They insist they comply with the law, yet California filed an Order to Desist and Refrain against them in January, ordering them to stop charging that fee.
Meanwhile, after months of waiting, Howard and Struthers' independent broker left them with no modification and no help in reducing their mortgage.
"We are going to have to pay, and I'm not sure how we're going to do that," Howard said. "This has gone from something bad to something really bad."
"Just never in a million years would [we] have dreamed to be in this position," said Struthers. " It's embarrassing."
After months of frustration, Debbie Dillon finally learned that People's First had not contacted her bank for almost six months, by which point it was too late to stop the foreclosure hearing.
"Everybody says to get a lawyer, sue 'em," she said. "But you gotta get money for that. I've now paid so much money out trying to stop this. I spent so much time and, oh just wearing right on my nerves. I can't take much more."
The court ruled the Dillons have to be out of the house by August. They said People's First refused to honor their money back guarantee. Several other former customers had similar complaints about collecting on that refund. Former employees confirm that their bosses were very resistant to paying anyone back.
"They're just trying to get something for free," said Tim Hutchison in defending his refund policy. "Everybody wants information, and information we sell there's a cost to it."
FBI special agent Keith Slotter, who runs the FBI's San Diego division, said that mortgage related complaints are soaring.
"Quite honestly, if somebody's asking ... for money upfront, hang up the phone. That's the best bet," he said. "Anytime there's an advance fee in business, people should be skeptical. That doesn't automatically mean the company's not legitimate, but it certainly is a key indicator."
Another option for desperate homeowners are the completely free services offered by non-profit groups. Subsidized by the Federal government, you can find a list on the Housing and Urban Development Web site or call 877-HUD-1515. Groups listed there, such as the Neighborhood Housing Services of New York, will also try to negotiate your modification. And they won't charge you for it.
The non-profits are a great way to go, since some experts suggest that it's not the best idea for most people to try and negotiate a modification on your own. However, if you have a more complex case, you could need a lawyer to help.
And if you do decide to hire a loan modification service, do your homework.
"There are very good loan modification companies out there," said Steve Dibert, whose company investigates mortgage deals gone bad. He says if you check a company thoroughly, you can get help.
"Ask for references," he said. "And real people that you can call."
Dibert says there are things to look out for. "If they tell you not to talk to your lender, so they don't want you checking on them, that's a big red flag. If they basically tell you what you want to hear and aren't being totally honest, that's another red flag."
Because he has heard from so many people recently who believe they've been the victims of home loan modification fraud, Dibert has started a Web site called MFI-Mod Squad. He says the site aims to expose illegally run loan modification companies and the people who run them, and that the number of reports is growing.