The word “risk” is often seen in the same sentence as “artificial intelligence” these days. While it is encouraging to see world leaders consider the potential problems of AI, along with its industrial and strategic benefits, we should remember that not all risks are equal.
On Wednesday, June 14, the European Parliament voted to approve its own draft proposal for the AI Act, a piece of legislation two years in the making, with the ambition of shaping global standards in the regulation of AI.
After a final stage of negotiations, to reconcile different drafts produced by the European Parliament, Commission and Council, the law should be approved before the end of the year. It will become the first legislation in the world dedicated to regulating AI in almost all sectors of society – although defence will be exempt.
Of all the ways one could approach AI regulation, it is worth noticing that this legislation is entirely framed around the notion of risk. It is not AI itself that is being regulated, but rather the way it is used in specific domains of society, each of which carries different potential problems. The four categories of risk, subject to different legal obligations, are: unacceptable, high, limited and minimal.
Systems deemed to pose a threat to fundamental rights or EU values, will be categorised as having an “unacceptable risk” and be prohibited. An example of such a risk would be AI systems used for “predictive policing”. This is the use of AI to make risk assessments of individuals, based on personal information, to predict whether they are likely to commit crimes.
A more controversial case is the use of face recognition technology on live street camera feeds. This has also been added to the list of unacceptable risks and would only be allowed after the commission of a crime and with judicial authorisation.
Those systems classified as “high risk” will be subject to obligations of disclosure and expected to be registered in a special database. They will also be subject to various monitoring or auditing requirements.
The types of applications due to be classified as high risk include AI that could control access to services in education, employment, financing, healthcare and other critical areas. Using AI in such areas is not seen as undesirable, but oversight is essential because of its potential to negatively affect safety or fundamental rights.
The idea is that we should be able to trust that any software making decisions about our mortgage will be carefully checked for compliance with European laws to ensure we are not being discriminated against based on protected characteristics like sex or ethnic background – at least if we live in the EU.
“Limited risk” AI systems will be subject to minimal transparency requirements. Similarly, operators of generative AI systems – for example, bots producing text or images - will have to disclose that the users are interacting with a machine.
During its long journey through the European institutions, which started in 2019, the legislation has become increasingly specific and explicit about the potential risks of deploying AI in sensitive situations – along with how these can be monitored and mitigated. Much more work needs to be done, but the idea is clear: we need to be specific if we want to get things done.
Risk of extinction?
By contrast, we have recently seen petitions calling for mitigation of a presumed “risk of extinction” posed by AI, giving no further details. Various politicians have echoed these views. This generic and very long-term risk is quite different from what shapes the AI Act, because it does not provide any detail about what we should be looking out for, nor what we should do now to protect against it.
If “risk” is the “expected harm” that may come from something, then we would do well to focus on possible scenarios that are both harmful and probable, because these carry the highest risk. Very improbable events, such as an asteroid collision, should not take priority over more probable ones, such as the effects of pollution.
In this sense, the draft legislation that has just been approved by the EU parliament has less flash but more substance than some of the recent warnings about AI. It attempts to walk the fine line between protecting rights and values, without preventing innovation, and specifically addressing both dangers and remedies. While far from perfect, it at least provides concrete actions.
The next stage in the journey of this legislation will be the trilogues – three-way dialogues – where the separate drafts of the parliament, commission and council will be merged into a final text. Compromises are expected to occur in this phase. The resulting law will be voted into force, probably at the end of 2023, before campaigning starts for the next European elections.
After two or three years, the act will take effect and any business operating within the EU will have to comply with it. This long timeline does pose some questions of its own, because we do not know how AI, or the world, will look in 2027.
Let’s remember that the president of the European Commission, Ursula von der Leyen, first proposed this regulation in the summer of 2019, just before a pandemic, a war and an energy crisis. This was also before ChatGPT got politicians and the media talking regularly about an existential risk from AI.
However, the act is written in a sufficiently general way that may help it remain relevant for a while. It will possibly influence how researchers and businesses approach AI beyond Europe.
What is clear, however, is that every technology poses risks, and rather than wait for something negative to happen, academic and policymaking institutions are trying to think ahead about the consequences of research. Compared with the way we adopted previous technologies – such as fossil fuels – this does represent a degree of progress.
