Editor’s note: Federal investigators are looking into so-called mortgage elimination programs that claim to wipe out home mortgages or other forms of debt for consumers. In this three-part series, we provide a case study of one mortgage-elimination process. Part 1 explores the methods the group’s proponents use to try to convince title companies and lenders that it has successfully eliminated mortgages. Part 2 follows the group’s beliefs and why they think mortgage elimination is possible.

Editor’s note: Federal investigators are looking into so-called mortgage elimination programs that claim to wipe out home mortgages or other forms of debt for consumers. In this three-part series, we provide a case study of one mortgage-elimination process. Part 1 explores the methods the group’s proponents use to try to convince title companies and lenders that it has successfully eliminated mortgages. Part 2 follows the group’s beliefs and why they think mortgage elimination is possible. Part 3 takes an in-depth look at the group’s business model.

A lender in Florida last November was unconvinced by various property documents filed by a group that claims to discharge mortgages for consumers, and instead issued a foreclosure notice against the property trustees. The incident is an example of what can go wrong with mortgage-elimination programs, which have caught the attention of federal investigators.

Thousands of Web sites have appeared on the Internet promoting methods to instantly eliminate home mortgages and other forms of debt. To participate, consumers typically have to pay up-front fees, and take part in the preparation and filing of various property documents that purport to wipe out debt.

Some mortgage-elimination programs produce official-looking paperwork in an effort to convince title companies and mortgage lenders that they’ve successfully eliminated a mortgage. Real estate industry experts who have seen the effects of these programs say it is common for participants to apply for a second loan or a full refinance on these properties, and to attempt to profit from the proceeds. It is also common, they say, for homeowners who follow such programs to wind up in foreclosure or other forms of financial and legal trouble.

The Dorean Group, based in California, is at the center of a national program claiming to offer a legal way to eliminate mortgages and provide “free and clear title” to a home “and a good amount of cash in hand” within a matter of months. The group requires an initial fee from consumers of $3,000 to $4,500 and also calls for a substantial share of any refinancing proceeds as payment.

Although principals of The Dorean Group say the term “mortgage elimination” does not reflect the true nature of the process, an extensive network of affiliated Web sites have loudly promoted a mortgage-elimination process on the Internet, with prominent ads on search engines and dozens of postings on Internet discussion boards. Information on the Dorean-affiliated Web sites outlines specific step-by-step plans detailing how consumers can free themselves from mortgage debt by challenging the lending process.


The courts and law enforcement agencies appear to have other thoughts about mortgage elimination programs, and a U.S. District Court judge last week referred the so-called Dorean Group mortgage-elimination process to a U.S. Attorney’s Office and to the State Bar of California. Other sources have said law enforcement agencies, including the FBI, are already on the case.


Last week, the Greater Cleveland Better Business Bureau announced that it learned of The Dorean Group during an investigation of Redwood Trust, a New York mortgage-elimination promoter, and the bureau “believes  that homeowners who sign onto Dorean’s program likely face several potentially serious legal problems,” including mortgage default, foreclosure, “and a possibility of being an accessory to criminal activity.”

The bureau “has shared its information with federal law enforcement agencies.”


Mortgage-elimination Web sites often promote anti-bank philosophies that question the validity of the nation’s mortgage process and overall financial system, and some Dorean-affiliated Web sites offer intricately detailed conspiracy theories about the dark and sinister intentions of the Federal Reserve, the military industrial complex and a vastly powerful New World Order, for example.

Recent searches for the phrase “mortgage elimination” at Yahoo! and Google called up several Dorean-affiliated Web sites that promote “mortgage elimination done professionally, legally, morally and ethically,” a “100 percent success rate,” “powerful legal procedures,” “700 happy clients,” and “free and clear title in 45 days from applying.”

Several of these Web sites carry the Capital Creation Resource name, which has been described at the CCResource.net Web site as a marketing arm for Texas-based DTE Financial Group, a broker for the Dorean Group, according to the site. Some Web sites have also named “Oxford Trust” and “Homeward Bound” as affiliated with The Dorean Group, and there may be other names associated with the group as well.

