A Montgomery County Circuit Court judge has sentenced two former top officials of a closed Bethesda mortgage firm to 18-month suspended prison terms and three years probation after the two pleaded guilty to conspiring to commit theft by altering loan documents from dozens of borrowers.

Martha Sue Kushner, president of General Mortgage Services, and Ellen Ballman, a company stockholder who ran the firm's daily operations, last week also were ordered to perform 500 hours of community service each and cooperate with Maryland investigators probing the document tampering scheme. The Maryland State Bank Commission shut down General Mortgage in November 1986, when state banking officials discovered the operation.

Investigators with the Maryland attorney general's office described Kushner and Ballman as the leaders of the loan tampering ring -- an intricate and widespread system in which the two and others at the closed mortgage firm falsified documents for mortgages worth tens of millions of dollars during seven months in 1986. The falsified documents showed that borrowers were qualified for larger mortgages than they might otherwise have been able to receive. The bogus loan packages were then purchased by unsuspecting outside investors.

In sentencing the two women to three years of supervised probation, Judge John J. Mitchell rejected a recommendation from the attorney general's office for five-year probationary terms. In addition, the state asked that the two not be allowed to work in the mortgage industry for at least five years. The judge, though, said they could remain in the industry as long as they obtain the proper licenses.

"I can't say I expected them to go to jail," said Elizabeth Volz, an assistant attorney general. "But they've got an 18-month suspended sentence over their head. If they don't fulfill the requirements of their probation, a judge can immediately impose the jail term."

Volz said the two have cooperated with the state's investigation into their operation "by giving us information and names of other people they had contact with." She would not reveal details.

Kushner and Ballman faced maximum prison sentences of 15 years and $1,000 fines.

"I deeply regret what I have done," said Kushner, 51, of Bethesda.

"I have been humiliated and embarrassed," said Ballman, 49, of Chevy Chase. "I find myself guilty of not stopping a practice as soon as I learned about it."

But state investigators said Ballman was not just ignoring the tampering scheme, but was its chief operator. They said a probe of General Mortgage revealed that more than 40 percent of loan documents examined had been altered by Ballman, Kushner or others at the firm.

In presentencing statements last week before the judge, lawyers for Ballman and Kushner portrayed the two as hard workers caught up in a frenetic home-buying and refinancing market. They also said the crimes were victimless because none of the borrowers whose loan documents were changed have been forced into foreclosure.

"Nobody has lost a dime," said Leonard Collins, Ballman's lawyer.

State banking officials have said the borrowers face an uncertain future because they obtained loans for which they might otherwise not have been qualified and might not be able to keep up payments.

In addition, Volz of the state attorney general's office said investors who bought the bogus loan packages were victims because they bought what could be risky mortgages that might face foreclosure if borrowers cannot make payments.

She said it is unclear how much profit General Mortgage made in the scheme.

The amount, however, is thought to be large because most mortgage brokerage firms receive a 1 percent to 2 percent commission for loans processed. Volz said the loan packages changed by General Mortgage represent "tens of millions of dollars" worth of mortgages. In addition, General Mortgage profited by charging borrowers application fees.

General Mortgage's loan tampering scheme took on various forms. State investigators found that borrower's tax forms, employment verification forms and bank records were changed using typewriter correction fluid, cutting and pasting, and more than 20 IBM typewriter elements. Kushner and Ballman also kept a stock of blank income tax forms to falsify potential borrowers' incomes, according to court records.

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

Prosecutors said that in most cases, the borrowers had no knowledge of the loan altering operation.

Despite the state's closing of General Mortgage, the firm stayed in business by reopening under another name near its old 4712 Rosedale Ave. address. The new firm was "nominally" headed by Eric Kole, a former General Mortgage employe, according to the attorney general's office. Investigators found, however, that Ballman and Kushner ran the new firm. That firm was ordered closed after state banking officials learned of it.