Nello Cristianini is the author of "The Shortcut: Why Intelligent Machines Do Not Think Like Us", published by CRC Press, 2023.
Cold Spring Harbor, NY – Cold Spring Harbor Laboratory Press (CSHL Press), a publisher of scientific books, journals, and electronic media, today announced the publication of The Medical Revolution of Messenger RNA by science and technology journalist Fabrice Delaye.
Credit: Endpaper Studio, George Restrepo
iStockphoto: Christoph Burgstedt
Cold Spring Harbor, NY – Cold Spring Harbor Laboratory Press (CSHL Press), a publisher of scientific books, journals, and electronic media, today announced the publication of The Medical Revolution of Messenger RNA by science and technology journalist Fabrice Delaye.
Many people think it took just ten months to develop a vaccine against the virus that causes COVID-19. What most don’t know is that it was made possible by using messenger RNA (mRNA), the molecule that instructs cells to make a viral protein that stimulates the production of antiviral antibodies, and that this breakthrough technology, which Nobel Prize winner Thomas Cech calls biology’s equivalent of putting a man on the moon, had been in development for three frustrating decades—decades preceded by thirty years of fundamental research. In fact, two scientists, Katalin Karikó and Drew Weissman, won the 2023 Nobel Prize in Physiology or Medicine for their pioneering work in messenger RNA.
Karikó and Weissman are among the many prominent scientists interviewed by veteran science journalist Fabrice Delaye for his book The Medical Revolution of Messenger RNA, which tells the story of how mRNA’s medical potential was finally realized, setting the stage for a coming revolution in which our own bodies will generate the therapeutic molecules we need. Though it’s now thought to show promise for the treatment of everything from cancer to cystic fibrosis to cardiovascular disease, mRNA was long overlooked by mainstream molecular biologists. The path to recognition of its therapeutic possibilities was littered with broken careers, lawsuits, and opportunities missed by pharmaceutical companies. For the scientists who persisted through years of academic and commercial disappointment, the COVID-19 vaccine was a huge vindication and an important step toward a new generation of therapies.
When mRNA-based vaccines came to the rescue during the pandemic in seemingly record time, Delaye realized that their development could not have been as simple and quick as people wanted to believe. But when he tracked down the origins of mRNA technologies, he uncovered a dramatic story that had never been told. Building on decades of contacts and his unique grasp of the science and the stakes involved, Delaye interviewed more than fifty mRNA scientists and entrepreneurs worldwide. His book documents the long, harrowing, unlikely but ultimately triumphant road to a discovery with the potential to revolutionize medicine far beyond the pandemic.
For more information visithttps://cshlpress.com/link/messengerrna.htm.
Fabrice Delaye is a science and technology journalist based in Switzerland. He was U.S. correspondent at the daily Swiss newspaper L’Agefi, science and technology editor at magazine Bilan, and is now a reporter-at-large for Heidi.news in Geneva. He is a graduate of the Institut d’Études Politiques de Paris and has a master’s degree from the Swiss Institute of Technology in Lausanne, EPFL.
About Cold Spring Harbor Laboratory Press
Cold Spring Harbor Laboratory Press is an internationally renowned not-for-profit publisher of books, journals, and electronic media, located on Long Island, New York. Since 1933, it has furthered the advance and spread of scientific knowledge in all areas of genetics and molecular biology, including cancer biology, plant science, bioinformatics, and neurobiology. It is a division of Cold Spring Harbor Laboratory, an innovator in life science research and the education of scientists, students, and the public. All revenue from sales of CSHL Press publications supports research at Cold Spring Harbor Laboratory.
Selling pre-foreclosure is often the best option for distressed homeowners who don’t qualify for any loss mitigation programs, but those homeowners are understandably hesitant to choose that option and often end up choosing it when time is running out.
That makes those homeowners susceptible to predatory behavior by some buyers operating in the pre-foreclosure marketplace, behavior that has been chronicled in several prominent, recent news stories.
Given this pre-foreclosure paradox, mortgage servicers and government policymakers are forced to walk a thin line: nudging distressed homeowners toward making a choice that’s in their best interest while also arming them with the knowledge and resources they need to be protected in the pre-foreclosure marketplace.
