Jratcliff--I think you are on the right track--the thread is loose on top and allowing it to nest underneath--meaning it has jumped a tension disk probably. First I'd be sure I had all loose thread from bobbin area (clean under bobbin plate) if you can remove the end of the upper part of your machine, make sure there are no loose bits in the bronze bearing--then locate your thread farther away from the take-up lever....if possible. There is much much helpful info on line at
http://www.annsultfixit.com/ultfixit.html. She gives how-to's for the model Brother Pacesetter ULT, but the Brother machines are similar in "guts". if you will....and I find the pix and fix-it descriptions invaluable for looking for answers.