Real Estate Blog - Money Merge Accounts: My Sincerest Apologies to Those With MMAs

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Money Merge Accounts: My Sincerest Apologies to Those With MMAs

I have some regret that I have to admit to about these programs. I feel like I failed consumers by allowing them to be misled for far too long. The truth of the matter is that I have done some more calculations, many of which I should have done back before I even posted my first blog about the subject way back in February 2007. The bottom line is that I have now done those calculations and it is time to let the truth out.

Once again, I have simply taken the information from United First Financial's own presentation on their Money Merge Account^TM program and run the numbers. Then I ran them again because I couldn't fathom the results. Being as skeptical as I am, I just couldn't believe the results, so I ran them more times and was absolutely astonished at the results.

To see the full text of my apology, please visit the link below (it is a must read).

Money Merge Accounts: My Sincerest Apologies to Those With MMAs

Posted by Florida's #1 Mortgage Planner on 01/15/2008 10:24 AM

Comments (19)

money merge account, mma, mortgage acceleration, misleading advertising, florida mortgage, florida real estate, mortgage planning

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19 Comments on Money Merge Accounts: My Sincerest Apologies to Those With MMAs

JAN

2008

There are so many people marketing this program who never took the time to investigate it. Their only interest in the program was the commissions to be earned from selling it.

I commend your honesty - Kudos to you!!

Honesty is always the best policy........

Thanks for your investigative work...and telling the results!!

=-)

Robert, You trying to fool me? I knew you wouldn't find anything good even in their numbers.

Bill Roberts

JAN

2008

Robert, AWESOME! I have been saying this for awhile. While I believe if the world was perfect and nothing ever changes then it can work. However, lets face facts life changes and the numbers just don't work. Also most of these people that are pushing these products have taken (A Cult Like) class where the have been brain washed into believing this is the only way. They will go on to quote tax laws, Claim to be financial planners, and everything else when the truth is they are known of these but have taken a sales course on the product. (can you tell you hit a sore spot with me?)..ha ha

JAN

2008

Robert, this is misleading and you know it. No professional in their right mind would recommend that a client put all of their disposable income into a closed ended loan to pay down equity more quickly.

It's irresponsible to recommend that as a strategy or even as an option.

By following what you recommend in the 2nd example the client would have to refinance at a cost of at least $3500 probably closer to $5,000 to access to the equity in the home. Didn't see that accounted for anywhere!

Again I am playing devils advocate regarding these MMA's. You fail to mention that using an MMA strategy with a line of credit gives the consumer more flexibility in terms of the equity in their home. As equity is built all they have to do is increase the credit line to take advantage of the increased equity, giving them financial choices. No refinance needed to access the equity in the home. This is true, with or without the purchase of the software!

There is a hidden agenda on your part here and it appears that the hidden agenda has to do with the fear of lost business.

The MMA is not a financial cureall and it's not for everyone. Our job as professionals is to fully understand the financial products on the market, both benefits and costs. It is our job to offer up solutions and options for our clients.

Here is an interest only option, the pros and cons are.
Here is an MMA option, the pros and cons are.
Here is an annuity option the pros and cons are.

If you are going to make comparisons, make comparisons that would be beneficial to the client. Make comparisons that you would recommend to the client. Don't put out a comparison that could financially hurt the client. There is a lack of full disclosure in this post that bothers me.

Until this post I held you on a pedestal, right now I'm pretty seriously disappointed.

Everyone can thank Kate for bringing me into AR right now, so kudos to her for doing so, though I do not think she will like what I have to say. But before I get into that, let me take a moment to acknowledge those who commented already.

Tracy - There are a vast and growing number of people selling the MMA and their presentations, which I use against them, are wooing people into the product without looking at other options. This post was derived solely from their presentation assumptions versus using the $3,500 price tag toward principal and then the $1,000 discretionary income, which UFF uses as part of the acceleration program.

Alexander - Thanks for the support and I agree with you 100%, even when it ruffles a few feathers (honesty is painful sometimes).

