MIAMI - Automated underwriting has unrealized potential that goes beyond merely closing loans, according to mortgage technology specialists at a conference here.

Using a computer model to grade borrowers based on demographic and credit history data is a "highly leverageable technology that is being underutilized," said Richard Beidl, an analyst at the Tower Group of Needham, Mass. He was interviewed at the American Banker conference here last week.

Automated underwriting can be "a key to cost efficiency," he said, if it is applied to the entire loan process, from before the consumer applies for a particular loan to the sale of the loan on the secondary market.

The technology has created a "whole new way of doing business," said Joseph Hausauer, chief executive officer of, a Seattle lender and technology provider. It gives "very accurate pricing and user profiles that can be used over and over again."

The process enables financial services firms to evaluate the pricing they get from investors who buy loans, he said. Keystroke has developed a "universal lending platform," which it recently sold to Morgan Stanley Dean Witter, Mr. Hausauer said. It is applicable to "any type of lending transaction," from a commercial loan to a home equity loan, because it supplies the rate and underwriting decisions in a single stroke, he said.

Using automated underwriting at the "earliest point in the process" will help lenders sell loans more profitably and give better customer service, said Patrick Mahaffey, executive vice president of Brightware Inc. of Novato, Calif. It can be applied to customizing loan products and to pricing and structuring securities deals, he said.

Risk-based pricing is already a fixture of the subprime market, and the conforming loan market is just beginning to rely more on it. "In the future, there will be very few 'yes-no' decisions and more 'at what price?' decisions," Mr. Mahaffey said. His company consults on mortgage technology.

Representatives of Fannie Mae and Freddie Mac said their companies are using the Internet to give better brokers and lenders better access to their automated underwriting systems.

"The point of sale is absolutely hungry for technology," said James S. Kurtzke, director of Loan Prospector communications for Freddie Mac. Freddie is offering its automated underwriting system, Loan Prospector, on the Internet to "better link brokers and wholesalers," he said.

Fannie Mae's Desktop Originator, an underwriting tool used at the point of sale by third-party originators affiliated with lenders, will be available on Fannie Mae's MornetPlus site after the first quarter, said Brian S. Murphy, senior product manager for customer technology marketing at Fannie. Desktop Originator and Fannie's automated underwriting system, Desktop Underwriter, are already accessible on the Internet through some lenders and other third parties.

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