Two former top officials of a closed Bethesda mortgage firm pleaded guilty this week to conspiring to commit theft by illegally altering loan documents of dozens of borrowers. The two face up to 15 years in prison.

Martha Sue Kushner, who was president of General Mortgage Services Inc., and majority stockholder Ellen Ballman, who ran the firm's day-to-day operations, admitted in Montgomery County Circuit Court that they falsified documents for mortgages worth tens of millions of dollars from April 1 to Nov. 6, 1986, in order to sell the bogus loans to unsuspecting outside investors.

During a probe of the widespread tampering operation, investigators for Maryland's State Bank Commission and the state attorney general's office said they found that more than 40 percent of the loan applications they examined had been altered by Ballman, Kushner or employes of General Mortgage.

Judge John J. Mitchell accepted the pleas of Ballman and Kushner after a half-hour hearing on Tuesday and set sentencing for Dec. 24. The charge carries a 15-year maximum sentence and a $1,000 fine.

"I offer to plead guilty because I made a terrible mistake," a sobbing Ballman, the firm's secretary-treasurer, said in a brief appearance before Mitchell.

Asked by the judge why she was pleading guilty, Kushner replied: "I am guilty of a crime."

Ballman, a Chevy Chase resident, and Kushner, of Bethesda, declined to comment after their court appearances.

As part of a plea bargain arrangement with prosecutors, Ballman, 49, and Kushner, 50, also agreed not to participate "directly or indirectly" in any aspect of the mortgage industry for five years. They also said they would cooperate with an ongoing state investigation of the firm and its former employes in return for a guarantee against further prosecution from the attorney general's office.

"I think this puts them out of business," said Joseph L. Evans, chief of the criminal investigations division of the Maryland state attorney general's office.

Evans said that it is unclear how much money General Mortgage made from the loan-altering scheme, but that the total is considered to be substantial because the firm received commissions of 1 percent to 2 percent on the "tens of millions of dollars" in loans processed. In addition, General Mortgage made money by charging borrowers application fees for processing loan documents.

To carry out the tampering scheme, Ballman and Kushner employed an elaborate system in which they also directed employes to participate, Evans said.

According to a statement of facts filed in court by the attorney general's office, "At the least significant end, {General Mortgage} merely eradicated poor credit histories {of borrowers}; at the worst, it enhanced applicant's incomes by 200 or 300 percent and created wholly fictitious second mortgages.

"The defendants, through the use of Wite-out, cutting and pasting, photocopying, and over 20 different IBM typewriter elements, routinely forged applicants' W-2 {tax forms} and employment verifications in order to reflect higher incomes," the statement said. In addition, prosecutors found that Ballman and Kushner maintained a stock of blank income tax forms in order to falsify borrowers' income.

Prosecutors said that in most cases, borrowers had no knowledge that their loan applications were altered by General Mortgage.

Ballman and Kushner also "altered bank documents to indicate higher savings balances and lower loan balances, fabricated sales contracts, and even created fictitious second mortgages so that applicants interested in refinancing could receive more cash," the statement said.

"These two women ... in effect operated a chop shop for documents," Evans said.

Last November, Maryland State Police searched the offices of General Mortgage at 4712 Rosedale Ave. and seized numerous boxes of loan documents.

In December, the firm was shut down by the bank commission after investigators uncovered the loan-tampering operation. By last spring, when the firm's operating license was permanently revoked by the state, banking officials found 53 separate incidences in which loan documents had been altered by General Mortgage.

In court documents, prosecutors said Ballman and Kushner also continued to operate their company under a new name, Numerica Financial Services of D.C. Inc., after General Mortgage was closed by the bank commission. Earlier this year the bank commission closed Numerica, charging that it was operating without a license.

Last month, the bank commission ordered that $50,000 from the firm's bond money be paid to 17 borrowers, all of whom complained that General Mortgage mishandled their loan applications. Those borrowers, however, were not part of the tampering investigation.

As a result of the tampering operation, borrowers who otherwise would not have qualified for home loans received mortgages. Like all mortgage brokerage firms, General Mortgage made its profits by processing loan packages, which were then sold to unsuspecting investors.

Home buyers who obtained the loans for which they should not have qualified face an uncertain future because they might not have income levels high enough to maintain their monthly mortgage payments.

State investigators said they have not heard of any of General Mortgage's borrowers facing foreclosure as a result of the loan tampering, but did not rule out such a possibility. In the past, lenders that purchase the fraudulent loans have said they would not demand that the borrowers return the money they were loaned.

In addition, prosecutors said the outside investors were also harmed by the tampering operation because they approved and purchased loans from General Mortgage based on false and misleading information.

In one case, an investor was told by General Mortgage that a Rockville couple was making a $36,750 down payment on a house, when in fact only $4,250 was being deposited.

In another instance, a Gaithersburg borrower's annual income -- an important criterion that outside investors consider in deciding to buy a mortgage -- was increased by General Mortgage from $25,148 to $65,148.