The home loan mortgage market has been the main focus of Federal Reserve chairman Ben Bernanke for the past several months. The main concerns for the mortgage loan market stem from the subprime mortgage and residential real estate corrections.

Bernanke recently announced that the Fed was in the process of curbing unfair mortgage lending practices to protect borrowers from adjustable rate mortgages. The Fed’s actions over the recent months have indicated its commitment to using its complete authority and resources to alleviate home loan borrowers’ concerns.

Chairman Bernanke outlined a four-pronged agenda to help alleviate the mortgage correction:

Preventing mortgage lenders from issuing mortgage loans that cannot be repaid
The subprime mortgage crisis was mainly a result of borrowers taking out adjustable rate mortgages with low initial interest rates that reset to higher mortgage rates at a later time. At the time of the reset, many homeowners no longer could afford the new mortgage payments and their home loans resulted in foreclosures.

Mortgage brokers and mortgage lenders to perform income and asset verification of the borrower
Usually called "stated income" lending, mortgage lenders would often issue credit approvals for people with lackluster credit or insufficient income to repay a home loan.

Necessitate escrow accounts for higher end mortgage loans
This requirement is for borrowers who do not comprehend the scope of paying back loans. Bernanke wants higher end loans to have a separate account for hazard insurance and real estate taxes.

Prohibit repayment penalties
The Fed intends to stop repayment penalties including “loan flipping” in which mortgage lenders force borrowers to do a mortgage refinance at higher unaffordable mortgage rates.

The Fed’s goal is to provide comprehensive and clear rules that protect the public against unfair lending practices while maintaining a viable mortgage lending market.

As the nation faces challenges in the mortgage, residential real estate, and financial markets, it is imperative that the Fed do its part in mitigating further risk to the economy. The steps outlined by the Federal Reserve Chairman are a welcome step in the right direction. But the most reassuring thing for Americans is that the Fed will do whatever is necessary to help the nation weather any economic crisis.