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For Immediate Release
February 15, 2005 Contact: Randall L. Hoth
414- 847- 6010

Mortgage Elimination Scheme Hits Wisconsin, warns Wisconsin Better Business Bureau

(Madison) The Wisconsin Better Business Bureau is warning businesses and consumers of a mortgage elimination scheme victimizing area lenders while leaving homeowners facing dire consequences.

So far, the Wisconsin BBB’s investigation has found a Milwaukee County property, two Waukesha County properties and three Dane County properties that are involved in this complicated scheme, which attempts to eliminate someone’s mortgage for a fee by filing false documents with their lender. The BBB’s investigation has uncovered that two individuals, D. Scott Heineman and Kurt F. Johnson are the individuals filing these false documents.

“This is a widespread and very serious scheme that could cost mortgage companies millions of dollars and is making the homeowner, perhaps unwittingly, an accessory to a crime,” warned Randall Hoth, president and CEO of the Wisconsin Better Business Bureau.

Here’s how it works: The homeowner pays a $3,000 fee and agrees to place his/her home in a family trust naming D. Scott Heineman and Kurt F. Johnson as trustees. A quitclaim deed is recorded naming the new trust as the owner of the property. Next, the trust presents the lender a document that contains 40-50 “legal” challenges to the loan and claimed “violations” of federal laws committed by the lender. The lender must respond with proof of the validity of the loan. When the lender fails to respond, a power of attorney is filed which gives the trustees authority to act on behalf of the lender. Using the power of attorney, a “Discharge of Mortgage” is filed certifying that the loan has been fully paid.

The next step is to apply for refinancing on the home. Once obtained, the homeowner, the agent broker and the family trustees divide the funds. This new loan is then “eliminated” using the same technique.

Of the six Wisconsin properties known to be involved in this scheme, all of them had a quitclaim deed filed giving ownership of the home to a trust. The two trustees named on these quit claims are D. Scott Heineman and Kurt F. Johnson. These two individuals’ names appear on multiple quitclaim, power of attorney and discharge of mortgage documents in several states.

In addition, Heineman’s and Johnson’s names appear on quitclaim deeds in Tennessee, Ohio, Florida, North Carolina and South Carolina. Although these two names are known perpetrators of this scam, the BBB is warning that there could be other individuals or businesses involved with it. Other names associated with this scam are the Dorean Group, Capital Creation Resource and Redwood Trust in New York (not to be confused with a California company of the same name).

The BBB believes that homeowners who participate in a mortgage elimination scheme likely face several potentially serious legal problems – default on their original mortgage, foreclosure, difficulty selling the home due to the irrevocable trust and the title issues it creates, potential liability for failure to pay any additional loans procured by the trust, and a possibility of being an accessory to criminal activity.

Richard Jungen, a director for the Wisconsin Mortgage Bankers Association, warned consumers that participation in these types of schemes could do irreparable harm.

“The seller of these schemes will be long gone when the person’s credit is permanently destroyed, or the title on their home is compromised,” Jungen said.

Attempts to contact Dorean Group have revealed that the address used on trusts and other paperwork is a UPS Store mailbox. No record of the company was found with the Secretary of State in California, the state in which the company lists its headquarters, and there was no telephone number for the company listed with information assistance. Mr. Heineman’s phone number is unlisted.

This scheme is typical of other “mortgage elimination” schemes. Most create documents that attempt to release mortgages then take out second loans on the properties in order to pay perpetrators. These companies often proclaim the entire U.S. banking system is flawed and use these claims to persuade homeowners that mortgage elimination is legal and ethical.

The BBB advises businesses in the mortgage industry to advise their customers to be skeptical of offers from any company claiming to eliminate their mortgages for an advance fee. In addition, the BBB advises that homeowners should consult an attorney before relinquishing their homes to an irrevocable trust and agreeing to participate in these programs.

For more information or further inquiries, please contact Randall L. Hoth, President/CEO at 414-847-60O0.