Computerized underwriting systems, which cut from weeks to days the time it takes to close a loan, are also opening up competition in the mortgage business. The systems are giving small lenders the tools that the giants of the mortgage business have long had access to, said Scott Cooley, founder of Contour Software Inc., one of the largest providers of software to mortgage originators.

Several of the largest private mortgage originators, such as Norwest Mortgage Inc. and Countrywide Home Loans Inc., have successfully used their own versions of automated underwriting for several years. But in the past two years Freddie Mac and Fannie Mae have launched versions that have had far-reaching impact throughout the rest of the industry, not least because between them Fannie and Freddie dominate the purchase of mortgages for resale as securities to investors.

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