Fed takes broad steps

Rules aim to prevent shady mortgage lending practices

WASHINGTON — After moving Sunday to quell growing doubts about the stability of housing giants Freddie Mac and Fannie Mae, the Fed on Monday adopted new rules to protect home buyers from shady mortgage-lending practices.

Both actions reflect a more aggressive regulatory zeal at the Federal Reserve Board, which has been criticized for allowing the nation's housing market to overheat and ultimately embrace dangerously unsound practices that helped trigger the ongoing foreclosure, lending and credit crises.

The new rules will protect home buyers from deceptive, unfair and abusive lending, establish new advertising standards and require lenders to provide clearer disclosures of loan terms earlier in transactions.

Consumer advocates wanted the practice banned. Instead, the Fed left the issue open for further study and possible action later.

"The Fed should be applauded for at least stepping up to the plate, but if this had happened five years ago, we probably wouldn't have had a sub-prime crisis," said Kurt Eggert, a law professor at Chapman University in Orange, Calif., and a former member of the Federal Reserve Board's Consumer Advisory Council.

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