Automated Underwriting

Getting a mortgage today is faster and easier than ever – and much of the credit goes to automated underwriting. Every day, mortgage originators use automated underwriting to reduce operating costs, expand markets, and provide borrowers with faster, fairer lending decisions.

What Is Automated Underwriting?

Automated underwriting is a technology-based tool that combines historical loan performance, statistical models and mortgage lending factors to determine whether a loan can be sold into the secondary market. The most widely used automated underwriting services are Freddie Mac's Loan Prospector® and Fannie Mae's Desktop Underwriter®.

Mortgage originators use automated underwriting to help them:

Determine the terms under which the loan can be sold into the secondary market.
Evaluate the credit, collateral and capacity of borrowers to make their monthly mortgage payments.
Identify the appropriate type of loan for the borrower.

How Does Automated Underwriting Improve The Mortgage Process?

Lower costs. Rather than collecting reams of documents, most originators now can process a loan with just a paystub, bank statement and W-2 – and sometimes even less. This cuts originators' costs by hundreds of dollars per loan.

Expanded markets. Automated underwriting helps the industry serve more borrowers. For instance, in the refinance boom of 2001-03, the industry has processed three times the volume that occurred during the last refi market of the early 1990s, even through the drop in rates was comparable in both periods. The big difference: automated underwriting was broadly used in 2001-03.

Faster, fairer lending decisions. Speed and fairness are the hallmarks of automated underwriting. Within minutes of submitting a loan application to Loan Prospector, originators get a response back from us–for more than four out of five loan applications, our response is that we will purchase the loan. Originators then have quick access to a broad range of mortgage programs and products.

Automated underwriting also helps originators shed old guidelines that excluded too many borrowers from homeownership. Indeed, by combining flexible, objective underwriting with our broad array of mortgage programs, originators can offer borrowers toward lowest-cost financing available at that time. This makes automated underwriting a big weapon against predatory lending.

Specific Examples Of Families Helped By Automated Underwriting

Many Americans wrongly believe that:

Low-income people cannot get a conventional loan.
Borrowers need almost perfect credit to qualify for a loan.
A downpayment of 20 percent is required to buy a home.

Automated underwriting helps to dispel these and other myths, and eliminate false barriers to homeownership.

Over the years, users of Loan Prospector have helped families:

Avoid loans with less favorable or even predatory terms.
Qualify for a mortgage loan when little funds were available upfront.

Learn more about the underwriting factors used in Loan Prospector.