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MMA Type mortgage Accelerator programs and Negative Amort Option arms are NOT THE SAME!!!!

I have seen a lot of controversy over "MMA type" mortgage accelerator programs here on Active Rain lately

Some People here on active rain are lumping together MMA's with Option arm Neg Am programs (Deferred Interest) as one in the same and that they are TERRIBLE products for ALL people...

First MMA's and Neg Am option arms are both No where even in the same universe as being the same. When an MMA is set up right there is NO WAY to go "Neg Am" in fact it does not even work closely on the same principle as an Option Arm so I am not sure why they have been lumped together here on Active Rain by certain individuals.

The only reason I can think that People have chosen to Lump together "Neg AM" option ARMs with "MMA type" programs is because they do not understand either of them....

The "Neg Am" option arms and MMA type, mortgage accelerator loans are NOT the same....The Option Arm has received a bad rap because it is sometime marketed in unethical manners to potential borrowers as a "hook" who really would not understand the loan to begin with, being explained by "rookie" loan officers that don't understand the loan either.

We have all seen the adds: "Get a 1% interest rate on your mortgage" , "Get a $600,000 mortgage for only $500.00 a month..." For crying out loud, even Lending Tree posts ads like these all over the Internet so people will apply through Lending Tree. It is Deceptive and this is where people can get in trouble if they do not take the time to understand what they are getting into...

I do agree that Option Arms are promoted in unethical ways for the sole purpose to ""hook" unsuspecting potential borrowers in getting into this type of Loan when they should definitely NOT be in this type of Loan...I am sure that eventually the FTC and HUD will start to crack down on the "unethical" promotion of Neg Am option arms...

Despite this I believe Option ARMs "DO" have their place....An example would be if you were an investor who purchases rental properties in an appreciating market and you were looking for cash flow and intended on selling the rental before 5 years or at least getting out of the Option ARM before 5 years. But this example is one of the very few instances when I think an Option ARM can benefit especially if the borrower knows what they are doing....

An MMA is Completely different and NO where nearly related to a Negative amortization option arm type loan. The power of an MMA lies in the use of a small HELOC line in second position to accelerate your current First Mortgage. An MMA set up with small "second" position HELOC that WILL NOT recast for at least 10 years against a Conforming 30 year fixed mortgage with NO pre-payment penalties specifically, is powerful that is.

For the MMA to work its magic, ideally, you should always be keeping the "total drawn" line amount at an extremely low level as you cycle your income through it and make additional principle pay-downs on your already established first mortgage...It does you NO justice to constantly Max-out your line amount on purchases that you would have not normally made if you did not have the HELOC in the first place If you intend to accelerate your first mortgage. Your Home is NOT a Credit Card and a HELOC should NOT be treated like one...

But an MMA works wonderfully for the "disciplined individual". Say you have a 30 year Fixed at 6% at 80% LTV (loan amount does not really matter for this purpose) and then you get a HELOC total Line amount of 15% LTV / 95% CLTV and cycle you income through the HELOC using it like you would use your Regular checking account...There would be NO possible way to go "Neg Am" in this scenario. You would only have the "opportunity" to accelerate your First mortgage by making "Forced" principle pay-downs as your income cycling through the HELOC exceeds the total current Drawn amount.

We All know that a HELOCs payment is based on the outstanding currently drawn amount against the line. So if your pay checks are direct deposited into the HELOC instead of a regular checking account it is constantly paying down the line thorough-out the month Not only is your payment on the HELOC automatically made through the direct deposits of your pay check but the amount of interest accumulated and charged against you is minimal, BECAUSE you are keeping the total drawn amount at a constant minimum.

I think the individuals here on Active Rain lumped together MMA's and Option arms because they themselves do not understand the difference and because they are "relatively" new in the public awareness and can appear "gimmicky" if they are not understood properly...But that is about the ONLY similarity...