Bill - I wasn't trying to fool you or anyone else, though I did play a little marketing into the mix as I wanted to draw people over to my current blog site at http://www.floridamortgagedaily.com/. I wasn't sure how many would actually even go over there knowing what I present, but it shows the power of "teaser text" I guess.

Matt - I am still not back yet, but I will be eventually, hopefully when I get done my pilot training next month and get set up in my new schedule. It will be interesting to see how the change of aircraft affects my ability to do business as it should prove beneficial (long haul flights versus shorter hops).

Ok, back to Kate...

Kate - This is actually not misleading at all and you should know that. I am quite frankly surprised that you have taken that tone, that is unless you have succombed to the UFF Kool-Aid. The numbers are the exact same numbers as are in the UFF MMA presentation, no changes, no assumptions beyond what they use. The reason I ran the numbers is I was getting an increasing number of questions as to the effect of using the same cost of the MMA ($3,500) and applying it to the mortgage directly instead. Believe me when I say I was surprised at the results.

"No professional in their right mind would recommend that a client put all of their disposable income into a closed ended loan to pay down equity more quickly." (My comment: That is exactly what the MMA and other mortgage acceleration programs are doing, accelerating that equity payoff through the use of discretionary income. Failure to do so prolongs the payoff and thus renders the presentation itself misleading.)

"It's irresponsible to recommend that as a strategy or even as an option." (My comment: I do not recommend it nor will I ever. I just wanted to show the results of an apples to apples comparison, namely the effect of using the money for its ultimate goal, paying off your mortgage quickly. I actually do not recommend mortgage acceleration at all as you have probably known through reading my posts.)

"By following what you recommend in the 2nd example the client would have to refinance at a cost of at least $3500 probably closer to $5,000 to access to the equity in the home. Didn't see that accounted for anywhere!" (My comment: Where did you get that the client needed to refinance? They don't, so this is a no cost comparison, hence why I left cost out of it. The scenario is buy the MMA or use the money as an extra principal payment instead. Come on, you know I will put costs in if there are any.)

"You fail to mention that using an MMA strategy with a line of credit gives the consumer more flexibility in terms of the equity in their home. As equity is built all they have to do is increase the credit line to take advantage of the increased equity, giving them financial choices. No refinance needed to access the equity in the home. This is true, with or without the purchase of the software!" (My comment: A line of credit is a very limited means of accessing equity and is not the wisest solution for that purpose. If you want access to your home's equity, the best thing is to not pay down your mortgage and use the money for other investments, etc. instead. No refinance required to access the equity in the home with a line. Well, I got news for you, any change in the loan is categorized as a refinance as you are changing the terms. In fact, adding a HELOC to your property is refinancing it.)

"There is a hidden agenda on your part here and it appears that the hidden agenda has to do with the fear of lost business." (My comment: Hidden Agenda? What a crock. If telling the truth about something is a hidden agenda, OK, I am guilty. As for fear of lost business, get real. Don't you think I would be jumping on the UFF bandwagon if I feared lost business. After all, everyone else is. I could sell the crap out of the program if I could just get the numbers to make sense. In fact, I could probably be their #1 seller if only it wasn't for the numbers. By the way, that "fear of lost business" ranks up there with the "I don't understand the sophisticated algorithms" reason for me not jumping on the MMA train. The fear reasoning is probably even more useless since I also make money flying airplanes.)

"Our job as professionals is to fully understand the financial products on the market, both benefits and costs. It is our job to offer up solutions and options for our clients." (My comment: Finally, something in your somment I can agree on. That is exactly what I do, and posts like this show I am willing to put the clients first, ahead of the product. The MMA is clearly not a good solution according to their own presentation.)

"If you are going to make comparisons, make comparisons that would be beneficial to the client. Make comparisons that you would recommend to the client. Don't put out a comparison that could financially hurt the client." (My comment: This post only helps the consumer. Other posts I have done and will continue to do show other options clearly beat the mortgage acceleration programs, and that other MMA programs are better than the MMA, when used as I suggest. Regarding the last sentence, that is exactly why I did this post, that is buying the MMA will financially hurt the client as shown.)

