JOHN STORMS sits at the kitchen table of his small, dark ground-level apartment and talks about the days when he once owned his own home.He has lived here for the past nine months, only a few streets down from the roomy three-story Dorchester, Mass., house where he previously lived for 20 years. But the bank foreclosed on the house last October when Mr. Storms, who was pressured into taking out high-interest loans from unscrupulous home-improvement contractors, was unable to meet the sky-high monthly payments. Contractors convinced Storms to refinance his house to pay for such things as vinyl siding, a new porch, roofing, and a handicap access ramp for his foster daughter. But these contractors seemed only interested in fast money. The ramp ended up being too high and failed to meet city inspection codes; the porch work was shoddy. "Some of these carpenters they had, I don't believe they ever had licenses," Storms said. "I think they go around to anyone to do the work. Then they take the money and go on vacation." Such contractors, who often work as middle men for high-interest mortgage companies, have victimized hundreds of Boston homeowners. They especially like to prey on elderly homeowners, like Storms, who had previously paid off his first mortgage. Most of the victims are located in low-income and minority Boston neighborhoods including Roxbury, Dorchester, and Mattapan. Storms says he believes he has been treated unfairly. "They make laws but justice never gets done," he says. "I always had a home. I never rented [until now.]" For victims like Storms, contractors use aggressive sales pitches and overcharge for their home improvement work. Contractors then contact the unscrupulous mortgage brokers who come along with loans as high as 30 percent to 40 percent and charge extra fees. If the customer fails to meet the monthly payments, the mortgage company then takes the house. "Most of these people were elderly and have had their homes almost paid for," says Ozell Hudson, executive director for the Lawyers' Committee for Civil Rights in Boston. "These are people who for 15, 20, 30 years had been working to pay off their homes." Minorities say they resort to the high-interest mortgage companies because mainstream banks deny them credit. The practice, called redlining, has long been known by city officials. Studies by the Federal Reserve Bank of Boston and the Boston Redevelopment Authority in 1989 found that city banks failed to provide enough mortgage and business loans to the black community. Community activists are upset because it is these mainstream banks that are financing the high-interest second mortgage companies. The problem is not isolated to Boston. Consumer law experts say it goes on in major cities throughout the country including New York, Chicago, Atlanta, Phoenix, and Los Angeles. "The banks have some culpability ... in providing financing to these intermediaries without paying attention," says Allen Fishbein, general counsel for the Washington D.C.-based Center for Community Change, a nonprofit group that tracks community reinvestment issues. "They haven't taken time to police and monitor these intermediaries." In Boston, city and state officials, community activists, and the banking community are scrambling for solutions. The issue gained attention here when community activists protested the takeover of the troubled Bank of New England by Fleet/Norstar, a bank based in Providence, R.I. The acquisition was approved by the Federal Reserve Board last week, making Fleet the region's largest financial institution. Community activists are not satisfied with the bank's community lending record and blame Fleet for financing the unscrupulous mortgage lenders. They are also critical of the banks's $111 million community lending plan, presented recently by Boston Mayor Raymond Flynn. Critics say most of that funding was money previously committed by the Bank of New England, some of it required under the 1977 Community Reinvestment Act. The act requires banks to invest in low- and moderate-income areas in the community. The Fleet plan also includes a full-service branch bank as well as a loan-origination office and two automatic cash machines in minority neighborhoods. But of the total lending plan, only $11 million will help second-mortgage victims with below-market refinancing and grants. Critics say that isn't nearly enough. "That agreement does not stabilize a community that Fleet helped devastate," says Bruce Marks, executive director of the Union Neighborhood Assistance Corporation in Boston, a nonprofit multiservice housing agency. "What needs to be done is a capital infusion to the impacted communities," says Mr. Marks. Flynn administration officials admit the agreement won't help all mortgage victims, especially those who have no connection with Fleet. Boston Redevelopment Authority director Stephen Coyle says it is at least a good beginning. "I think people were trying to identify a deep pocket source for the problem," Mr. Coyle says. He defends Mayor Flynn's quick decision to back the Fleet lending deal, despite criticism that Flynn didn't allow enough input from community activists. "We respect the other approaches but the economy here is in a very difficult situation and we could well see 15 or more bank failures in the next six months," says Coyle.