Article: Fannie, Freddie under scrutiny as they automate underwriting. (Federal National Mortgage Association, Federal Home Loan Mortgage Corp.)

The oversight agency for Fannie Mae and Freddie Mac is taking a hard look at their drive to automate the home loan business.

Aida Alvarez, director of the Office of Federal Housing Enterprise Oversight, has raised concerns that the new technology will concentrate more market power in the hands of the two agencies - formally known as the Federal National Mortgage Association and the Federal Home Loan Mortgage Corp.

Speaking before the California League of Savings Institutions last week, Ms. Alvarez suggested that the automated underwriting systems the agencies are developing could allow them to bypass lenders and come closer to making loans directly to consumers.

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