Fed to flex its mortgage-relief muscle

WASHINGTON - The Federal Reserve is finalizing a far-reaching mortgage proposal that would ban certain lending practices and apply to the lightly regulated subprime mortgage specialists that proliferated during the recent housing boom.

The proposal, expected in two weeks, is emerging as the most muscular use of regulatory power at the central bank since Fed Chairman Ben Bernanke took office in early 2006.

It is expected to target certain prepayment penalties as well as loans that don't escrow taxes and insurance. The plan also targets low-documentation loans and loans that are made regardless of a borrower's ability to make payments, Fed officials have said.

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Source: msnbc.msn.com