The term “subprime mortgage” has certainly been in heavy rotation in recent months, and economic panic has spread as a result of lenders playing fast and loose with their home-lending criteria, causing chaos in the mortgage market. Enter the Federal Reserve to try to undo some of the damage and prevent a recurrence.

The New York Times:

By a 5-to-0 vote, the Fed approved a plan that would tighten provisions meant to protect borrowers and apply them to a far larger share of home loans — whether from banks, mortgage companies or other lenders — than under current regulations.

Late [Tuesday] afternoon, the House passed legislation to spare homeowners who restructure their mortgages to avoid foreclosure from having to pay taxes on the forgiven debt. The legislation, approved by voice vote, may have to be reconciled with a Senate version. President Bush has said he will sign the bill that emerges from Congress.

The proposed Fed rules underscore the more assertive role the agency is now prepared to take in regulating lending, in a big shift from the central bank’s approach in the past.

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