Walking that thin line is becoming increasingly important as more distressed sales are pushed up-funnel into the pre-foreclosure marketplace — a trend that began developing about 10 years ago and has accelerated in earnest over the last two years.
“If you’re experiencing long-term financial hardship and cannot afford your monthly mortgage payments, selling your home may be the best option,” explains a US Bank video that walks this thin line. “Our goal is to help you avoid a foreclosure sale while protecting your credit score and preserving your equity.”
Even the Consumer Financial Protection Bureau (CFPB) has weighed in, with a January 2023 blog post titled “For many struggling mortgage borrowers with home equity, selling their home could be an alternative to foreclosure.”
In its first paragraph, the CFPB blog post encourages mortgage servicers to provide distressed homeowners with a nudge toward a pre-foreclosure sale.
“Servicers can remind homeowners that a traditional sale might be one option to avoid foreclosure. … And servicers may want to suggest homeowners contact a real estate agent if the distressed homeowner is considering selling their home.”
The pitfalls of pre-foreclosure
The CFPB blog post doesn’t touch on the potential for predatory behavior in the pre-foreclosure marketplace. Those dangers can be found in recent headlines from the New York Times and ProPublica.
A July 2022 article in The New York Times traces how one man’s New York city real estate empire was allegedly built through a practice called deed theft, often targeting homeowners facing foreclosure.
“(Prosecutors and homeowners) have accused him of fraud: offering to help homeowners facing foreclosure by arranging to pay off their mortgages, while actually tricking them into signing over their buildings at bargain-basement prices. In nearly every case, the mortgage was never paid, leaving the homeowner with no property but a pile of debt.”
A May 2023 ProPublica article details how the self-proclaimed “largest homebuyer in the United States” is training its franchises to target and sometimes take advantage of distressed homeowners who are in pain. One of those sources of pain is a “looming foreclosure.”
Myriad manifestations of fraudulent and predatory behavior emerged during the five-year slide in home prices following the 2008 crash. One prominent scheme involved unlicensed “short sale facilitators” charging upfront fees to distressed homeowners and often representing “straw buyers” with lowball offers. Ethical concerns even arose for licensed real estate agents who approached distressed homeowners to list properties even though those agents were also representing prospective buyers.
A growing pre-foreclosure market
While it’s hard to quantify the prevalence of such predatory behavior, the opportunity for it is growing as the pre-foreclosure market grows. An Auction.com analysis of public record data from ATTOM Data Solutions found more than 150,000 pre-foreclosure sales nationwide in 2021, up 37% from 2020 to the highest level since 2014. Pre-foreclosure sales were defined as properties sold via an arms-length sale where a public foreclosure notice was filed prior to the sale, excluding foreclosure auction sales.
By comparison, only 33,000 properties were sold at foreclosure auction in 2021, the lowest level since 2003. That’s not too surprising given the pandemic-triggered nationwide foreclosure moratorium on government-backed mortgages (excluding vacant properties) that was in effect through the end of 2021.
But even after the foreclosure moratorium expired, pre-foreclosure sales continued to far outpace foreclosure auction sales. In 2022, there were nearly 142,000 pre-foreclosure sales compared to about 38,000 foreclosure auction sales and about 40,000 sales of bank-owned (REO) properties. That means pre-foreclosure sales accounted for 64% of all distressed property sales in 2022, the highest share on record.
Nudges from mortgage servicers are likely contributing to the growth in pre-foreclosure sales, but proactive marketing to distressed homeowners by prospective buyers is also a likely contributor.
“Our team tries to make every effort to purchase the properties on the front side,” said Mary Tritt, managing broker at Tritt Realty, a Carrollton, Georgia-based company that buys and renovates distressed properties. “When the (foreclosure auction) list comes out, us as well as other investors are trying to knock on the door, we’re trying to speak with those homeowners to see if there is anything that we can do to purchase the property before it actually goes to foreclosure.”
Tritt said her goal is to help the homeowner avoid foreclosure while also selling the property for “top dollar.” She will offer to list the home for sale on the MLS if there is enough time before the scheduled auction. But she noted that not all investors operate this way.
