Q. Exactly what is underwriting?
A. The procedure by which a person’s credit and financial data are evaluated in the aims of being approved of for a loan.

Q. What then is automated underwriting?
A. The computerized procedure by which a decision to grant a loan, based upon inputted credit histories and personal financial information can be rendered instantaneously.

Once upon a time, underwriting was viewed upon as an inconsistent process which took days or even weeks to make a final determination.

Not always looked upon in a favorable light, underwriting is making an about face change. Now able to deliver results within literally minutes or sometimes even seconds, underwriting is also becoming more standardized. Consistency, based upon pre-established parameters, is something which consumers perceive to be as a very good thing.

This miraculous turn-around can be attributed to the technological advancements which have made it possible for mortgage specialists to integrate the most current and updated rates and guidelines into computerized IT programs designed to expedite underwriting procedures.

Quite a labor intensive process, underwriting formerly involved a great amount of human involvement. As underwriting, basically risk assessment and, based upon which, assignment of a loan rate, has not relied upon regulations netted in ink. Thus, not always considered an exact science, underwriting was a result of intellectual guesswork. To a certain extent, per each transaction, there was a large margin of error in both the profit or loss arena.

As much information goes into rendering an underwriting decision, i.e. credit checks, verification of data and cross checks conducted against public records, it formerly seemed prohibitive to attempt to systemize the process.

That is why automated underwriting is only approximately seven to ten months old.
Utilizing a portal site, partnering agencies can submit loan product information. Thus, once a customer inputs their background data, should an appropriate match exist, they can be linked with companies potentially interested in funding their loan.

Such determinations are able to be made based upon an applicant’s income and purchase price and the amount set by the lender as to not only what their loan rate will be but also what the cost of the associated mortgage insurance they needs to purchase will be.

The major advantage of automated underwriting is that it allows lender to standardize the measurements upon which they approve and deny candidates’ loans. Within the industry, the term “best practices” is used in reference to safeguards in place to ensure all person’s receive equitable and fair consideration when applying for a loan.
It is anticipated that over the next couple of years, automated underwriting will become a major factor in the industry. Then, in five to six years, the majority of the mainstream companies will be employing such computerized practices.