An Automated Underwriting System for Lenders


The lending industry as a whole is moving towards the use of new automated loan underwriting tools that improve processing time.

The Federal Housing Administration (FHA) recently launched a new automated underwriting system (AUS) for use by lenders originating mortgages.

The two major government-sponsored enterprises have made strides in underwriting automation; Freddie Mac has an underwriting software known as Loan Prospector and Fannie Mae has an automated underwriting tool called Desktop Underwriter.

Automated underwriting systems process all types of loans and can also provide a schedule for installment payments.

These sophisticated systems enable lenders to automate the loan approval process for credit cards, insurance policies, car loans, and mortgages. 

Mortgage Lenders Need Automation

The mortgage industry is one of the largest sections of the US lending market - it has trillions of dollars worth of debt.

However, it’s been the slowest to digitize, and incumbent mortgage lenders have difficulty removing friction from the underwriting process due to a lack of automation.

Speeding up the mortgage loan application process for future homeowners has become a priority for both incumbent lenders who want to keep market share and digital-first lending startups looking to disrupt the industry.

Manual Mortgage Underwriting

The entire process of manually processing mortgage applications is labor-intensive. The approved lenders have to review the applicant’s credit report, job status, income, and savings by hand.

From there the human underwriter verifies that all of the applicant’s data is completely documented before deciding whether to go ahead with the lending process.

Automated Mortgage Underwriting

Automated mortgage underwriting tools digitally bear the brunt of the decision-making processes involved in approving mortgage loans.

Understanding the Automated Underwriting System

Automated underwriting software processes an applicant’s data to instantly arrive at a loan decision. 

Automated underwriting streamlines the first stage of the underwriting process by providing immediate decisions that can typically take weeks to complete when manually done.

In practice, an underwriter has a small role in the first phase of automated loan processing.

However, there are also complicated cases that require human expertise. In these instances, automated underwriting systems can identify and refer applications to human underwriters to complete the approval process.

How Automated Underwriting Systems Work

The underwriter or loan officer enters the applicant’s information into the underwriting software, such as income, savings, borrower's credit history, occupation, and address.

The automated underwriting system can decide whether the application is approved, approved under certain conditions, or it can refer the case to a human underwriter for additional processing.

Benefits of Automated Underwriting

Lenders that deploy automated underwriting processes drastically cut down on loan processing times, identify any inconsistencies, and improve the customer experience.

Let's take a closer look at the advantages of digitizing the automation process.

Data Entry

The information on the application form is checked by the automated underwriting system.

The software solution identifies missing documents, such as tax returns and pay stubs, and flags issues that require further explanation.

Fraud Detection

Fraud detection is a huge challenge in manual mortgage processes, which is why companies are turning to automation.

Automated underwriting systems review different financial measurements and customer data in order to cut down on fraud.

Speed And Accuracy

Since automated underwriting systems use pre-set rules and algorithms to approve applications, they are virtually error-proof.

Conversely, mistakes can always happen during manual input, even when numerous checks by employees are carried out.

Also, lenders cut down on delays generated by going back and forth chasing missing supporting documents. 

Customer Experience

Approving an application in a fraction of the time required with manual underwriting improves customer satisfaction. An underwriting system can also be configured to offer updates on the status of the process or notify applicants about outstanding documents.

Automated Underwriting with Higson

Higson is a rules engine that connects to underwriting systems to help automate the decision-making that immediately greenlights eligible applicants.

Optimize Processes with Business Rules

Underwriting decisions can be instantly created and updated through Higson's user-friendly graphical interface. Non-technical users can make rule changes in just a few clicks, with no downtime, and without having to wait for the IT department for help.

More Control Over Decision Results

Unlike legacy underwriting systems that make data difficult to access by hard-coding everything, Higson offers a business-friendly way of managing business logic while removing the need for unwieldy hard-coded legacy IT systems.

As a result, non-technical subject matter experts can make instant changes to underwriting criteria and streamline the loan origination process without relying on the development team to manage the rules.

Get in touch with us to find out more about how Higson is used for credit underwriting, insurance underwriting, mortgage loan applications, fraud prevention along with many other use cases.

Get a personalized evaluation of Higson's potential for your use case
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