Home Equity Loan Dangers

After 21 years living on the same block, sharing a home with her mother -- Ruby Gomez may have signed away their security.

"Do you think there's a chance you and your mom could lose this house?" asked CBS News Correspondent Sandra Hughes.

"There is," Ruby replied.

Looking to pay off $20,000 in personal debt with the equity in their home, mother and daughter re-financed. They say the loan broker promised a low interest rate, and a lower monthly payment.

But Ruby's credit rating pushed the interest rate up and it wasn't until she signed loan documents that she realized her house payment was going up.

"I feel desperate, you know, that I need to do something, and I don't know what," she said. "At night, I go to bed dreaming about it. I say, 'What am I gonna do today' or 'How am I going to, where am I gonna get the funds to pay next month's mortgage?'"

Technically, nothing illegal was done to the pair. They did what millions of Americans do every year -- refinanced their home loan to consolidate debt. But the problem, according to the Federal Reserve, is that one quarter of those homeowners end up with a larger loan.

But that hasn't stopped the trend, spurred on by national advertising campaigns.

Kevin Barnes, who went to prison for mortgage fraud, knows the temptation to close the deal -- no matter the cost to consumers.

"The broker is taking full advantage of the borrower in that position, not thinking of the outcome, of the people not being able to afford the property at a later date," he said.

Now he lectures mortgage brokers on their ethical obligation to home owners.

Still, mortgage experts warn, consumers have an obligation, too. Read the closing documents; know what your interest rate and payment will be.

"The more we educate a consumer about how a broker does business and what they need to know and understand and what the fine line is between an ethical loan and an unethical loan," said mortgage expert Arthur Prieston.

Otherwise you may end up like Ruby Gomez and her mother.

"So you are getting into more financial trouble trying to get out of financial debt?" asked Hughes.

"Oh yes, I have had to incurred more credit card debt to make my bill every month," replied Gomez.

Now after two decades of homeownership, the two are at risk at becoming renters again.