The agency would have the power to set standards protecting consumers and encouraging competition, and the authority to make sure consumer-protection regulations "are written fairly and enforced vigorously," the Treasury Department said in a press release.

The Consumer Financial Protection Agency might, for example, develop guidelines for simple "plan vanilla" mortgages with predictable payments, require a "duty of care" for mortgage brokers, and ban "yield spread premiums" -- rebates paid by lenders when mortgage brokers place borrowers in high-interest-rate loans.

The new rules would serve as a floor, not a ceiling pre-empting states from passing their own laws, and states would be empowered to enforce the strengthened federal rules.

The Consumer Financial Protection Agency would also have the ability to gather information from anyone making loans and respond to changes and address bad practices as they develop.

During the housing boom, no single agency was charged with looking at mortgage lenders of all types across the market. Had the proposed agency existed, "its examiners could have gotten inside the operations of these unregulated mortgage companies and detected unfair, deceptive and abusive lending practices that so damaged the markets," the Treasury Department said.

A draft bill the administration delivered to Congress would require the new agency to develop a uniform mortgage disclosure form and put it forward for public comment within a year of the agency's creation.

The uniform disclosure form would have to meet the requirements of both the Real Estate Settlement Procedures Act (RESPA) and the Truth in Lending Act (TILA) -- something the real estate industry has been demanding since the Department of Housing and Urban Development and the Federal Reserve drew up separate disclosure forms for consumers.

The standardized disclosure forms developed by HUD to meet RESPA requirements -- the Good Faith Estimate and HUD-1 settlement statement -- are currently scheduled to become mandatory on Jan. 1, over the objections of lenders and critics within the real estate industry.

Industry groups including the Mortgage Bankers Association, the American Escrow Association and the American Bankers Association have asked HUD to withdraw the form and other RESPA rule changes and work with the Federal Reserve on a uniform disclosure form.

The National Association of Home Builders and the National Association of Mortgage Brokers have also filed separate lawsuits aimed at blocking aspects of the rule changes (see story).

Many House lawmakers are sympathetic to the real estate industry's concerns. Last year, more than 240 lawmakers signed a letter urging HUD to withdraw its proposed RESPA changes and work with the Fed on a simplified disclosure form (see story).

In a 300-114 vote May 7, the House approved HR 1728, a bill aimed at curbing predatory lending, which also included an amendment that would delay HUD's RESPA rule changes for one year.