But brokers are uniquely problematic because of lenders' reward systems. Typically a broker receives a fee or commission equal to anywhere from 1 percent to 3 percent of the loan's value as a reward for steering customers to a lender.

If a broker guides a borrower who qualifies for a lower-rate loan into a loan with a higher interest rate, which makes more money for the lender, the mortgage broker earns a higher bonus. This is called a "yield-spread premium."

Sometimes borrowers accept a higher interest rate in exchange for less cash down or for improvements such as landscaping done at the time a loan closes. Sometimes, borrowers are steered into unsuitable loans.

"Are yield-spread premiums abused? Absolutely. Do borrowers understand what they are paying in yield-spread premiums? The vast majority of time they do not," John Robbins, the chairman of the Mortgage Bankers Association, told senators.

Hearings have documented how brokers steer borrowers with weak credit into loans that reset and carry steep penalties if the borrowers try to pay off the loans before they reset. These make it difficult to refinance or pay off loans before they shift to punishing high interest rates.

To clarify that brokers should serve borrowers, Sen. Charles Schumer, D-N.Y., introduced legislation that would create suitability standards. It would make mortgage brokers and the lenders they work with legally liable for loans issued to borrowers who can't afford them.

The bigger question Congress faces is how to impose federal regulation on mortgage brokers, who are now regulated at the state level, quite unevenly.

On June 29, the Federal Reserve issued "best practices" guidance to sub-prime lenders - advising against "prepayment penalties," for example - but the Fed lacks the power to enforce its guidance on mortgage brokers.

If Congress tried to federally regulate brokers, that could require a new bureaucracy at a time when the federal budget is under a severe squeeze. A more attractive alternative is creating a national licensing system and standards of conduct that would be set by the federal government but enforced by state regulators.

Such a system would target individual brokers and the companies they work for, collecting data about complaints, fraud and the like.

The Conference of State Bank Supervisors is finalizing a national registry and database that will make it harder for fly-by-night operations or brokers to jump from state to state. The registry would provide a track record for consumers to evaluate.

"If you look at where at least some of the problems are, quite often it is with the individual loan originator," said Gavin Gee, Idaho's director of finance, who began trying to regulate all loan originators last year. "If you've got a rogue originator ... if they commit fraud in one company, that company may terminate them. But they just go to work for another company."