At least 20 U.S. subprime lenders in recent months have closed, retrenched, filed for bankruptcy, delayed earnings reports, taken financial hits, or been sold or downgraded amid a rise in delinquency rates.

And federal regulators have noticed.

Worried that "subprime borrowers may not fully understand the risks" of such lending products as adjustable-rate mortgages, the Federal Reserve, the Federal Deposit Insurance Corp. and three other regulators on Friday asked lenders to carefully evaluate borrowers' ability to repay at the full rate.

The regulators don't want marketers of subprime products to base their lending decisions on "teaser" rates that expire after a short period of time.

Putting out a call for public comments, the regulators also noted that the products "may pose an elevated credit risk to financial institutions."

Indeed, bad news continued to bubble up this week in the subprime mortgage industry, which serves home buyers with poor or limited credit records and typically charges two or three percentage points above safer prime loans.

Shares of Irvine, Calif.-based New Century Financial Corp. closed down 7.6 percent Friday as the subprime lender announced plans to lay off four percent of its workforce and postponed filing its year-end financial results.

Even General Motors Corp. might be affected by the industry's shakeout. The automaker said this week that it would again delay filing its annual report, triggering concerns about its possible exposure to the subprime lending market through its GMAC residential mortgage unit.

On Thursday, even Warren Buffett, chairman of Berkshire Hathaway, opined on "weakened" residential lending practices.

"The 'optional' contracts and 'teaser' rates that have been popular have allowed borrowers to make payments in the early years of their mortgages that fall far short of covering normal interest costs," the legendary stock picker wrote.

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