Fed aims to protect Americans from shady loan practices

Recent lending practices, particularly for some mortgages, have been called everything from dishonest to outright dangerous.

Tuesday the Federal Reserve took action to protect Americans from questionable loan practices that have left some homeowners barely holding on.

The sub-prime mortgage crisis has cost millions of Americans their homes, and put millions more at risk.

To ensure this never happens again, the Federal Reserve is offering new protections against shady lending practices.

Federal Reserve Chairman Ben Bernanke said, "Unfair and deceptive acts and practices hurt not just borrowers and their families, but entire communities and, indeed, the economy as a whole."

Some of the proposals include:

• Restricting lenders from penalizing sub-prime borrowers who pay off their loans early
• Forcing lenders to make sure sub-prime borrowers set aside funds to pay for taxes and insurance
• Cracking down on misleading ads by lenders
• And requiring lenders to have proof of a borrower's income.

Federal Reserve Governor Randall S. Krozner said, "The carefully considered rules that we are proposing today will go far toward ensuring reasonable credit options for consumers while stemming the problems we have seen."

Still, some lawmakers criticize the fed for not acting fast enough, and not enforcing existing laws, which already give the agency broad power to stamp out dangerous loans.

Meeting in Washington Tuesday, the Fed reminded Americans they need to accept A certain amount of responsibility themselves.

Krozner said, "Consumers also need to be well-informed shoppers when it comes to the important decisions of buying a home and taking out a mortgage."

Before any of the rule changes go into effect, they must be voted on again after a 90-day period of public comment.