I implore EVERYONE to take the time to understand what an MMA actually is and judge for yourself how it is NOTHING like a Negative amortization Option ARM Loan. Just Go to http://www.loanacceleration.net/ and watch the various videos and Visual presentations to get a clear understand of the POWER of an MMA

Thanks

Keith

Posted by Keith Gill on 02/24/2007 09:55 AM

Comments (16)

16 Comments on MMA Type mortgage Accelerator programs and Negative Amort Option arms are NOT THE SAME!!!!

FEB

2007

Keith- take a deep breath.

I searched the blogs and the comments and I didn't find a single instance of anyone saying that they were THE SAME. If I'm wrong, please point me in the right direction.

Several people have commented however that the explanation of an MMA and an Option ARM are not easy - the average Customer will not quickly understand either of them. I joked earlier that the MMA should be the fifth payment choice for the Option ARM- now that would be a mess! Notice where I said 'joked'?

That's why it takes well-trained people to properly, honestly educate the Consumer.

(We've all had the experience when someone comes to us for an Option ARM and no matter what you say, they just have that glazed-over, far away stare as they mumble "one percent" over and over.)

Now, I have no time to watch a video, please explain to me how much of a difference the MMA could make to a Consumer in a 5 year time frame.

Jason & Mark go to the following blogpost:

http://activerain.com/blogsview/46913/Wanna-pay-off-your

Then scroll down and look Mike Muelers comment...He devoted a whole blog post of his own in response to my Post about the MMA and he did indeed "Lump together" the Option arm program with the MMA in is response located here: http://activerain.com/blogsview/48529/Don-t-Accelerate-Your

Now in all fairness, Mike did not say they were the same program but he also did NOT make the distinction that the MMA and Option arm are indeed two completely different programs that do NOT work on the same principles and do not share the same negatives and dangers.

Mike just made a response to my blog post about the MMA and started talking about how they are marketed and then slipped in the comparison of the Option arm in the mix, giving the implication that they are the same type of programs that should be avoided....

What's curious is why both of you and Mike and others attempt to debate without FULL context and then try to discredit a product that has been presented with the caveat on my part that it does take dicipline....If you just don't like the product then say that...Don't try to discredit the "objectively" verifiable benefits of the MMA when it is structured in the manner that I have described....This is why I have said that you guys are just NOT understanding how the MMA works in the manner that I have presented...NOT ALL MMA's are the same

Secondly I never even brought up or started a blog post about the Option arm untill Mike Muellers post when he lumped together the Option arm with the MMA in the same post...

And Jason you are wrong about the MMA being able to go Neg AM...You are making the assumption that if you have a Second HELOC that the total Line amount availiable would bring you to 100% CLTV...which I have never advocated or indicated that is how to properly structure the MMA. Also even if you did have the Line amount to 100% CLTV the idea is to have your income cylceing through it, so as to rapidly pay it down through out the month....

I only recommend and structure the MMA up to a max of 95% CLTV without taking a full draw and usually less than that with a total line amount of no more than $25,000.00. You don't need a huge line amout or have the CLTV brought way up for the MMA to work properly....

I respect your guys experience and knowledge but I am asking you to take the time to understand what is being presented before you jump to anymore wrong conclusions and then try to pass these wrong conclusions off as FACT...I have not done this to any of you or any post you have made advocationg a particular product, program or method...I like to get a Full context understanding about something before I make any conclusion, I suggest all of you do the same...It's only common courtesy

Keith

FEB

2007

Keith,

By definition, negative ammortization means an increase in principal balance to a mortgage. Using my scenario, the monthly balance went up from the previous month's balance, therefore neg am occured. I never said that it negatively ammortized the same way the option arm does. (You are reading into it too much because you are thinking that I am comparing this to the option arm, which I am not). I do know what I am talking about as I have written about this product in the past. Feel free to visit the review that I put up on this post.

