With the prospect of stringent and undesirable legislative mandates looming larger, mortgage industry trade groups are scrambling to demonstrate that their voluntary efforts to assist struggling subprime borrowers are bearing fruit.

Going further than this regulator has ever gone before – although too far for many financial institutions and not far enough for consumer advocates and some legislators – the Federal Reserve Board has proposed to expand and strengthen the protections offered to mortgage borrowers.

If you have any doubt about the seriousness or severity of the fallout from the subprime mortgage implosion, consider this observation from former Congressman James Leach, a Republican from Iowa, who chaired the House Banking Committee before he lost his seat (and the Republicans lost their majority) in the last mid-term election. “If foreclosures occur [on the scale that has been predicted], the political reaction will be astonishing,” Leach, now director of the Harvard Institute of Politics, told the American Banker recently. “We’re not talking about losses in the stock market,” he said. “We’re talking about the loss of the family home…and that has just huge implications.”

With residential mortgage foreclosure rates setting new records (again) in the third quarter and the pain from the ailing housing market continuing to spread, Congress and the Bush administration are under increasing pressure to help struggling borrowers hang on to their homes and to prevent the fallout from the housing/subprime crisis from tipping a weakening economy over the recession edge.