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. Underwriter

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

    The spread between the amount underwriters pay an issuing company ...
  3. Underwriting Income

    Profit generated by an insurer's underwriting activity over a ...
  4. Underwriting Cycle

    Fluctuations in the underwriting business over a period of time. ...
  5. Negotiated Underwriting

    A process in which both the purchase price and the offering price ...
  6. Competitive Bid

    A step in the initial public offering process whereby an underwriter ...
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. Insights

    Energy Fuels Announces $10M Bought Deal Offering (UUUU)

    Energy Fuels will use the proceeds to fund various projects, including shaft sinking and evaluation at its high-grade Canyon mine project in Arizona.
  4. Investing

    AMC Prices Secondary at $31.50, Shares Fall

    AMC Entertainment priced at secondary offering at 31.50
  5. Investing

    Up-to-Six-Figure Loans a Business Can Get – Fast

    The banking industry has invested a lot of money into shortening loan approval times from a few weeks to a few minutes, but should you dive in?
  6. Insurance

    Brokerage Functions: Underwriting And Agency Roles

    Learning about these various activities can give insight into how securities are issued and traded.
  7. Personal Finance

    Before you Buy that Home: Shop for the Best Loan

    Before even starting to search for a home, the first thing you need to do is get pre-qualified for a home mortgage.
RELATED FAQS
  1. What is real estate underwriting?

    See how underwriters for major lenders scrutinize real estate loans and manage their risk, and learn the origin of the term ... Read Answer >>
  2. 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 >>
  3. 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 >>
  4. What are examples of risks for all underwriter types?

    Learn about the risks faced by different types of underwriting activity. Explore specific examples of risks faced by insurance ... Read Answer >>
  5. 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 >>
Trading Center