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. Credit Crisis

    A crisis that occurs when several financial institutions issue ...
  4. Negotiated Underwriting

    A process in which both the purchase price and the offering price ...
  5. Underwriting

    1. The process by which investment bankers raise investment capital ...
  6. Total Debt Service Ratio - TDS

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

    What's Investment Banking?

    An investment bank is a special type of bank involved in a variety of large and complex financial services for major institutions.
  8. Trading Strategies

    Is Goldman Sachs Still A Winner?

    Goldman Sachs might not be the best dividend play out there, but there are other reasons you might want to consider it as an investment.
  9. Investing Basics

    The 10 Biggest Latin American Banks

    Brazil is home to most of the major banks in Latin America, claiming six of the ten largest financial institutions in the region.
  10. Investing Basics

    What's the Role of an Investment Bank?

    Investment banks provide financial advice to businesses and governments and help them raise capital through the sale of stocks, bonds and other products.

You May Also Like

Hot Definitions
  1. Fixed Cost

    A cost that does not change with an increase or decrease in the amount of goods or services produced. Fixed costs are expenses ...
  2. Subsidy

    A benefit given by the government to groups or individuals usually in the form of a cash payment or tax reduction. The subsidy ...
  3. Sunk Cost

    A cost that has already been incurred and thus cannot be recovered. A sunk cost differs from other, future costs that a business ...
  4. Technical Skills

    1. The knowledge and abilities needed to accomplish mathematical, engineering, scientific or computer-related duties, as ...
  5. Prepaid Expense

    A type of asset that arises on a balance sheet as a result of business making payments for goods and services to be received ...
  6. Gordon Growth Model

    A model for determining the intrinsic value of a stock, based on a future series of dividends that grow at a constant rate. ...
Trading Center