MBA Premier Member Editorial: How Generative AI Tools Impact Lawyers and their Mortgage Industry Clients
Andrew Liput is president and CEO of MBA Premier Member Secure Insight, Hamilton, N.J.
The legal industry has always been defined by copious documentation, meticulous research, and billable hours. It’s now in the throes of a technological revolution. Tools like ChatGPT, Claude, and specialized legal AI platforms are revolutionizing the way legal work is conducted. Artificial intelligence has evolved from a future idea to an everyday reality, affecting the practice of law for attorneys, self-represented litigants and courts alike, including document preparation, case research and strategic analysis.
Increasing Access to Law for Pro Se Litigants
The impact of generative AI on self-represented litigants, or pro se parties, has been significant. In the past, people without access to legal aid found it very difficult to navigate complex legal procedures and to prepare correct court paperwork. Today, these parties are increasingly using AI approaches to prepare complaints, motions, and other legal papers.
ChatGPT and other systems are capable of generating legal papers that are sufficiently organized with basic facts and jurisdictional information. A tenant facing eviction can share their story and receive a preliminary response to an eviction complaint. A small business owner might write a demand letter for unpaid invoices. But these documents need to be reviewed and often need to be improved, but they do provide an initial structure that was not feasible without the use of an attorney.
Judicial systems are beginning to face this developing reality. Many governments accept documents created by AI today, recognizing that the technology can increase access to justice for those who cannot afford legal representation. Some courts have adopted standards requiring disclosure of AI tool usage in the creation of documents, while other courts have advised against verification of AI-generated information. This points to a pragmatic awareness of the democratization of legal knowledge through AI, but also raises problems of quality control, and the illegal practice of law.
Advantages to Legal Professionals
Lawyers can gain a lot from generative AI, which can make them more efficient and better at providing services. Traditionally, legal research has been one of the most time-consuming aspects of practice. Now, it may be done much faster. AI systems could scan vast databases of case law, legislation and regulations in seconds, identifying relevant precedents and legal principles, turning hours of research into minutes.
The art of writing documents has undergone a major revolution. You can use templates for contracts, briefs, and discovery requests and customize them with the help of AI. That enables lawyers to concentrate their skills on strategy, negotiation, and complex legal analysis rather than boring drafting tasks.
AI can recognize patterns and so can be quite helpful in examining problems. These algorithms can evaluate discovery information, uncover key facts, locate inconsistencies in evidence, and suggest legal ideas that could otherwise be overlooked. AI levels the playing field between sole practitioners and small firms and those bigger firms with more resources.”
The Tale of Two Lawsuits: The Easing of Suits and the Rise in Mortgage Litigation
It seems obvious that democratizing access to law is a good thing. But it has substantial unanticipated consequences. AI technologies might unleash a flood of lawsuits, including false, frivolous and vexatious claims that were previously too costly to pursue, by dramatically reducing the barriers to beginning litigation. So, they use the legal system against both corporations and individuals. The absence of the financial barrier of needing to pay an attorney means that those unhappy with something can churn out a well-prepared complaint with relative ease and at minimal cost.
It means financial hardship for mortgage lenders. Even frivolous a lawsuit wastes scarce resources. It compels lenders to retain lawyers to respond, devote time to discovery, and endure the reputational damage of being sued, whether the allegation is meritorious or not. It’s usually more expensive to defend a spurious lawsuit than the amount at stake, which creates perverse incentives for nuisance settlements. The cost burden, multiplied by thousands of AI-enabled claims, is significant. More lenders are seeing this with frivolous challenges to the validity of mortgages by borrowers in an effort to void their debt.
In some industries, companies are systematically deploying defensive tactics to defend themselves against the danger of litigation. More consumer contracts contain mandatory arbitration clauses, which remove disputes from the court system. Corporations are filling their terms of service with more restrictive conditions on what customers can do, filled with broad disclaimers and massive releases of liability. In some cases, the threat of a lawsuit may outweigh the possibility for profit, and some businesses may choose to vacate high-risk areas or consumer segments. Regulatory restrictions prevent lenders from making wholesale changes to loan documents, however.
