Mortgage fraud on the rise

Mortgage fraud targets homeowners facing the possibility of foreclosure and the most common type is loan modification mortgage fraud.

Loan modification happens when a third party promises to work with a lender to get a homeowner a lower interest rate and monthly payment. It's a concept the Hillman family of Virginia Beach thought would be a perfect fit.

Only five blocks from the oceanfront, the Hillman's bought their dream home in 2006; a three bedroom, two bath house.

But during the summer of 2008, their dream almost disappeared.

"I was the victim of fraudulent activity and fell behind on my mortgage," said Russell Hillman.

Hillman says the credit score hit from the missed mortgage payments made re-financing next to impossible, and he quickly realized the risk of foreclosure was very possible.

Then Hillman had what he thought was a lucky break. He ran into a friend who is in the mortgage business. After listening to his dilemma, the mortgage broker pointed Hillman in the direction of a company he claimed could help him modify his loan and get back on his feet.

The company was called American Mortgage Modification and it claimed after an upfront fee of a few thousand dollars, it could lower monthly payments by negotiating a loan modification.

"On their website they had references and testimonials," Hillman told WAVY.com

Hillman says he made several phone calls to make sure the company was legitimate, and he says even the references checked-out.

A few days later, a signature on the dotted line made things official.

"They wanted half of the money up front and half in 45 days," said Hillman.

After the first payment, Hillman claims the modification company told him to stop all communication with his lender and stop paying his mortgage, so he did and after the second payment cleared, trouble hit.

"The phones were disconnected, their website was down, their e-mails bounced back," Hillman said.

It was as if the company never existed and a quick phone call to the local mortgage broker who recommended the company, confirmed the worst. American Mortgage Modification had dissolved and the owner was on the run, wanted in several states for mortgage fraud.

WAVY.com talked to Thomas Tierney, a Norfolk FBI agent who says he's working an exploding number of mortgage fraud cases in Hampton Roads.

"They're in all cities, in all the Tidewater area," Tierney told WAVY.com

They're scammers, Tierney says. And they are costing local homeowners millions in potential loan loss.

Former President of the Tidewater Mortgage Brokers Association, Steve Rockafeller, told us some simple number crunching can prevent scammers from making a move. "There's a debt to income requirement that's required for a loan modification to occur, sometimes they go up to 100 percent," said Rockafeller.

So, if you know your debt-to-income ratio is more than 100% and a loan modification company is still anxious to get you signed, very likely something is wrong.

"The first question they should ask is can I pay you, after you perform what you say you're gonna perform?," said Rockafeller.

That question could have saved Russell Hillman several thousand dollars and a lot of stress, but instead he was left with no other choice but to start over and try to save his house another way.

Once again putting the future of his home, his finances and his family in the hands of a stranger.