A Web site for Capital Creation Resource, http://www.ccrsolution.com/, claims to be the main Web site for this marketing arm, though there are several similar sites, among them: http://www.mortgagegone4ever.com/, http://www.freedomforyou.net/, http://www.freedomforlife.net/, http://www.seemedebtfree.com/, http://www.ccrsolution.us/, http://www.mortgagefreeforme.com/, http://www.honestbanks.com/, http://www.mortgageelimination.org/, http://www.ccresource.net/, http://www.abao.us/, and http://www.mst101.com/.

According to the CCRSolution Web site, here’s how the program is supposed to work: Consumers go to the county recorder’s office to get a copy of their mortgage documents. Consumers prepare a promissory note and loan agreement for each property they want to enter into the program. Those documents are sent to The Dorean Group, along with a $3,000 cashier’s check for a first mortgage and $1,500 check for a second mortgage or home equity line of credit.

Next, a trust is set up in the homeowner’s name, and Dorean Group principals D. Scott Heineman and Kurt F. Johnson are named trustees for the property. According to the Web site description, the trustees “have no intention to sell the property or to take any other action against the best interest of the beneficiary.”

The trustee lawyers present a cash-backed bond to the bank that can only be redeemed if certain documentation is provided by the bank about “the validity of the loan,” according to the description. And trustee lawyers send out a legal complaint outlining “40 or more federal laws that have been violated in the ‘lending process.'” The lender has a limited time to respond to this complaint, according to the Web site.

“The trustee’s legal team will notify you when your loan(s) is/are satisfied,” according to the Web sites, and this “usually will happen within 45 to 60 days from the time the paperwork is approved. Once the loans(s) is/are satisfied, refinancing begins.”

Consumers are then directed to refinance the property “at the maximum loan-to-value ratio possible,” and the purpose of this is to pay off The Dorean Group and affiliates and also to provide consumers with some of the proceeds. Web sites state that The Dorean Group receives 50 percent of the refinancing proceeds, while Capital Creation Resource receives 25 percent and consumers receive 25 percent.

This process “takes five to seven months in most cases,” according to the Web site, “however, the contract has a full year for complete performance. The end result is that the client gets free and clear title to the home and a good amount of cash in hand.”

A document at the Capital Creation Resource Web site describes a commission process by which “agents” and “referrers” to the program “have the right to commissions” from their clients’ properties or from “personally sponsored” agents’ personal properties and referrers’ personal properties.

The documents appear to suggest that agents will earn $600 for bringing a first mortgage into the program, $400 for bringing a second mortgage into the program, and 10 percent of the proceeds from a refinance.

Dwight Bickel, a lawyer for LandAmerica Financial Group, Inc., said that the refinancing scheme promoted by The Dorean Group “expects the old mortgage not to appear on the title search, so a new mortgage can be for the full amount of the land value.” Some creative paperwork is filed with county recorder’s offices to give the appearance that the original mortgage has been discharged. Bickel said that property trustees who participate in this program “falsely state that they are the authorized agent of the lender,” and then they claim “to discharge the mortgage without the authority of the lender.”

In one example of paperwork The Dorean Group used to pursue mortgage elimination, a “quitclaim deed” was filed with the comptroller’s office in Orange County, Fla., in July. Quitclaims are used to relinquish legal claims to a property. This document also names Heineman and Johnson as trustees of a family trust set up in the homeowners’ family name.

Another document the company used for this property, titled “Notice of Intent to Correct Title” and dated July 17, announces that the mortgage lender “must provide full and complete disclosure of alleged (mortgage) contract within 10 days, or else forfeit “any interest in the property.” And a related document states that Heineman or Johnson are appointed by the lender to act as “attorney-in-fact” or “agent” for the property, and have extensive authority to prepare various documents relating to the property.

A subsequent document dated August 12, 2004, signed by Heineman claims to discharge the mortgage. But the lender didn’t believe it and instead prepared for foreclosure.

Other companies and organizations also aren’t convinced these transactions are entirely legitimate. Title companies have issued alerts about various mortgage-elimination schemes and have taken steps to defend against methods employed by mortgage-elimination groups.