You also have a tendency to make something out of nothing. You are writing a whole post that says stop comparing the two as the same. Yet, your comment above says that no one actually has done so, but rather you are complaining that no one has made a distinction between the two. Maybe, that is because it is like comparing fixed to adjustable (which many of us have lumped into the same post, but never said they were the same). We know they are different programs.

In addition, neither Marc nor I discreditted this program. We simply stated that this program will probably end up being abused like the option arm once brokers learn how to use it (whether it be properly used or worngly used). We both agreed that this program is for certain individuals just like the option arm if for certain individuals. (Again, you are trying to put words in peoples' mouths that are just not there).

Now, if you care to read my post, there is no 2nd mortgage involved. It is simply a first mortgage (a HELOC if you will) whereby the borrower's income is deposited into the account. Then drawn from there to pay normal monthly expenses with left over income being automatically applied to the balance. Your's is just another version of the MAP.

If you want to promote this program, you will get a lot more people by writing an informative post rather than a defensive post or by directing people to a video. I am sure that if you formulated the post right and made it informative and interesting to read, you would get this featured and get more people to understand the product.

"I am sure that if you formulated the post right and made it informative and interesting to read, you would get this featured and get more people to understand the product...."

You are absolutely right...I will take this advice and use it for my next post about the MMA....

Thanks

Keith

Jason, both you and Marc origionate for the same Mortgage company in Florida.

Jason, you are also the founder of that group I said in another post that Marc confirmed that I was banned from...You banned me from your group, obviously you don't like what I post about, so why are you wasting your time responding to my blog and group posts?....Does not make sense to me....Jeesh

Keith

Keith,

Again you are jumping to assumptions that are not true. I did not block/ban you from the group. I have assigned several people to act as moderators of the group. One of them blocked you from the group. I have checked in to it and found that Marc banned you from the group because you violated the groups purpose on more than one occasion.

In the group description, it clearly states that the group is not to be used as a place to blatantly advertise. I have instructed the moderators to follow the 3 strikes and you are out rule. The reason I assigned this task to others is because my duties in AR and with my company have become too much for just me to handle. I have selected these individuals based upon their reputations here in AR and know that they will be just in their decisions of what is meeting the group's expectations.

I also understand that the banning had nothing to do with you personally. It is just easier for the moderators to ban repeat offenders than to keep deleting their posts. If you can assure me that you will not blatantly advertise your company, I will be more than happy to restore your status within the group. You have some good insight to this program that I know many other originators are not aware of. The Mortgages group has the largest membership of all the mortgage groups, so you will have a large audience. Just keep in mind the rules of the group.

O.K. Jason I Promise No blatant advertising...I am still fairly new to active rain and just feeling my way through....

Keith

FEB

2007

No problem... your status is back to "can post to group"

If you ever have a question about AR or some of its features, please feel free to let me know and I will try to help. I look forward to reading some more of what you have to say about this program.

MAR

2007

Thanks for the entry in The "Carnival of the Economics of Real Estate". I'll be posting the entries and winners by Friday and will be sure to notify the winner about his/her new Forbes subscription. We had fifteen entries; two from new Active Rain members. You can see all the entries here with a star next to them.

Each entry was masterful. One person will win the Forbes subscription but all of you won something from your well thought out posts; increased knowledge. Be sure to comment on each other's posts. There is a lot to learn from each other.

Keith,

As I have commented about the MMA type programs before on other posts (mine and yours), the product is a good product deserving to be looked at as it will fit some people well. The only issue I bring up repeateadly for readers is to not get caught up in any one loan program no matter how good it seems as there may be a better "fit" elsewhere, just like I posted fairly recently.

That being said, I would like to also state that Option ARMs are a great fit for a lot of people, especially investors. You can now get these products with a fixed rate for 3, 5, 7, and even 10 years, limiting your risk of rising rates. You have the same options (down to a 1.25% payment rate) as with other Option ARMs. I just wanted to mention that because these loan products have been defamated without knowing their real value.

