Underwriting Standards

AAA

DEFINITION of 'Underwriting Standards'

Guidelines established to ensure that safe and secure loans are issued and maintained. The underwriting standards in place help to set benchmarks for how much debt may be issued to a person, the terms of the loans, how much debt a specific company is willing to issue, and what interest rates will be charged.

INVESTOPEDIA EXPLAINS 'Underwriting Standards'

During economic turmoil, underwriting standards may become more lenient, as acquiring loans may become too difficult for the majority of borrowers. For example, during the economic downfall of 2008-2009, some lenders reduced pre-payment fees and offered heightened flexibility regarding the terms of the loans issued. At the same time, during that same crisis many companies also tightened underwriting standards that had been one of the culprits in the downturn.

RELATED TERMS
  1. Credit Rating

    An assessment of the credit worthiness of a borrower in general ...
  2. Issuer

    A legal entity that develops, registers and sells securities ...
  3. Negotiated Underwriting

    A process in which both the purchase price and the offering price ...
  4. Credit Risk

    The risk of loss of principal or loss of a financial reward stemming ...
  5. Total Debt Service Ratio - TDS

    A debt service measure that financial lenders use as a rule of ...
  6. Underwriting

    1. The process by which investment bankers raise investment capital ...
RELATED FAQS
  1. In what ways does government regulation impact the insurance sector?

    Regulation is not consistent among all forms of insurance. The kinds of regulations imposed on AIG for guaranteeing credit ... Read Full Answer >>
  2. How does an underwriter syndicate work together on an initial public offering (IPO)?

    An underwriting syndicate is a group of investment banks that share the responsibility of marketing the shares of a company ... Read Full Answer >>
  3. Who are Berkshire Hathaway's (BRK.A) main competitors?

    Led by renowned investor Warren Buffett, Berkshire Hathaway (BRK.A) is involved with multiple sectors of industry, facing ... Read Full Answer >>
  4. What are the biggest stadium naming rights deals of all time?

    The top three stadium naming rights deals of all time were all for stadiums hosting New York City teams. The largest was ... Read Full Answer >>
  5. What are the different ways I can file my income tax return?

    In contractual law, a letter of intent is a document that represents an agreement between parties before the final agreement ... Read Full Answer >>
  6. What developed countries have the highest concentration in the banking sector?

    The developed countries with the highest concentration in the banking sector, as of 2015, are the United States, the United ... Read Full Answer >>
Related Articles
  1. Insurance

    A Review Of Past Recessions

    Here we look at the biggest economic declines in the U.S. since the Great Depression.
  2. Brokers

    Brokerage Functions: Underwriting And Agency Roles

    Learning about these various activities can give insight into how securities are issued and traded.
  3. Insurance

    Is Insurance Underwriting Right For You?

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

    Uncovering The Securities Firm

    Learn about the various departments of a securities firm and the professionals who make it work.
  5. Retirement

    The Bright Side Of The Credit Crisis

    Find out how this tough economic period can be a learning experience for all.
  6. Options & Futures

    Market Bottom: Are We There Yet?

    No one rings a bell when the bear market's over, but that doesn't mean there's no way to predict a bottom.
  7. Entrepreneurship

    How Microfinance and Investment Banking Compare

    Investment banks and microfinance institutions (MFIs) provide similar services, but the clients they serve and the incentives that motivate them are very different.
  8. Entrepreneurship

    Should I Have An IPO on My Business

    The ultimate outside investment opportunity is going public through an initial public offering. However, IPOs come with costs that you may want to avoid.
  9. Fundamental Analysis

    Why Investment Bankers Need Financial Advisors

    Even the most successful investment bankers need financial advisors. Here's why.
  10. Fundamental Analysis

    Why Investment Bank IPO Valuations Go Wrong

    The costly services of investment banks don’t necessarily guarantee accuracy in IPO pricing.

You May Also Like

Hot Definitions
  1. Covered Call

    An options strategy whereby an investor holds a long position in an asset and writes (sells) call options on that same asset ...
  2. Butterfly Spread

    A neutral option strategy combining bull and bear spreads. Butterfly spreads use four option contracts with the same expiration ...
  3. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
  4. Moving Average - MA

    A widely used indicator in technical analysis that helps smooth out price action by filtering out the “noise” from random ...
  5. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  6. Productivity

    An economic measure of output per unit of input. Inputs include labor and capital, while output is typically measured in ...
Trading Center