This creates a worrying dilemma. AI can help improve access to justice for customers with valid grievances, but it can also make companies like mortgage lenders seek ways to pass along added costs of litigation or seek ways to create contractual obstacles that make it harder to assert spurious rights. Consumers will ultimately pay the price of fighting against any litigation, whether justified or frivolous, in the form of higher costs, less services or tighter business relationships.
The key question is whether access to the legal system via AI will be a net positive, allowing consumers to hold businesses accountable for valid grievances, or whether it will create a litigation-heavy environment where mortgage lenders and others will pursue, out of necessity, defensive tactics which will ultimately come to the detriment of the very consumers the technology was meant to serve. The answer might lie in the capacity of courts and lawmakers to craft mechanisms distinguishing frivolous AI-generated claims from valid ones; a delicate balance yet to be struck.
The Risks of AI Hallucinations
The integration of AI into mortgage operations and legal practice is fraught with serious risks, including the phenomenon known as “AI hallucinations,” where AI confidently generates false or fraudulent content. This creates serious professional liability problems for lawyers.
The cautionary instance is Mata v. Avianca, a 2023 ruling that sent shock waves throughout the legal community. Attorney Steven Schwartz is utilizing the AI-powered chatbot ChatGPT to do legal research for a personal injury lawsuit in federal court. The AI generated ostensibly relevant case cites to support his points. Schwartz referred in his brief to these incidents without any substantiation. What is the problem? The cases were not there. ChatGPT spit out fake case names, citations, and opinions that sounded real but were totally fake.
The opposing counsel and the judge found out about the fake citations, and Schwartz got sanctioned and had a lot of professional egg on his face. The problem this occurrence highlighted is that AI tools can generate legal writing that appears authentic but is entirely incorrect, and they do so without any warning signs.
That leaves lawyers open to malpractice if they don’t verify AI-generated results. Ethical committees and bar associations have issued guidance that attorneys are responsible for all work product, no matter how it is created. Competency and the duty to provide correct information to courts cannot be delegated to an algorithm.
Will AI Take the Place of Judges and Lawyers?
The question of whether sophisticated machine learning will fully replace human legal practitioners is a hot topic in the industry right now. Can AI systems evaluate evidence, apply legal concepts, and reconcile differences in civil and criminal cases?
AI might, in theory, be able to do some judicial tasks. Machine learning algorithms can weigh evidence, identify relevant legal standards, and apply rules to facts consistently. In certain jurisdictions, AI is being employed to provide recommendations for bail and guidance on sentencing. Predictive algorithms are very accurate at predicting case outcomes.
But there are significant challenges to fully replacing lawyers and judges. Decisions in law are often about balancing conflicting values, exercising discretion and making judgments reflecting community standards and dynamic social values — things that cannot be done by merely algorithmic processing. Constitutional rights of criminal defendants include the right to confront witnesses and the right to due process. These are human judgments of culpability.
The legal system also has functions which are not just the mechanical application of rules. Judges confer legitimacy by virtue of their independence and accountability. Lawyers are advocates and advisers, they require empathy, strategic insight and ethical judgment. Public faith in justice is somewhat conditioned by human accountability for decisions affecting liberty, property and rights.
However, for the foreseeable future, complex litigation, appellate advocacy, and criminal trials are likely to require human expertise, however AI may be able to handle routine matters such as uncontested traffic tickets or simple contract disputes.
Summary: Augmentation Not Replacement
Generative AI is clearly transforming every industry, including the legal industry, but the future likely involves augmentation rather than replacement. Artificial intelligence tools will continue to improve the efficiency and accessibility of legal services, helping attorneys improve their job and empowering people to understand their legal rights. But the practice of law is necessarily a human endeavor that calls for judgment, accountability and ethical obligation.
The challenge before us is the responsible integration of AI – putting in place safeguards against hallucinations, preserving professional norms and ensuring the technology serves justice, not undermines it. The courts, the bar, and lawyers need to develop frameworks that will capture the upside of AI while protecting against its downside. The smart adapters will flourish. Those who ignore either the opportunities or the dangers do so at their own peril.
(Views expressed in this article do not necessarily reflect policies of the Mortgage Bankers Association, nor do they connote an MBA endorsement of a specific company, product or service. MBA NewsLink welcomes submissions from member firms. Inquiries can be sent to Editor Michael Tucker or Editorial Manager Anneliese Mahoney.)
