Mortgage - This Shouldn’t Be Happening
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What is the main topic discussed in this episode?
It's The Real Estate Podcast, brought to you by Ray White, the largest real estate and property group in Australasia.
And welcome to another episode of The Real Estate Podcast. Well, the banks, as we know, and mortgage brokers have never been busier than in the last couple of years. Every day there are huge numbers of Australians applying to lending institutions for mortgages and the applicants are putting their best foot forward, supplying information like a good paying job, keeping things like your credit cards under control and expenditure overall is shown to lenders who hopefully see you as a good bet, a good risk holder. with that all-important credit score you achieve when it comes to unlocking a mortgage and that you've been a busy bee banking a good percentage of your wage. Now imagine being told that where you live isn't a good enough postcode for a mortgage.
Could your postcode secretly affect your mortgage application?
That's right. The points and criteria in some cases are starting to look at postcodes of both poor and richer areas. But does living in a poorer postcode have anything to do with your ability to pay a mortgage? Well, let's invite Jeannie Marie Patterson into the conversation. She is a professor of law at University of Melbourne and co-director for the Centre of AI and Digital Ethics. Hi Jeannie, welcome to the podcast.
Thank you for having me.
What's going on here? This all seems a little bit crazy, doesn't it?
Yeah, it's a strange new world. What we're seeing is some agencies that provide credit rating are now trying to use algorithms to help with that credit score.
How are algorithms and credit-rating firms using postcode data in lending?
And that means they provide all sorts of data to the algorithm, which then comes up with the score. And one of those factors that is being considered is postcodes. Now, the thing you mentioned is you might be told your postcode's not good enough. The point here is people who are trying to borrow money won't even be told their postcode was considered. They'll just be told they're not a good borrower. That's part of the problem, that the algorithms that are being used are grabbing all sorts of data that we don't really know about, which may not be that relevant, which may not be fair, but is still potentially affecting whether a person gets a loan.
So coming back to that all-important question, where you live doesn't really reflect your ability in any way to repay the mortgage.
No, where you live does not affect an individual's capacity to repay a mortgage. But what these algorithmic processes are doing is looking at groups of data, groups of people that look like each other or live near each other or have similar profiles. So that if the algorithm finds that in a particular postcode, either people are bad at repaying their loans or equally people aren't borrowing money at all, then the algorithm is going to say, well, that postcode correlates with poor ability to repay. And that tells you nothing about a particular individual's ability to repay. And it might not be relevant at all.
Why might postcode-based scoring be unfair or discriminatory?
It might just be people in that postcode don't borrow very much money.
Is it a form of discrimination?
It can be a form of discrimination because it can be a correlation. The postcode can also be a correlation with people who are older and or younger or of a particular cultural background or ethnic background and then we have what's called discrimination by proxy the score is not based on somebody's race but it's de facto based on race because it's picking up where people of a particular cultural or ethnic background live and in fact there's been a lot of problems in the us with this practice
You know, you talk about these algorithms that the companies are using. They're using it in an automated way and they're somewhat flawed based on the automation.
That's right. So automation is justified as being more efficient. than what a human would do but it's also less reflective so all an algorithm is doing is looking for patterns in large amounts of data and those patterns might be useful but they also might not be useful and there's websites that have you know lots and lots of what we call false correlations for example people who died being tangled in their bed sheets
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Chapters
7 chapters
1
What is the main topic discussed in this episode?
0:02–1:01
2
Could your postcode secretly affect your mortgage application?
1:01–1:52
3
How are algorithms and credit-rating firms using postcode data in lending?
1:52–3:19
4
Why might postcode-based scoring be unfair or discriminatory?
3:19–6:04
5
What are the dangers of automated decision-making and false correlations?
6:04–7:08
6
How could transparency and accountability help borrowers denied by algorithms?
7:08–11:10
7
What responsibilities do banks and purchasers of algorithms have to check bias?
11:10–14:01
Speakers
3 identifiedMore from Aussie Real Estate Podcast
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