Rosa Greene fell several months behind on her mortgage payments last year and decided to take out a second loan on her home to try to save the deteriorating Northwest Washington property she has owned for 14 years.

What followed was an economic nightmare. Greene, 52, an unemployed clerical worker with a high school education, got her second loan, but with it came a massive interest rate of more than 40 percent that she later alleged was hidden in the paperwork. Suddenly she was faced with losing the five-bedroom house she shares with her son, her dog Sambo and her cat White Trash.

Although Greene received only $2,700 in the loan deal, she was committed to repay a total of $7,057 over five years, including a $2,800 broker's fee that a federal judge said "shocked the court."

Relief came only recently when U.S. District Judge June L. Green ruled that her lender, Gibraltar Mortgage Investment Corp. of Arlington, was guilty of unconscionable and fraudulent business pratices and that Greene need not repay any more of the money she had borrowed.

"They didn't care about the loan. They just wanted to take my house," said Greene, whose original $260 monthly house payment shot up to $378 with the second loan. "I can't hardly blame them. That's the American way -- to step on other people to get ahead."

Whether it is the American way is open to debate. Gibraltar, which has denied any wrongdoing in Greene's case, has appealed the verdict. The larger significance of her allegations, say financial experts in the area, is the danger that many homeowners, squeezed by today's inflation, may be vulnerable to such tactics.

High-interest second mortgages amount to fail-safe investments for loan companies, according to industry spokesman. If the borrower repays the loan, the lender gets a windfall from the interest charges.If he cannot, which is far more likely, the lender can foreclose.

"The worst part is that most people don't even know they're being taken," said Russell B. Kinner, staff attorney with the D.C. Neighborhood Legal Services Program. "Very few of these cases ever come to light."

Among the signs of economic disruption are reports that business and personal bankruptcies in the District in the first two months of this year were up more than 80 percent over a year ago. Nothern Virginia's bankruptcy toll is up 26 percent over last year, and Maryland's had climbed by one third.

In all three jurisdictions, officials say, the increases have chiefly been caused by credit-tightening moves.

Some area mortgage lenders reportedly have begun to warn homeowners about seeking second loans, reminding them that "alienation clauses" in many contracts allow a lender to foreclose on an original mortgage if the homeowner obtains additional financing -- even if the owner has enough equity built up to cover the amount of both loans.

"It used to be that lenders would let people go out and get second mortgages and it wouldn't be any problem," said David Wells, deputy director of Maryland's division of building, savings and loan association. "Now many [lenders] have low-yield loans that they got years ago they see the chance to get out of them."

Such clauses are legal in Maryland and the District, but are barred in Virginia.

Rosa Greene said she sought a personal loan on the equity in her house at 1502 Emerson St. NW last spring because high blood pressure had left her unable to work and she was slipping behind in her payments. Turned down by several large loan companies, she found Gibraltar, a tiny firm that processes about 100 loans annually.

Gibraltar was willing to grant her the money, but there was a catch, according to court documents filed in U.S. District Court in the District of Columbia. Company officials allegedly insisted she sign a form saying she intended to use the money for a business purpose: converting her home into a rooming house.

"I didn't want any roomers, but I thought that was the only way to get some money," she said later.

What Greene did not know was that District Lending statues, which at the time limited the interest rate charged on personal loans to 14 percent, do not apply such restrictions to business loans of more than $5,000.

While Greene had sought a loan of only $3,000, the loan Gibraltar granted her was for far more -- $5,800, or just a shade above the regulation cutoff on business-purpose loans.

Only $2,700 of that actually went to Greene, however. A larger sum, or $2,800, went directly to Gibraltar as a "broker fee," while the rest was siphoned off in settlement costs.

In the end, according to a form provided to Greene by Gibraltar, she agreed to pay back $7,057 over five years for the use of less than $3,000 -- which amounted to an interest rate of more than 40 percent per year.

Although Greene received a formal statement of charges from Gibraltar, the line on the form that specified the annual interest rate charged was left blank. The Federal Truth in Lending Act requires seeking personal loans, but does not extend similar requirements to business loans.

Greene says she never noticed that the interest charge was greater than the 8 percent Gilbraltar quoted to her until she again fell behind on her payments and the loan company threatened to foreclose on her home. It was only then that she sought a lawyer.

"I felt so embarrassed" at not computing the annual interest rate on the loan, said Greene. "I just wasn't bright."

Attorney Lawrence N. Minch of Covington and Burling, working with Kinner though Neighborhood Legal Services, represented Greene in court.

Willis Kemper, president of Gibraltar, denies he suggested a business-purpose loan as a way of getting around the District usury law. "She said she wanted to make a rooming house," he said. "She said this was what she wanted to do."

Kemper said Greene was fully aware of the terms of the loan agreement she signed because they had been explained by Gibraltar's attorney, J. D. Miller. "We don't want her property," he said. "We never make a loan in anticipation of owning property."