10 et seq.).
c. A residential mortgage loan lender, registered mortgage loan originator, or mortgage loan originator that violates subsections b., c., or d. of section 2 of this act shall be liable for a civil penalty of not more than $500 for a first violation and for each subsequent violation.
d. The department, in consultation with the Division on Civil Rights in the Department of Law and Public Safety, pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), shall promulgate rules and regulations to effectuate the provisions of this act.
Section 3 establishes the enforcement scheme. A person who violates the section 2(a) sale/development/use audit requirements faces a civil penalty of up to $1,500 per violation, increasing by two percent for each additional day of continued violation and accruing daily for each tool. Lenders and originators who violate the website posting, applicant notice, or input-restriction duties face a separate penalty of up to $500 per violation.
Penalties are payable to the Department of Banking and Insurance and recovered by the commissioner in a summary proceeding under the Penalty Enforcement Law of 1999. The department, in consultation with the Division on Civil Rights, is directed to adopt implementing rules. These provisions are enforcement hooks and a rulemaking delegation and create no independent affirmative compliance duty of their own.
This act shall take effect on the 90th day next following the date of enactment, except that the commissioner may take such anticipatory administrative action in advance as shall be necessary for the implementation of this act and shall be applicable to mortgage loan applications received on or after the enactment date.
Section 4 sets the effective date at 90 days after enactment, with the commissioner authorized to take anticipatory administrative action beforehand. The act applies to mortgage loan applications received on or after the enactment date. This is a timing provision and imposes no independent compliance obligation.