Housing activists and state and city officials on Wednesday blasted proposed state predatory lending laws that they say would weaken regulations on the books since 2001.

The proposal crafted by the Illinois Association of Mortgage Brokers drew fire at a public hearing called by an advisory board to the Office of Banks and Real Estate.

"Many more high-cost loans would remain unregulated" under the proposal, said Dan Lindsey, supervisory attorney for the Legal Assistance Foundation of Metropolitan Chicago.

That is because, he says, the proposed law would raise the trigger levels used to define high-interest-rate loans. Those triggers are designed to thwart abusive lending practices.

The proposal is far from becoming law.

"We're just at the beginning stages of this, seeking comments," said Michael Seng, chairman of the state agency's advisory board.

The subject is gaining attention because the debate comes amid rising home foreclosures nationwide and in Chicago, and efforts to pass national predatory lending laws.

A tough lending law in Georgia recently prompted the leading credit-rating agencies to stop issuing ratings on bonds backed by loans from that state. Unlike Illinois and many other states, Georgia transfers lender liability on high-cost loans to companies that purchase loans from originators.

The financial industry has long complained about the patchwork of state anti-predatory lending laws and regulations, and a bill in Congress would set federal standards on so-called high-cost loans that could threaten to make the current debate in Illinois moot.

A bill introduced by Rep. Robert Ney (R-Ohio) would raise the threshold definition of high-cost loans to 8 percent above Treasury rates. The threshold in Illinois is 6 percent.

Rep. Jan Schakowsky (D-Ill.) is fighting the initiative with a measure of her own that would not preempt tougher state laws.

Bottom line, say activists and industry groups alike, the issue is heading for center stage.

"Right now, the rules are so piecemeal that compliance is tough," said Marv Stockert of the mortgage brokers group.