The housing industry is about to get a mortgage makeover.

The Federal Reserve has now opened the door,ready to remodel the business model for mortgage brokers and lenders.

The new rules are designed to protect borrowers from shady and abusive lending practices that have shaken the foundation of the nations housing market.

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A home goes up for sale in this file photo.

"It seems like there's a change on a weekly basis." said Patrick Palmer, president and CEO of Alpine Mortgage in Lake Oswego. Palmer said it's time the feds stepped in to restore confidence in the housing market.

"There's definitely a negative perception about being in the mortgage industry right now."

It's what the Fed is trying to fix in response to the subprime mortgage crisis.

"We want consumers to make decisions about home mortgage options confidently, with assurance that unscrupulous home mortgage practices will not be tolerated." said Federal Reserve Chairman Ben Bernanke.

Among the new rules, barring or restricting lenders from penalizing subprime borrowers, who pay off their loans early.

Palmer says it would allow borrowers to apply for a more safe loan.

The new rules would prohibit lenders from giving people unaffordable loans. Loans they can't afford to repay after a low introductory loan rate.

"I think that the industry definitely abused that to a certain degree." said Palmer.

The Fed also wants the industry to clamp down on what are called "liar loans". This is a loan that isn't verified by the lender as to the actual income of a potential borrower.

Before the Federal Reserve announced it's new rules, some lenders decided to police themselves. In addition to tighter restriction on loans, some are asking for an additional independent appraisals. This is causing some deals to fall through.

"It does eliminate some of the business, but it's good because you're not going to see the inflated appreciation that we've seen in the last few years." said Ben Andrews, President of Willamette Realty Group.

The new rules apply to future loans. But, for the present, the subprime market continues to drag down the housing market and the economy. It's a market that desperately is looking for a reversal of misfortune.

Before the new rules take effect, there will be period of time for public comment and possible revisions. The proposal could be finalized next year.