Automated Underwriting
Barron's Banking Dictionary:
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Automated Underwriting
Mortgage lender's analysis of a new loan application using a computer program to collect all the information necessary to approve the loan application. In the United States, automated underwriting systems such as Fannie Mae's Desktop Underwriter® and Freddie Mac's Loan Prospector® review the loan applicant's credit history, and ability to repay the loan and determine if the price the applicant is offering to pay is supported by the property value. The main advantage these systems offer is their speed in approving loans scheduled to be sold to investors in the secondary mortgage market.
Investopedia Financial Dictionary:
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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.
Investopedia Says:
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.
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Barron's Banking Dictionary
Dictionary of Banking Terms. Copyright © 2006 by Barron's Educational Series, Inc. All rights reserved.
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