"There is a lack of full disclosure in this post that bothers me." (My comment: OK, you got me there. here is the disclosure of information missing...I DON"T RECOMMEND PPAYING OFF YOUR MORTGAGE BEFORE YOUR OTHER FINANCIAL GOALS< IF AT ALL AS IT CAN BE DETRIMENTAL TO YOUR FINANCIAL HEALTH. Beyond that, what disclosures are you talking about as I presented assumptions and comparisions on how the numbers were derived within the post.)

"Until this post I held you on a pedestal, right now I'm pretty seriously disappointed." (My Comment: I never asked to be there and prefer not to be on a pedestal. I am just a mortgage professional looking to educate Americans, especially Floridians, on mortgage truths and facts behind various strategies.)

One thing I will add is that I have many testimonials and have yet to have a single complaint about my work, both offline and online, from anyone other than a UFF MMA sales agent. Even the CMG guys don't argue with me unless they also do the MMA. Also, I would point out that I do offer compatible HELOCs and have startegies that employ them. In fact, my equity harvesting and mortgage acceleration strategy was the first of its kind to my knowledge.

Thank you again for all of your comments and feel free to keep adding to the discussion, although I may not be back for a while to answer your questions, though I will try.

JAN

2008

Robert, I do not apologize for my tone. This is not the first time that I've read your blog and felt that the numbers presented don't tell the whole story.

I finally realize from your comment above that your issues are with UFirst, it's business model and the purchase of the software. I am not advocating for any software nor am I advocating for mortgage acceleration.

My issue with this post is that you are comparing apples to oranges. Don't put put numbers out there and tell us that numbers don't lie. While numbers don't lie, the omission of significant facts or details skew the decision making process. The presentation of skewed information is not good for the consumer. There is the potential that someone would employ the strategy suggested in the 2nd set of numbers and commit financial haricari.

Since you "offer compatible HELOCs and have strategies that employ them", why didn't you use these strategies in your analysis?

My point is this: Based on the significant differences between the financial instruments, (open ended vs. close ended) your conclusion is incorrect. If a consumer is hell bent on paying off their mortgage early, the safer choice is to spend the money on the software and take the extra couple of months to pay off the mortgage.

This is because, the HELOC is an open ended loan and provides a financial safety net that is not existent if all the disposable income is put into the closed ended mortgage. The MMA concept provides access to the equity in the home if should it be needed. That financial safety net is a significant difference between the two scenarios. Your failure to disclose that information skews the decision making process.

Second, you and I both know that a financial analysis and plan of any kind is only as good as it's implementation by the the client. The analysis is just a starting point, a worst case scenario. The software allows the plan to be adapted over time. It is entirely possible that the consumer who uses it will obtain substantially better results than the analysis predicts.

Mortgage acceleration is not a new concept. Frankly, as a mortgage acceleration plan the MMA concept is a superior strategy when compared to 15 year mortgages or bi-weekly payments. (notice that I say concept, not software)

My objection to this post (and a few others) is that the numbers are presented in a misleading way. I've spent a significant part of my life analysing number and I've made a lot of money doing it. I can look at numbers and understand that they don't always tell the whole story.

Had this blog post compared apples to apples, I would have had no problem with it. Had you said I don't believe in mortgage acceleration I would have been fine with it. Had you said your money is better spent with a Financial Planner I would have been fine with that too.

In conclusion, my participation in these discussions of MMA's as a devils advocate is very simple. I believe that the attacks on these products paralyze the consumer into inaction. Doing nothing is not an option. Any financial plan, even if it's not the best financial plan, is better than no plan at all.

Kate... it's been a long day, but I will say this. You are stuck on the UFirst's program and companies that offer the same. Do you have a hidden agenda? I bring this up because you made a comment in my post one day that you hate Pay Option Arms. Can we then justify that you are not giving your clients the best options either? If you use the Pay Option Arm to it's fullest potential, it is actually better than the MMA's and programs like them. You actually need to know how to run the numbers.

