While many home loan borrowers are pleased with the lower payments brought by refinancing, Neil and Elsie Nelson wished they never even started the process.

The Bellingham, Wash., couple, and hundreds like them across the country, are struggling to remain in their home, thanks to the terms of outrageous loan refinances they claim they were persuaded to accept.

“We’ve had to borrow – even from my sister in Georgia – to stay here,” said Elsie, 58. “It’s been a real stressful time. We’ve had to cut back on everything. And, it’s Neil’s birthday this week.”

According to a complaint filed in U.S. District Court in Spokane, Wash., the Nelsons did not realize until after signing the loan with a subsidiary of Illinois-based Household International that the interest rate on their first mortgage had risen to 10.669 percent from 7.125 percent and that they had taken out a line of credit at 24.9 percent. In addition, the couple was sold a credit life insurance policy and its premiums ($4,722.50) were added to the loan amount, the complaint stated.

Neil, 70 when the policy was signed, was beyond the age ceiling for the insurance program.

“We told them earlier he was 70, but the form came back saying he was 62,” Elsie said.

“We didn’t realize it until later, but they had filled the age in. Of course we signed it … they said it was mandatory for us if we wanted to get the loan.”

The Nelsons’ case is one of hundreds brought against Household for “predatory lending” practices the past few years. The company has agreed with the attorneys general in 44 states to settle several pending lawsuits involved alleged predatory lending practices for a reported $484 million.

“That’s just a drop in the bucket to what these people really should receive,” said Bob Parlette, an attorney who also filed a separate action on behalf of the Nelsons and other borrowers. “The way it is set up now, each of these parties will receive somewhere between $1,800 and $6,000 – nowhere near the number to make them whole.”

“The other thing the settlement with the states did not do was reduce the interest rates on these loans,” Parlette said. “These poor people are stuck with the same loan terms.”

Debra Cook, a mortgage broker with Fairhaven Mortgage in Bellingham, first discovered the Nelsons case. Cook and the Nelsons happen to use the same accountant.

“My accountant called and asked what I could do for these people,” Cook said. “Their payments were so high, yet they had been in the area for years in a nice home. When Neil brought over the paperwork, I could not believe what I saw.”

According to the complaint, the Nelsons received a call from a mortgage company in Seattle, asking if they were interested in refinancing their loan because rates were so low. At the time of this call, the Nelsons had a satisfactory first mortgage home loan with Washington Mutual for approximately $95,000 with an interest rate at the time of 7.125 percent, according to the complaint.

“I think by the time they were done, the Nelsons had a $220,000 first mortgage and a $15,000 second mortgage on a house that was appraised at $178,000,” Cook said.

According to the complaint, the Nelsons paid $16,000 in fees to get a new first mortgage and a second mortgage in the form of a line of credit. The interest rate on the line of credit was 24.9 percent, court papers show.

“I just didn’t know what I could do for them,” Cook said. “They were going backward so quickly. The only thing I could think of was to call the Attorney General’s Office and report what I found. The AG’s office was not surprised that Household was involved.”

Tom Kelly, former real estate editor for The Seattle Times, is a syndicated columnist and talk show host. He can be reached at news@tomkelly.com.