WASHINGTON — Federal and state regulators yesterday announced a coordinated effort to weed out deceptive or unfair practices at some of the nation's largest subprime mortgage lenders.

The announcement came before Federal Reserve chief Ben Bernanke's scheduled testimony on the economy before a House panel today. Bernanke could be peppered with questions from lawmakers who say the Fed hasn't done enough to stop abusive lending.

The pilot program, to begin around October, will target about a dozen of the most active firms offering higher-cost loans to consumers with impaired credit. It focuses on lenders that don't take deposits like conventional banks and, therefore, get lost in the regulatory shuffle, and mortgage brokers who work with them.

"These best practices address the concerns we have identified in the subprime mortgage markets," said Nick Griffin, Hawai'i's commissioner of financial institutions.

"We believe a coordinated effort among federal and state regulatory agencies is necessary to provide consistent and effective oversight of subprime lending and overall supervision of the mortgage industry," Griffin said.

All lenders operate under a web of state and federal laws and rules. The program envisions better coordination to see if loans are financially sound and comply with existing laws on truth in lending, high-cost lending and race and sex discrimination, among other things.

There's no set end date for the project, which could be expanded depending on what regulators find. "Stronger collaboration by state and federal agencies ... will help us to better weed out abuses," said Fed official Randall Kroszner.

Consumer groups estimate that as many as 2 million households could lose their homes as adjustable-rate subprime loans reset to higher levels.

"Nothing was stopping them (the lenders) from doing this before," says Alys Cohen, staff attorney at the National Consumer Law Center, adding that the effectiveness of the move depends on how tough enforcement and possible penalties are.

Steve O'Connor, a senior vice president at the Mortgage Bankers Association, called the move a good step, one that underscores the need for uniform standards.

Many subprime mortgages are based on stated income, have penalties for early repayment and are not affordable for borrowers once an initial low rate expires. The Fed recently issued tighter standards, which states may adopt. The pilot program includes the Fed, Office of Thrift Supervision, Federal Trade Commission, Conference of State Bank Supervisors and American Association of Residential Mortgage Regulators. Griffin is a member of the CSBS.