Congress in 1994 began to address the growing nationwide uproar over predatory lending, passing the Home Ownership and Equity Protection Act, or HOEPA.

The law bars or limits such things as pre-payment penalties, balloon payments and excess interest penalties if a mortgage is "high cost" - where rates and fees exceed a threshold set by Congress.

But critics say the threshold - 8 points above the Treasury bond - is so high it's ineffective. Treasury bond rates, currently at 5.14 percent for the 10-year bond, are used to set traditional mortgage rates. So regulators now plan to review the law and its limits.

But given past concerns, beginning with North Carolina in 1999, 28 states passed their own laws further restricting interest, fees, prepayment penalties, credit insurance and balloon payments on high-risk loans, according to the Center for Responsible Lending in Durham, N.C.

New York's law, enacted in 2003, is one of the strongest, the group says.

Indeed, Legal Aid Bureau attorney Athena McCrory said that while lenders became more creative in structuring points and fees since the New York law took effect, there's also a lot fewer prepayment penalties and balloon payments, and less "flipping" of houses.

But abuses continue in New York and nationwide.

One reason was that nationally chartered banks no longer must comply with many state laws. Federal regulators recently enacted their own rules for their banks, but critics say the rules are weaker.

"Nobody deserves to be taken advantage of. We do everything in our power to make sure that doesn't happen," said Barry Wides, deputy comptroller of the currency for community affairs, whose agency regulates national banks.

Consumer advocates, meanwhile, want more done, but lenders are pushing to reverse some measures already taken. These state-by-state laws make it cumbersome, lenders say, for them to operate nationwide.

Also, they say, too many restrictions on these high-risk loans drive companies away, so borrowers with bad credit won't get loans at all.

The industry wants national legislation that would override conflicting state laws. Several bills are pending.

"We need one uniform national standard for the marketplace. That's the best way to protect consumers, and lenders can understand what the rules are," said Steve O'Connor, vice president of government affairs for the Mortgage Bankers Association of America.

But supporters of the state laws, including Eliot Spitzer, New York attorney general and gubernatorial candidate, say a single federal law would be weaker for consumers.

"The industry is trying to find ways to insulate themselves from liability, and government has been very complicit in that," said Stuart Rossman, litigation director at the National Consumer Law Center in Boston.

- Jonathan D. Epstein