“Many times, we’ll find the sellers will try to sell their properties to an investor who’s come through and offered some too-good-to-be-true number only to find out that investor doesn’t have the money to purchase it and save the property before it goes to foreclosure auction,” she said. “So, we try to advise against that. Whether or not someone sells to us or to someone else, we’re just making sure that they truly understand the process and how to save the property or sell the property before it goes to auction.“
Price realization for pre-foreclosures
A deeper dive into pre-foreclosure sale data reveals that while many of these properties may have equity on paper, most are still selling well below their estimated after-repair market value. An analysis of more than 40,000 pre-foreclosure sales that occurred between 2018 and 2023 — after previously being scheduled for foreclosure auction on the Auction.com platform — shows the properties sold for 18% below their estimated after-repair market value on average.
While some discount below market value is to be expected with these properties — many are in distressed condition due to deferred maintenance — a look at the discount by buyer type indicates that some buyers are getting a bigger discount than others.
About one-third of the pre-foreclosure sales went to buyers identified in the public record data as institutions, including companies, corporations and limited liability companies. These institutional buyers purchased pre-foreclosure properties for 30% below estimated after-repair market value on average.
There are good reasons why institutional buyers might buy pre-foreclosure properties at a deeper discount. Institutional buyers are typically willing and able to take on more highly distressed properties in need of substantial renovation that an individual buyer may be hesitant to tackle. And institutional buyers can often provide more flexibility in terms of a graceful exit for the current occupant of a pre-foreclosure property.
Still, the opaque nature of the pre-foreclosure space may be enabling some institutional buyers to make off-market, lowball offers that distressed homeowners accept without listing the property in a transparent marketplace like the multiple listing service (MLS) or the robust foreclosure auction environment created by companies like Auction.com.
“Auction.com hinders my in-person auctions by advertising the available deals to the general public … (which) only drives up the price at auction,” wrote one buyer in response to a Auction.com survey sent out in March 2023.
Mary Tritt’s husband, Tony, has been investing in real estate in his local market west of Atlanta for more than 20 years. He’s seen the foreclosure auctions disrupted by transparent marketplaces like Auction.com, but recognizes that disruption is good for the market even if it may mean higher acquisition prices for him.
“Let’s face it, the auction industry, in general, has utilized online platforms to bring higher bidding on every widget imaginable. I’ve seen it firsthand play out in the housing market, specifically at non-judicial foreclosure sales and bank-owned REO auctions,” he said, adding that the disruption can also create efficiencies for his business. “An ideal scenario would be for all properties to land within the Auction.com platform, then I could cover more counties on foreclosure day, with far less labor!”
Democratized with transparency
Just as the previously opaque foreclosure auction marketplace has been democratized with transparency, inclusion and innovation over the past decade, so can the pre-foreclosure marketplace be democratized. The journey to a more transparent marketplace can start with mortgage servicers who go above and beyond simply suggesting a pre-foreclosure sale to distressed homeowners.
To help these vulnerable homeowners, servicers can provide them with a proven path to getting the highest and best offer for their home. In the distressed property world, that proven path involves some combination of listing the property for sale on the retail (MLS) marketplace and putting it up for auction on a competitive platform that is likely to receive multiple, competing bids from buyers who are experienced in dealing with distressed properties and distressed homeowners.
Local community developers like Mary and Tony Tritt understand that a more transparent pre-foreclosure marketplace will result in more competition from other buyers, but they also understand more competition will result in better outcomes for distressed homeowners and help winnow out bad players.
“While I realize that aggressive marketing of pre-foreclosures will inhibit our opportunities from both the pre-foreclosure perspective as well as at the foreclosure sale, I also recognize that the long-term health of our industry along with the specific outcomes for distressed owners will likely be markedly improved,” Tony said.
Proven pre-foreclosure path
The dual-marketplace approach has produced optimal outcomes for both servicers and borrowers in a pre-foreclosure sale program created by Auction.com called the Market Validation Program (MVP). It allows servicers, in cooperation with distressed borrowers, to post properties on Auction.com that are also listed as short sales on the MLS.
While the MLS produced the highest and best offer about 60% of the time in MVP, nearly 40% of the properties got a higher offer from the Auction.com platform. And those higher offers were often substantially higher — an average of $44,000 (19%) above the MLS offer.
That’s likely the case for two reasons: first, not all properties are promptly listed on the MLS by the listing agent. The Auction.com data shows 47% of properties in the MVP program were not yet listed in the MLS when they were referred to Auction.com. The second likely reason for the higher auction offers: Some pre-foreclosure properties are a better fit for the local community developers using the Auction.com platform than the retail buyers dominant on the MLS.
