Devaney White kept getting offers to lower her mortgage payment.

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"They sent me letters," she recalled. "They showed up and came in. They called me on the phone."

And White kept buying it, refinancing her home or taking out a second mortgage on it 10 times between 1998 and 2005 -- boosting the amount she owed from $35,000 to $382,500, according to a complaint her lawyer filed as part of her bankruptcy proceedings.

White, a 78-year-old Boeing janitor who has owned her home since 1981, sat in her living room Wednesday below a portrait of one of her sons in a U.S. Marines uniform. Two of her other three sons were in the Army and her husband served in the Navy for more than two decades. White now supports two sons and a grandson, who all live in her modest house.

Her lawyer, Melissa Huelsman, said it took months to piece together loan documents -- and she still doesn't know everything.

According to White's complaint, some mortgages came months after previous loans and, in June 2002, she signed up for two mortgages in three days; the second was rescinded when an escrow agent noticed.

Some of the money went for a new roof and to pay off credit card debt, much of which stemmed from her husband's illness before he died in 1997. But tens of thousands of dollars went to fees and prepayment penalties, according to her complaint.

"My mortgage kept on going up," White said.

A big problem

White is part of a growing trend, which may be bad news for the economy in general, buyers and homeowners.

Last year, there were 41 percent more foreclosures in King County and 42 percent more nationally than in 2005, and the number could get higher, according to RealtyTrac data.

The reason? Wall Street investors poured money into the booming housing market in recent years and lenders found increasingly creative ways to get it to borrowers -- mortgages with adjustable rates, or ARMs, mortgages with an artificially low "teaser" payment, loans made without verifying borrowers' incomes -- particularly using subprime mortgages, which are more expensive loans for those with poor credit, and in markets where prices rose faster than paychecks.

About 20 percent of Seattle mortgages had adjustable rates in 2004, according to the most recent U.S. Census Bureau numbers. A Monday report from the Center for American Progress, a left-leaning think tank in Washington, D.C., said subprime loans made up 17 to 18 percent of U.S. mortgages issued in 2006 and 13 percent of all outstanding U.S. mortgages.

"There are huge numbers of people in foreclosure because of being in ARMs or being put into loans that are completely inappropriate for them," said Huelsman, who specializes in foreclosures.

Although ARMs are the biggest problem in Seattle, she said, she expected more problems with interest-only loans, which became popular only in the past couple of years.

Those most vulnerable are people like White, who were talked into a series of ever-more-expensive loans, and others who could only barely afford their initial payments.

When home prices increased by double-digit percentages in the past few years, owners could refinance or at least sell for more than they owed. That's changing.

The non-partisan Center for Responsible Lending in Durham, N.C., projected in December that nearly one in five subprime mortgages issued in the past two years would end in foreclosure, up from one in 10 issued in 2002.

Part of the problem, said Erin Rearden, a mortgage default counselor with the Seattle non-profit Solid Ground, is that many borrowers don't understand their loans.

"A surprising number of people don't even know if they have an adjustable-rate mortgage or a fixed, or don't even know what their interest rate is," she said.

The number of foreclosures Rearden sees is relatively stable, but those in trouble seem to be in deeper, she said. "What we're seeing now is people who have permanent reduction in their income or no income. They're six, seven, eight months behind."

Just about everyone has refinanced to take equity out of their homes, she said.

Hitting Wall Street

Foreclosures cost borrowers their homes and ruin their credit, but that's not why they're making news, Huelsman said. "You're seeing it because it's hitting Wall Street."

Investors were happy until recent months, when more and more loans started going bad. Now, some lenders are failing and others are scaling back subprime lending. Earlier this month, five federal financial regulatory agencies urged subprime lenders to better ensure borrowers were informed and could afford payments.

White got loans through some of the biggest names in mortgage lending and banking, including New Century, Ameriquest, Accredited Home Lenders, Washington Mutual, Chase and CitiFinancial, according to her complaint.

Most companies named in the complaint declined to comment or did not reply to requests for comment. A Citi spokesman said in a written reply that White's loan had a fixed rate that was not expensive and would have fallen under Citi guidelines, including verification of income and ability to pay.

Mike Fratantoni, senior director of single-family research and economics for the Mortgage Bankers Association, said in a January report that he expected "some modest increases" in delinquency and foreclosures nationally, but rising values would protect borrowers and the market.

The increase in foreclosures wouldn't be enough to soften Seattle's market, thanks in large part to area job growth, said Adam Stein, president of the Washington Association of Mortgage Brokers. He added that many Seattle homeowners still have significant equity.

But Huelsman expects things to get much worse.

"Wall Street is definitely downplaying how bad it's going to be," she said.

Wider fallout

Tuesday revealed the potential for bad loans to drag down the wider economy, when new data on surging home foreclosures helped send the Dow Jones industrials sliding 240 points.

If investors limit the money into the market, getting loans may get harder just as more foreclosures boost supply. And that could cause home prices to dip or at least not go up as fast.

Stein, whose firm is in Auburn, said he's seeing the market's impact on loans. Six months ago, he said, he could get 100 percent financing for someone with verified income and poor credit. Now, people with low credit scores need 10 percent or 20 percent down payments.

"I think you are going to see some reduction in the number of home buyers," he said. "It'll be a negligible difference."

But Stein worries about talk of restricting access to loans that could be risky, but also could be healthy when used properly. "What concerns me is they're lumping in everything that appears to be new and different."

The Center for American Progress says rising foreclosures could drag down property values and make mortgages harder to get in poor neighborhoods.

The cost of foreclosures to lenders -- which the center pegged at more than $50,000 each -- and Wall Street concerns may be behind increasing corporate efforts to stave them off. A Wednesday Standard & Poors report said prominent loan companies are starting to take action early by, for instance, checking in with borrowers well before interest rates adjust and opening more options to delinquent borrowers.

Back at home

White's family didn't know about her problem until they noticed her tax forms, Huelsman said.

As Huelsman dug through paperwork, she found what the complaint alleges to be inaccurate information lenders put on applications to make it look like White could pay.

For example, the complaint says an Ameriquest employee failed to include her income information when he took her application in 2002, but later a computer-generated version said she made more than $5,800 a month as a "service tech" at Boeing.

White said she actually gets about $3,750 monthly from her job, a pension and Social Security. For the moment, she's paying about $2,500 a month toward her mortgage.

Huelsman is seeking damages from the lenders, and also is talking with White and her family about selling and moving to an apartment. "She's going good right now. But she's not going to be able to work forever."

Meanwhile, White said she got a new mortgage offer in the mail Tuesday.

"They said, 'Don't worry about anything. We're going to take care of you.' "

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