A District widow, whose housing loan arrangement with the D.C. government went sour after its once-high promise, faces foreclosure on her house because she and city housing officials cannot reach an agreement on new loan repayment terms.

The widow, 65-year-old Fatima Zein, and the city's Department of Housing and Community Development have been at loggerheads for about three years over two low-interest loan programs designed to rehabilitate decaying neighborhoods.

City Council Chairman David Clarke intervened to block a foreclosure sale last spring, but now the agency has given Zein a "nonnegotiable" proposal for repaying the long-overdue mortgage.

"We've done everything we can to get the debt down to acceptable levels," said Shirley Diamond, head of the agency's Neighborhood Improvement Administration. " But there comes a time when you have to resolve matters. This is over."

Zein, who paid about $13,000 on her mortgage and then stopped paying after problems with a contractor, says the housing agency got her into debt and then abandoned her. And she says she cannot meet the repayment terms demanded by housing authorities.

"I'm in no better position today," she said. "In fact, I'm worse off."

The difference between the city's loan repayment proposal and a counterproposal by Zein is about $60 a month. But this gap could mean the difference between buying a home and losing a home, according to a privately funded housing counseling agency.

"With the city's offer she loses her house," said Marjorie Shuman, a staff member with Housing Counseling Services who accompanied Zein to a meeting with housing officials. "She needs every penny."

Zein, a former secretary long retired on disability, dreamed of owning her own home and thought she had found a government program to help her pay for it.

But more than six years after she embarked on her quest for home ownership, the city is out thousands of dollars and the house Zein bought in the 1100 block of Irving Street NW stands vacant and vandalized.

At the height of her troubles, Zein's disability payments were terminated and she found herself in debt to the District government for more than $102,000 while her monthly income was just $46. Part of that debt came from a loan that housing officials now say was a mistake.

For a time, the city housed Zein rent-free and paid to store her furniture while renovation work on her home was under way.

But Zein's monthly income is now $814, and housing officials are pressing her for the mortgage payments.

Under the city's proposal, two low-interest loans made to her would be restructured, requiring her to pay the unpaid principal balance of $50,971 on one loan at 3 percent interest over 20 years. Her monthly payments would be $282.69.

And although their letter to Zein seems to contradict this, officials said the $27,584 balance on a second loan would be converted to a grant that she could use for renovation work.

Zein, who said she is being given no renovation funds, has made a counterproposal to city officials that calls for her to repay the original mortgage and settlement costs, roughly $44,000, at 2 percent interest over 20 years. This would reduce her monthly payments to $223.

Zein said she must reduce her monthly payments to have money for renovation and to pay her apartment rent until she can fix up the basement of her house and make it livable.

The city, arguing that Zein could move into her home quickly, is proposing to end a rent subsidy she currently receives.

Shuman said the housing agency's offer leaves Zein with nothing to accomplish the supposed purpose of its program: to help low-income city residents own their homes. She agreed that Zein probably never should have been cleared for the program, given her precarious financial circumstances, but she said she thinks it is not fair to penalize her for the agency's mistake.

Housing officials, who said they have set foreclosure procedures in motion, said Clarke's office approved of the agency's proposal beforehand.

The council chairman was out of the country and could not be reached for comment.