Attorney Bill Purdy believes it's time to reform mortgage lending.

His law firm, Simmons and Purdy in Soquel, is handling 150 cases in which borrowers with adjustable-rate mortgages complain they were misled. In his discussions with clients, Purdy has found:

• People believed they were eligible for an interest rate lower than others paid. They didn't realize they would have to pay extra later.

• People didn't realize they were getting an option adjustable-rate mortgage, where the interest rate adjusts monthly. They thought their initial low payment would increase by only $100 a year for five years, not realizing that was a projection rather than a guarantee. They didn't realize that if their loan balance grew to 125 percent of the initial loan, it would trigger a switch from a partial payment to the full amount.

• Mortgage brokers received a fee from a lender when the borrower agreed to pay a higher interest rate or a prepayment penalty. Few borrowers understand the fee, known as "YSP" or yield spread premium, which has been upheld as reasonable by a federal court.

Harvard Law School professor Howell Jackson told Congress in 2002 that the YSP was common and "unnecessarily raises costs for some consumers." The fee is disclosed in "cryptic" fashion, he said.

Purdy cited cases where the YSP payment to the broker totaled $15,000. The borrower picks up the tab over the life of the loan.

More than 680 county homeowners have missed a mortgage payment this year, according to the Santa Cruz Record. Purdy expects that number to increase.

"It's like watching a tsunami that's rising," he said. "It hasn't even broken over anyone yet."

"People call me as a last resort," he said. "They've borrowed from relatives. They've taken two or three jobs. They come in, and in the first five minutes, they start to cry."

Six months ago, Letona saw one mortgage case a month. Now it's one new case a week. He is reviewing 15 to 20 mortgage cases, and as a one-man office he's turned people away. His clients are mostly Spanish-speaking, mostly first-time homebuyers.

"They were told they could refinance or sell in two years," Letona said.

That isn't possible now because their home appreciation has stalled or dropped. Experts tell borrowers to ask their lender to modify their loan, but not many are successful. Letona said that's because the company that collects the mortgage payment is responsible to the investor that bought the loan, not the borrower.

Reviewing the laws and court rulings on disclosure to borrowers, he concludes that "federal laws don't have enough teeth." One example: The Home Ownership and Equity Protection Act limited prepayment penalties and prohibited making a loan to a customer without verifying that the customer can repay. Not all loans are subject to this law -- only those with fees exceeding 8 percent of the loan. For a home selling for $700,000, less the county median, the law would apply only if fees exceed $56,000.