My take on Mortgage Elimination:
Our forums at
Neodemesne/REI-Resource became inundated with discussions about mortgage elimination (ME).
The general argument to justify ME is that the banks don't really loan you any money when you buy a house. They 'monetize' your promissary note and, in essence, the borrower is funding his/her own loan. You really have to be able to suspend all logic to buy into this premise.
There is currently a scheme being worked by The Dorean Group, who markets their program through brokers and agents, that claims they will eliminate your mortgage for about $3,000 upfront (paid to the agency) and 50% of the amount of refinance (with another 25% going to the agent) on the back-end of the process.
The homeowner Quit Claims their property into a Family Trust, naming Dorean principals D. Scott Heineman and Kurt F. Johnson as Trustees.
A presentment is made to the lender, with a bond alledgedly worth twice the value of the mortgage, which the lender can cash in IF they can prove they haven't broken a slew of banking regulations. They must answer within 10 days or default their posiion.
After the bank stops laughing and 10 days goes by, the principals appoint themselves attorney-in-fact and discharge the mortgage in the bank's name. Instant Free & Clear title.
Having created the illusion of a clear title, the homeowner is to seek the maximum LTV refinance and fork over a total of 75% of the equity. The refi is then supposed to be eliminated using the same method.
This program boasts of 1000 successes. Well, they may have filed 1000 reconveyances, but to date I know of 0 real successes. What our research has shown is that a number of clients have already lost their homes after they stopped paying their mortgage, and those that haven't continue to make payments on what they are calling a free & clear title. Go figure.
While I suppose it is possible that some future court ruling will uphold the Dorean claims to their right to appoint their own Power of Attorney and validate the reconveyances, it doesn't seem likely. I forsee that clients who go as far as the refinance will end up with two very upset lenders after them and most of their equity gone to the Doreanites.
Do the math.
They claim 1000 reconveyances. I have to guess at the average home value, but let's use $200K, which is conservative.
Lets also assume they refi at 80% LTV.
$200,000.00 x .80 = $160,000.00
$160,000.00 x .50 = $80,000.00
$80,000.00 x 1000 = $80,000,000.00
And that's just the principals cut. The agents get 25% of each refi. The homeowner keeps 25%.
That's quite an incentive to perpetuate the myth that when all is said and done the clients won't be left with 2 mortgages. I'm not saying this all won't work out as planned. I just doubt that it will.
The word is getting out now about the Dorean Group. We have been compiling a list of BBB and title company alerts.
See: http://www.freeforumworld.com/forum/viewtopic.php?t=7&mforum=neodemes
There is only one way to eliminate a mortgage that I am aware of ... pay it off!