MAR

2007

Robert, I agree with you 100%. getting locked into any "One" loan thinking it is the best option for all people is never a good idea. The option Arm is also a good loan for "some" people as you have mentioned. You pointed it out for investors...I agree. I even mentioned that in the above "initial" post.

I happen to like the MMA because I come from the school of thought that is very much associated with the "old school" way of thinking that it is to truly "own" everything you have free and clear in the shortest amount of time possible but using common sense while doing it. You can build your wealth at the same time as you are your road to being "Fully" debt free....

Just imagaine what it would be like if "Everyone" who is considered middle class in this country, who has a Mortgage and credit card debt committed to paying off their mortgage and everyting elss within 8 to 10 years using the methods that I teach using the MMA...Then after that 8 to 10 years increased their investing based on the all the "Freed up" income they now have...What would that do for our Economy?...What would that do for the individual?.....

That "possibility" excites me. And I think it is a lot more inspiring for the average individual to grasp then to tell them that it makes more sense to stay in a mortgage as long as possible, with a low payment, take the tax benefits (which the government can pull away anytime) and invest the difference over the long haul...It's like saying "YOU MUST CARRY A MORTGAGE AND STAY MIDDLE CLASS BECAUSE THAT IS MORE REALISTIC..." Yuck,...even if this were true do you think this is inspiring?...I sure don't

What ever happen to "Good 'ol horse sense.." of my parens era, to actually fully Pay off quickly that which you own?...My father always stated he HATED paying interest to anyone...I can understand that.

It just seems to be against common sense for Some to try to advise people not to pay off their mortgage as quickly as they can....Unless of course there is a specific reason and plan why NOT to....But to just blanket it by saying that it is BETTER not to, is just a lack of common sense in my view...

Keith

MAR

2007

Thank you for this discussion. I am one who hates paying interest too. A friend of mine is selling "U First Financial's" MMA program. I am trying to figure it out. I've been all over the internet in the past 2 days reading different theories of MAP's and have thorougly enjoyed your discussion. It is shedding some kind of light for me. I am even considering selling it myself. However, I don't want to get involved in an MLM. Are any of these MLM's?

MAR

2007

Hi betty, If you want to know more, please just contact me by going here Email Me

I will gladly answer all your questions about the MMA and other similar programs...

Thanks

Keith

APR

2008

You don't need a HELOC or MMA or spreadsheet to pay off your mortgage. All you need is discretionary income. Unfortunately, when combined with its $3500 fee and its wasteful way of using HELOC interest cancellation, MMA costs more than simply doing it yourself. Claiming that the program is 20% more efficient than the analysis is bogus.

Here is a link to MMA's overview: http://www.u1stfinancial.com/Portals/2/Flash/15_minute/ and here is a link to my spreadsheet showing how doing it yourself beats MMA by over $3600, before you add in MMA's $3500 fee.: http://spreadsheets.google.com/pub?key=pszjmlNnSFKhwM90Q3dWHVg
The green table is do-it-yourself and the blue table is MMA with the HELOC.

If you truly believe that moving money in and out of the HELOC is the best way to use the "bank's money" and "leverage" your interest, than do it the correct way. Make a ONE-TIME INTEREST-ONLY loan from your HELOC equal to your take-home pay and put that toward your mortgage. Run all your income and expenses through the HELOC. Meanwhile, use your discretionary income to pay down your mortgage. If you need extra cash, simply borrow it from the HELOC and pay it down to your take-home pay level, before continuing to pay down your mortgage. This is the simplest and most effective way to take advantage of the HELOC.

DEC

It is understandable the people might not see the truth of this program. It doesn't take $10 dollars to 15. No. I knew I did NOT know how to maximize the money I have. I do now, and that's a good thing. The guys at MMA are dedicated to this, or they will look bad, And it shows. Their determination on my success convinced me to be an agent as well. That's the difference. Now I'm an agent. If you want to hear more, or let me do your analysis, email: evan.cutler@teammmacos.com

If you want to read my advertisement, please go to www.teammmacos.com

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