WASHINGTON — Friday marked a turning point in the continuing tale of woe in the subprime mortgage market, with federal regulators issuing new rules that go into effect immediately. Cascading losses and spiking foreclosures, particularly caused by adjustable-rate mortgage products that explode when rates balloon from initial "teaser" rates proved the straw that broke the borrowers back.

The new rules require banks to make more disclosures, limit prepayment penalties and the use of "stated income" loans, and also give borrowers a complete picture of the loan. Left out is a "suitability standard" to make sure the consumer gets the best loan for their situation.

The biggest loophole, however, is that the rules do not apply to mortgage brokers, who originated nearly two-thirds of all subprime loans in the latter half of 2005, during the height of the real estate market, which are now repricing.