Most of what Robert is trying to discredit, besides that you have too many idiots that don't even know what a mortgage is, selling these programs.... but to discredit the fact that if you are paying down your mortgage quickly, and as you state, to take that money out of the equity and then invest it. You can do the same from the get go, buy taken the extra money, which you call discretionary income, and invest that from the get go... leaving your house alone and letting it work for yourself. And you don't lose $3,500 that is the initial investment.

Again, we could be here forever, but you won't change your mind. And the comment that you made in regards to disliking the Pay Option Arm tells me that you didn't run the numbers correctly in your comparisions. You went off of past judgment because these types of loans failed, because people either weren't told how they worked and how to use them... or, they were told how, but didn't follow the plan. And if you think about it, in 2 yrs, the same will be said for these MMA's and programs like it. WHY? Because people either don't follow rules or are not disciplined. These programs are only for the 2% out there..... but it will be sold to another *5 to 15% of the public, that will get themselves in trouble just like they did with the Pay Option Arm.

The MMA program is an illusion. The program looks to work great when they run the slide presentation in front of you. I was even amazed in the first 10 minutes. But then I broke down each month and year... and just compared it to a regular amortization and the fixed rate still came out ahead. The only thing that you can't do is take money out of your house on the fixed payment. Besides, there are other ways to invest and still make more money. It goes back to stocks, which I will be doing a blog on this.

JAN

2008

Jeff, you have an extremely bad habit of taking what I say and twisting into something that I didn't say.

The comment that I made regarding options arms was in direct response to a negative remark that you had made regarding option arms. In addition it talked about a personal experience where the broker wanted me to buy multiple houses all on option arms AND he recommended that I make the minimum payment. My exact remark was "it was the dumbest thing I ever heard." My comment was not about option arms as a viable option, it was about LO's putting clients into loans that they shouldn't be in!!

I am not nor have I ever debated that there are other investment options for a client. I am not nor have I ever said that accelerating your mortgage is always a smart choice. That said, there are valid reasons for wanting to accelerate your mortgage. I am saying that for a client who wants to accelerate your mortgage, for any reason, the MMA strategy is a better choice than putting your disposable income into a closed ended loan where the client doesn't have access to it if they need it.

Having fast access to the equity is a huge benefit - huge!!!

My comments are based within the very narrow world of mortgage acceleration, I am not discussing alternative investment opportunities. So while you guys are clouding the water by making apples to oranges comparisons you are failing to answer my question: "Since you "offer compatible HELOCs and have strategies that employ them", why didn't you use these strategies in your analysis?"

Clearly, the fact that strategies have been developed tells us that there are times when mortgage acceleration makes sense.

I didn't make an apples to oranges comparison; I just had the courage to challenge it. By accusing me of having a hidden agenda - what's that saying?..."me thinks you protest too much."

JAN

2008

Kate, I think Robert has done an admirable job of being civil to you. I remember one time I challenged you on one of your posts you deleted my comments. Robert has been against UFF's money merge account program for a long time. He is not necessarily against mortgage acceleration. I have not seen him "attack" CMGs product.

I believe that his position is that for most people they are better served by putting any "excess" money into other investments and keeping the mortgage at its maximum amount. After all, this is the basis of mortgage planning: using the house as a "bank."

So the question is "Are you selling the UFF product?"

Bill Roberts

BTW you are welcome to comment on my Pay Option post: What Good Is A Neg Am Loan? So far I have never deleted any of your comments.

Bill,

and the question remains, "Since you "offer compatible HELOCs and have strategies that employ them", why didn't you use these strategies in your analysis?"

Clearly, the fact that strategies have been developed tells us that there are times when mortgage acceleration makes sense.

The fact remains that within the context of this blog post, the comparison is apples to oranges.

I am not debating anything else. Let me repeat, I am not debating any thing other than the apples to oranges comparison.

So, Robert - "Since you "offer compatible HELOCs and have strategies that employ them", why didn't you use these strategies in your analysis?"

