March 20, 2009 -- The big, bright, four-bedroom Florida dream house was proof for Dr. Dan Howard and his fiance, Nickie Struthers, that they had finally made it.
"I think of being proud and showing her 'Look, I can provide this, you know, for our family," said Howard, a surgeon. "That was a good moment in life."
Howard, who is beginning to establish his medical career, and Struthers, a real estate agent and mom, stretched their budget to buy at the top of the housing bubble. Then their own bubble burst, with a one-two punch of illness and economic downturn.
"My being ill and not being able to work full-time for nine months hurt, a great deal," said Struthers.
"We, we had planned on two incomes," said Howard. He and his fiance both dismissed the notion that someone in the medical field might be immune to economic hardship.
"Things happen to doctors' families too, "Struthers said.
"Yeah, the same way it happens to Joe the Plumber," added Howard.
Falling behind in their payments, the couple asked their bank for a loan modification -- a lowered interest rate that would bring their monthly obligation way down.
The bank said no, but then Struthers received a phone call from an acquaintance.
"Out of the blue I get a call from somebody I knew and said he was doing loan modifications and was just calling to see if I knew of anyone that could use help," she recalled.
It seemed like a way out. A professional would negotiate with the their bank, and the couple wrote the man a check for almost $3,500. What they didn't know was that they were being sucked into a whole new industry, often staffed by former mortgage brokers who helped fuel the crisis and are now making their living off troubled homeowners.
Jay Nichols, who worked in just such a place, says now it's "not what I signed on for."
Last year, Nichols was employed as a salesman at what he describes as an aggressive loan modification company, People's First Financial in San Diego.
He said the mantra was: "Sell -- sell hard ... trying to get as much money as they could, as quickly as they could."He said the sales staff was revved up at training sessions that included such movies as "Boiler Room," which glamorized a hard sell.
'What in the World Have We Just Done'
Negotiating loan modifications can be a legitimate service, but a current People's First Financial employee who asked not to be identified said customers were signed up even when they had almost no chance of qualifying for bank renegotiation.
"And sometimes the salesperson just didn't care to check if they even could," the employee said.
Former customers said they were lured in by talk of huge cuts in monthly payments, and some say they were even told it was a government-sponsored program. Nichols confirmed that other salesman made this kind of false claim.
"I thought, you know, that kind of sounds too good to be true," said former customer Debbie Dillon."But he says, he goes, we have numerous people that we have helped and cut their payments in half."
Debbie Dillon and her husband, Don Dillon, live 2,000 miles from San Diego, in tiny Boyceville, Wisconsin, and they, too, were facing the loss of their home.
"We wanted the payments to go down, and our mortgage holder would not work with me," said Debbie Dillon.
Her husband is a truck driver, but injuries sidelined him for months, and the man on the other end of the phone was offering help with no risk.
"One hundred percent satisfaction," she said. "If they could not get our mortgage thing modified, that we could get our money back."
They say they checked with the Better Business Bureau, which at the time, had received few complaints. So the Dillons paid a steep $3,000 advance fee. Then came what experts said was dangerous advice. The Dillons said People's First told them to stop making mortgage payments and avoid talking to their bank.
"That's what they were told," said the current employee. "They wouldn't be a potential client if they weren't behind."
Howard and Struthers said the independent broker they dealt with gave the same advice.
"Six months went by and I thought, what in the world have we just done," Howard said. "Here we are now six months down the road having not paid any payments on our mortgages. And nothing's going on."
And in San Diego, People's First was doing big business, with as many as 40 salespeople selling to hundreds of often desperate homeowners. But in the back room, where the actual bank negotiations took place, for months a handful of workers were completely overwhelmed, "surrounded by files," said Nichols.
"We have files in there since last June and July that we still have, and the reason they weren't worked on is because they were lost," said the current employee.
Debbie Dillon says she repeatedly called and emailed asking for updates on her case, but rarely got through. When she finally did reach someone, "I said are you people gonna do anything?" she said.
She said the response was, "Yeah, we're working on it. I said that's all you ever tell is you're working on it. But nothing."
Soon, complaints were starting to pile up at the Better Business Bureau. 83 complaints about People's First Financial in the last year.
Seeking Answers From Loan Modification CEO
The company earned an F rating, partly because it had not been adequately answering complaints. "20/20" confronted CEO Tim Hutchison at the People's First offices to try to get some answers, and he invited us in to speak to his brother Trevor and their lawyer.
Trevor Hutchison called the Better Business Bureau rating "just someone's opinion.
"The only reason we don't have a superior rating is because there was a couple of complaints that were missed to respond to. And that's it."
According to the BBB, there have actually been 83 complaints about People's First Financial in the last year.
Even worse, California said People's First has been breaking the law, because without state approval of their consumer contracts, they cannot charge an advance fee.
"Well to my knowledge we don't do that [charge an advance fee]," said Trevor Hutchison. "But if you want to put any questions in writing and send those over I'd be more than happy to answer those questions."
When pressed about the policy and charging money upfront, Trevor Hutchison said, "Um, you know, that's a question that our legal department would be good to answer."
He said the lawyer present was "not the only one, so if there are questions about contracts, things like that, I'd be more than happy to answer those in writing."
Neither Tim Hutchison, Trevor Hutchison or their attorney would explain the advance fees charged.
"We collect fees on services rendered," said Trevor Hutchison. "So that's what we do."
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."
Negotiating a Loan Modification
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 wantyou 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 loanmodification 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.
As for People's First, the company insists they have many happy customers, and don't condone overpromising.
"I apologize if people do make guarantees," said Tim Hutchison. "We don't make guarantees, to my knowledge, because there, there is no guarantees."
Insiders told "20/20" that the company has hired more support staff, but say that for some customers, the changes came "too late."
Too late to save the house Debbie Dillon's father had built 35 years ago, and that her husband lovingly remodeled.
"I'm angry 'cause I'm gonna lose everything that I've put into this place, for my for my wife and for myself and for my grandkids," said Dan Dillon. "You know, to enjoy it after we're gone. But it ain't gonna happen. "
People's First insists it has many happy customers, and critics don't dispute that, but they also say greed led to collecting thousands in upfront fees from many more clients than they could ever help.
The Dillons will say goodbye to the home where Dan Dillon said they have "a lot of memories."
"It was good while it lasted," said Debbie Dillon.
"Someone will enjoy it," said her husband. "Won't be us."
Resources for Loan Modification:
U.S. Government's Program to Refinance or Modify Loans: To find out if you qualify, and how much your loan might be reduced, CLICK HERE.
HUD-Approved Foreclosure Counseling Agencies: CLICK HERE to find a HUD-approved counselor or call 877-HUD-1515.
Neighborhood Housing Services of New York City (NHS): CLICK HERE to reach NHS, a HUD-approved counselor.
CLICK HERE for more information on where to go for help.