DEFINITION of 'Automated Underwriting'

A computer-generated loan underwriting decision. Using completed loan application information, an automated underwriting systems retrieves relevant data, such as a borrower's credit history, and arrives at a logic-based loan decision. Some applications may be referred to manual underwriting, and some inputs - such as income and assets - must be verified at a later date.

BREAKING DOWN 'Automated Underwriting'

Automated underwriting engines can provide near-instantaneous loan approval or denial decisions; therefore, implementing automated underwriting systems can save a considerable amount of time, as manual underwriting can take as long as 60 days to complete.

In addition to the time savings, automated underwriting is preferred because it is based on algorithms, eliminating human bias. Freddie Mac maintains and markets a large automated underwriting engine known as Loan Prospector, and Fannie Mae has an automated underwriting engine known as Desktop Underwriter.

RELATED TERMS
  1. Underwriting Fees

    Underwriting fees are monies collected by underwriters for performing ...
  2. Underwriter

    An underwriter is a company or other entity that administers ...
  3. Underwriting Spread

    The spread between the amount underwriters pay an issuing company ...
  4. Underwriting Agreement

    A contract between a group of investment bankers who form an ...
  5. Undivided Account

    An underwriting system in which each underwriter in the group ...
  6. Underwriting Cycle

    Fluctuations in the underwriting business over a period of time. ...
Related Articles
  1. Insurance

    Is Insurance Underwriting Right For You?

    If you have excellent analytical skills and an eye for detail, this may be your calling.
  2. Insurance

    What is Underwriting?

    Underwriting is a term most often used in investment banking, insurance and commercial banking. Generally, underwriting means receiving a remuneration for the willingness to pay for or incur ...
  3. Insurance

    What is a Greenshoe Option?

    A greenshoe option is a provision in an underwriting agreement that allows the underwriter to buy up to 15% of the shares in an IPO at the offer price.
  4. Investing

    The Road To Creating An IPO

    Through an Initial Public Offering, or IPO, a company raises capital by issuing shares of stock, or equity in a public market. Generally, this refers to when a company issues stock for the first ...
  5. Insurance

    What Does an Underwriter Do?

    In the investment world, an underwriter is a company that helps corporations or other issuing bodies distribute their securities.
  6. Trading

    Greenshoe Options: An IPO's Best Friend

    Find out how companies can save or boost their public offering price with these options.
  7. Investing

    What is the One Job Automation Has Eliminated in the Past 60 Years?

    Automation might not be as bad as you think: In actuality it has eliminated just one occupation in 60 years.
  8. Tech

    Will Your Job Get Eaten by Automation?

    With the rapid growth of technology, it has been widely contested whether automation will start to replace jobs.
RELATED FAQS
  1. Do underwriters make guarantees to sell an entire IPO issue?

    Underwriters represent the group of representatives from an investment bank whose main responsibility is to complete the ... Read Answer >>
  2. How do I become an underwriter?

    Learn about the education, training and certification required to become an insurance underwriter as well as the important ... Read Answer >>
  3. What is the underwriter's job in a real estate transaction?

    Find out why the underwriter may be the most important person in your real estate transaction, and learn what information ... Read Answer >>
  4. What does the underwriter do in a new stock offering?

    Learn the role an underwriter plays for an initial public offering, and the steps an underwriter takes in preparing for an ... Read Answer >>
  5. When is an underwriting fee too high on a commercial loan?

    Learn about underwriting fees and when they're too high. If the underwriting fee exceeds 2% of the total loan size, the fee ... Read Answer >>
Trading Center