Robert,

For a period of time I thought you maybe a touch hard on these MMA programs. I struggled with them as well, one issue that bothered me was taking out equity lines and putting the equity at risk. There are several fundamental problems with the UFF program compared to main line mortgage planning principals. The first is that by taking out the principal and investing it in a "SAFE" money market or bond, the borrower retains control of their money and receives some type of return. The problem with the MMA is that that equity is at risk (due to market conditions, or simply from the demands of our consumer culture on these borrowers. You leave a cake in front of a heavy person, are you surprised that they don't have the will power not to eat it, same can be applied to this MMA program.

Second, $3500 is paid for this software (should cost you less then a $100 if you've ever used it), and so where does the other $3400 go? Yep, it's commission folks! So how is that better then what we do, we'll the consumer is getting absolute ZERO advice for their money.

I must admit I made a mistake actually believing that you could make this program. I should have gone along with my first instinct and railed against it from the start. I also apologize to those whom I may have led to believe that the program could actually help people in certain situations. I'm now convinced that it's a dangerous program, and should only be employed in extreme cases.

Anyway, keep up the good fight Robert!!

JAN

2008

Kate,

As I stated in my previous comment, I would not be back here for a while and decided not to address your latest attacks. I have some time to kill now, so let me address some of the points you seem to need clarification on.

1) Yes, this post was directed at the MMA and UFF, not mortgage acceleration in general. I am glad you got that.

2) This is an apples to apples comparison, no smoke, mirrors, or any gray in it. It was simply a side by side comparison of using an MMA versus using the cost of the MMA toward principal and then discretionary income (same as MMA) to pay off mortgage ASAP. It showed that by UFF's own presentation and assumptions, the MMA cost more and took longer, hands down. It was not about any other strategies, nor my endorsement of paying off your mortgage.

3) Anyone who reads more than one post of mine knows where I stand, which is as Bill stated.

4) I have and will continue to use other strategies in my posts in comparison and my original post from nearly a year ago did exactly that. Hands done, mortgage planning and focusing on investments versus trapping money in your home wins over any mortgage acceleration strategy.

5) All of my posts have been straight forward and honest, no hidden meanings, smoke, mirrors, twisting of reality, etc. So, your arguments that I am comparing apples to oranges, it doesn't truly hold water. Read numerous posts of mine and it is clear where I stand and what I advocate.

6) I agree that a plan is only good if implemented. However, the software doesn't provide a real benefit as it still requires the client to use it, something that requires the same level of discipline as other strategies. Is it better than a 15 year or bi-weekly? Yes, but so are the other products out that beat the MMA. Also, getting a 30-year IO and investing the difference beats all of the strategies, including mortgage acceleration.

7) You talk about having instant acces to equity using the MMA. Yes, but limited to the remaining balance on the HELOC, so it is not as liquid as one is led to believe. Certainly, keeping all of the money you can separated from the home, working for you, is more liquid and, dare I say, safer, than trapping it in your home which is what any mortgage accleration product does.

8) I cannot tell you how many times I have had mortgage professionals say I should stop talking about this subject because it may lead someone into inaction or not get the product. Is telling the truth and revealing facts about how mortgages work, how a client can do better, etc. wrong? If that is what you believe, well, I hate to say it but I wouldn't want to work with you. I am trying to show how these products, particularly the MMA, will do mor eharm over time. As for CMG and others, they are better, but even then, I don't like how they are used overall in comparison to other strategies that provide greater liquidity, safety and even rates of return.

So, you may not agree with what I have to say, but don't try to confuse the situation or say I am comparing apples to oranges, leaving out numbers, or even not talking about other strategies. Those statements simply are not based on facts and if you read more than one or two posts, you would know that.

I have not changed my stance since Feb. 2006 when I first started talking about how these programs are not necessarily (notice how I said that) the best thing for consumers. UFF and the MMA have spread like a plague and even their disclosures tell you you shouldn't listen to them. I posted about that, too.

Bottom line is that you have the right to believe as you do, and that is fine. I also have the right to keep talking about these programs and how other strategies are better financially. If you are unsure what I advocate overall, here is what I posted as a comment recently on my original post...