“The last one I purchased was a short sale, which was a first for me with Auction.com,” said Karen Tyler, owner of Prodigy Realty in Virginia Beach, Viriginia, of an MVP purchase. “I didn’t even know it was a short sale listed on my own MLS because that particular property was not something I would look at for an investment property through the MLS. But if it’s an Auction.com property, I actually pay a little more attention to it.”
Uncovering hidden equity
Furthermore, 6% of the winning bids on Auction.com resulted in a full payoff of the mortgage in foreclosure. That means the property did not sell as a short sale as expected and the distressed homeowner was able to walk away with something to show for the equity uncovered by the power of dual transparency.
“Elated,” said homeowner Pam Mormino, whose home sold via the MVP program for $46,000 above the highest MLS offer and more than $40,000 above the total debt owed on the mortgage. “It really relieved so much stress on me.”
The higher offers on the Auction.com platform also stem from a more consistent level of competition in than in the retail, MLS marketplace. Competition in the retail marketplace tends to be more volatile, subject to market conditions such as rising mortgage rates. Over the past four years, 80 and 90% of all bank-owned (REO) auctions on Auction.com receive bids from multiple, competing bidders, while the share of MLS properties with multiple offers has ranged from as low as 40% to as high as 74%, according to an analysis of data from Redfin.
The covid pandemic hurt a lot of retailers. In some cases, that was a short-term thing. Customers could not visit during the lockdown periods and that forced people to shop elsewhere.
In some segments, we thought that just because covid forced people to change their behavior did not mean that those changes were permanent. That was a lesson learned by companies like Peloton which saw a boom during the darkest "stay at home" covid days.
People like working out in gyms and it turned out that once it became safe to be in public places crowded with people, the demand for Peloton dropped too. That was true for streaming services as well.
When we were all stuck at home any new programming was valuable. But as the world opened back up, many Americans realized that they may want some streaming services, but they no longer needed to pay for all of them.
In some cases, people's behavior did permanently change. Americans, for example, are much less willing to go to a movie theater. That seems like an acceleration of a trend that started before the covid pandemic. Watching movies at home showed us that, aside from big blockbusters or Taylor Swift concert movies designed to be a communal experience, most films did not need to be seen in a theater.
Covid also forced a lot of diehard book fans to consider their digital options. Many people who had argued for the joy of holding a physical book realized that being able to download any book to their phone from anywhere had its pluses as well.
That's not good news for bookstores and one popular regional chain has filed for bankruptcy and plans to close some of its stores.
Regional bookstore chain declares bankruptcy
While for a time it seemed like digital books would make printed books obsolete, that has not happened. Actual books actually still outsell their digital counterparts, but any e-book sold is a book not sold by a bookstore.
And while some regional bookstore chains have thrived and even Barnes & Noble has found its footing, selling books is a very tough business. Digital books are cheaper than printed books which makes many people visiting bookstores browsers who intend to purchase elsewhere.
That's a very tough operating environment. One regional bookstore chain, Tattered Cover, has filed for reorganization under Chapter 11 Subchapter V in the U.S. Bankruptcy Court for the District of Colorado. The company "owes more than $1 million to publishers, as well as more than $375,000 to Colorado's Office of the State Auditor for abandoned gift cards," Publisher's Weekly reported.
Subchapter V is specifically for small businesses. Tattered Cover believes it can use the filing to obtain new funding up to $1 million from a new company formed by investors and some of its current board.
That money would be a lifeline, allowing Tattered Cover, which operates seven locations, to purchase inventory for the upcoming holiday season among other uses," according to a company statement.
The chain expects to close three of its bookstores as part of the restructuring.
“Our objective is to put Tattered Cover on a smaller, more modern and financially sustainable platform that will ensure our ability to serve Colorado readers for many more decades,” Brad Dempsey, who became CEO of the company in July, shared in a statement. "Restructuring for long-term viability requires managers to make very difficult business decisions that affect people and business partners, and we intend to do what we can to minimize these impacts."
Tattered Cover intends to honor all gift cards. All of its changes and decisions require the approval of the bankruptcy court.