Federal and state investigators are aware of mortgage- and debt-elimination programs and in some cases have taken action or are actively investigating the participants in such debt-elimination programs. The FBI is actively investigating mortgage-elimination services and has warned consumers about mortgage-elimination scams.

The Office of the Comptroller of the Currency, which regulates and supervises all national banks, issued a warning last year about “debt elimination schemes,” and the state Attorney General’s Office in Minnesota in January warned consumers about debt-elimination programs and announced that it had filed lawsuits against two companies that promoted debt-elimination schemes.

The Dorean Group’s Heineman in a phone interview last month admitted to being under investigation.

Mortgage Electronic Registration Systems, a technology company created by the mortgage banking industry to electronically streamline the mortgage process, in November issued an alert to its members specifically about Johnson and Heineman.

“We are alerting our members because we have reason to believe that documents have been forged by one or both of these individuals purporting to be officers of MERS and attempting to appoint themselves as an agent of MERS,” the alert states. “The proper authorities are investigating this rash of lawsuits and MERS will be taking an active role in making sure that neither MERS nor our members fall victim to meritless lawsuits.” The lawsuits were filed primarily in California, “but we have seen a few in Georgia and Washington” that involve MERS, the alert also states.

Sharon Horstkamp, corporate counsel for MERS, said, “I know that the FBI is also involved.” Another source confirmed that a working group of local, state and federal agents are monitoring the activities of people associated with The Dorean Group.

Heineman and Johnson appear as trustees on several documents filed in connection with mortgage elimination attempts in several states. In Orange County, Fla., alone, there are several quitclaim and other documents that have been filed with the county.

The Dorean Group’s promoters have said there are examples of successful refinancing for properties that have followed the group’s process, though Heineman refused to say whether The Dorean Group has profited from any refinancings.

Lawyers for Johnson and Heineman have filed a wave of lawsuits against lenders in several states. In many of these lawsuits, which are launched after the paperwork process has begun, Johnson and Heineman have argued on behalf of family trusts that the loan process was invalid and that lenders engaged in fraud.

U.S. District Court Judge William Alsup, referring to one of the suits filed against a lender by Heineman and Johnson and a family trust, said the complaint was “rambling and largely unintelligible,” and its allegations are “disjointed, vague and incomprehensible.” The judge dismissed the case on Nov. 9, and Thomas Spielbauer, a lawyer who has represented Heineman, Johnson and various family trusts in litigation, voluntarily dismissed a group of 14 related lawsuits later that month.

Spielbauer stated in court documents relating to one of the lawsuits that he “carefully considered the court’s ruling of Nov. 9, 2004. This led to the eventual dismissal of all of the remaining cases.” Spielbauer also said in court documents that it is “ludicrous” to say that his short-term representation of Heineman, Johnson and a family trust in a lawsuit against a mortgage company “constitutes a partnership of some sort in a fraudulent scam.”

In one case initiated on behalf of Heineman, Johnson and a family trust, Spielbauer was sanctioned by the court with a $10,000 fine for filing a complaint that did not follow court rules. Spielbauer, who has been a candidate for Santa Clara Superior Court judge in California, did not return numerous phone calls seeking comment about the litigation.

Last week, Judge Alsup, referred to this mortgage-elimination process as an “elaborate Internet scam orchestrated by Scott Heineman and Kurt Johnson upon distressed homeowners on the verge of losing their homes.”

The judge, in a Jan. 19 order, also noted “disturbing allegations that, if true, suggest mail and wire fraud,” and he referred the matter to the U.S. Attorney for the Northern District of California and the State Bar of California for review. He ordered Heineman, Johnson and Spielbauer to share in paying $77,300 in attorney’s fees for bringing a number of frivolous lawsuits to the court.

Alsup noted that refinancing on property is sought as part of the mortgage-elimination scheme, with 50 percent of refinancing proceeds paid to Heineman and Johnson and 25 percent going to CCR. “At the conclusion of this process, the borrower is in even worse condition than when he or she first looked to (the providers of the process) for debt relief,” the judge stated.


Send news tips or a letter to the editor to glenn@inman.com; (510) 658-9252, ext. 137.

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