Now, every client's situation is unique, so their best solution is unique as well, derived from an analysis across the financial spectrum, not just a 1003 or application for expensive software. What I advocate is educating borrower's on the strategies and concepts that span the spectrum. Without that kind of knowledge, the "real" best solution will never presents itself correctly.

Jeff, Bill, and Karl - Thanks for your support. The people selling these programs are getting out of control and the turmoil in the markets has everyone doing whatever they can to make money, even when it isn't in the best interests of the client.

JAN

2008

Robert, Thank you for the valuble post.

I'm perhaps not as harsh towards the MMA as you, thinking that most Americans are math challenged and financially illiterate, unable to navigate through the many options available to them. Simply making extra principal payments is a guaranteed 6% compounded (Less tax effects). As an investment it's as safe as you get.

I'm skeptical about your comparison, not on your end, but U1st's example. I also tried applying the $1,000 in discretionary income to principal but without using the extra $3,500 as in your example. I came up with a payoff in 121+ months (still better than the UFirst example). My skepticism lies with their example since we don't see their full amortization schedule (the results should be better). I tried another example that I felt would be similar to theirs. $10,000 initial payoff of principal and $975 in extra payments per month (setting aside a little to retire the LOC debt). In this example the payoff was in 116 months. Better, but nowhere near enough to justify $3,500. (Why they would screw up their example to their disadvantage is baffling to me)

The bottom line is: I kind of like their program as an option, but the price is way too high. What should the price be? I would use simple arithmetic and the law of supply and demand to decide: This is supposedly a one purchase per lifetime product. Let's say the average U1st agent wishes to sell 25 of these per year for the next ten years. That's 250 clients (end users) per agent. The price and the agent compensation should be set at rates that result in that (250 to 1) ratio.

A question for U1st: What is the end user to agent ratio? A question to U1st agents: Are you signing up 250 clients per every agent that you sign into your organization?

It would be interesting to see how many more they could sell if the price were about $500, and how many less agents there would be if their compensation were about $250.

I find it sad when a good product gets distributed through a multi level marketing scheme.

Excellent work Robert!

Robert,

It's unfortunate that the written word cannot display inflection and tone of voice. I am not attacking you, your professionalism or what you advocate.

I have a problem with this post as a stand alone post, in my opinion it is comparing apples to oranges - we can agree to disagree on that.

I walk right down the middle of the battle between these products. I can see both sides and I don't understand the venomous attacks that take place. Certainly I agree that this is not a mass market product that every Tom, Dick and Harry should buy. UFF's Business model is both it's genius and it's achillies heel. Had it been marketed only through financial avenues these discussions would not be so fierce. Additionally, in this market it's marketing avenue is somewhat predatory. It's a very narrow niche for a very narrow spectrum of consumers. I've never said otherwise, not once!

That said, I have yet to read a single blog, article or professional say that, mathmatically, the MMA concept doesn't work. It's from this basis that my comments are derived.

What bugs me is that the major argument is that the consumer won't use the software. In the end the same can be said about clients who are put into I/O loans so that they can invest the difference. My guess is that a very large number of consumers don't actually invest the difference. In that situation when the loan recasts to P/I they could be in a worse situation. They have no equity in their home and they've spent the investment. So, for the consumer that didn't use the software to complain that it didn't work bugs me. Well, why didn't ja use it?

I read recently that only 15% of all Financial Planners clients actually follow the plan. Is it the Financial Planners fault that this number is so low? Of course not. It's the 80/20 rule.

In the end it all comes down to client implementation. The mathematical spreadsheets created in our labs are only as good as the client allows them to be.

It all comes down to matching the right product, with the right client. MMA software that provides cash management, budgeting and equity building strategies have a place in the market and are a valuable tool to help people achieve their financial goals! While UFF does not match this description, this does not mean that the entire category doesn't deliver!

JAN

2008

Robert, Thanks for your post and glad to see your objectively look at programs.

JAN

2008

Pat - I wonderd about why they used that example as well as it is very clear that other strategies, including simply paying the money toward principle are better. But, then again, other startegies are better all the way around. The client needs to have someone fully qualified present ALL strategies and then they can see the best solution.

Tim - Thanks for the compliment.