Today a seller of the United First Financial Money Merge Account product threw out a challenge: Show him how a simple spreadsheet can pay off a mortgage faster than MMA. He said that his client owed $200,000 on a mortgage, and with only $200 “extra” cash left each month after regular living expenses, the MMA product made it possible to pay off that 30 year mortgage in only 13.2 years.
That MMA must be something special!!! No regular person could pay off a mortgage so fast with so little extra money.
I took the reader up on his challenge. I asked for the MMA analysis provided by the software, detailing this 13.2 year payoff. I said that with that data in hand, I’d beat the MMA payoff schedule. In all fairness, I knew when I asked for it that there was funny business involved. It’s not possible to pay off a $200,000 mortgage in less than half of the 30-year payoff schedule with only $200 extra each month applied to the mortgage.
And the data provided proves that UFF and their software is defrauding consumers. Here’s what was in that analysis (click on images to see them full-size):
It doesn’t take a trained investigator to spot the fraud in this analysis. In the first graphic, the printout shows $5,000 total monthly income. (That’s actually incorrect, based on the $2,500 bi-weekly income shown above that. The correct figure should be ($2,500 x 26) / 12 = $5,417 per month.)
The printout then shows below that $200 discretionary income each month… implying that the customer has only $200 extra each month to apply to the mortgage.
Except when you scroll down to the side-by-side analysis of before and after the MMA… you see that in year one there is a total paid of $12,888 without MMA, versus $29,288 paid with the MMA. That’s a difference of $16,400 extra paid under the MMA scenario, or almost $1,400 per month? Where did that money come from? The MMA certainly didn’t generate that cash or generate that savings!!!
The MMA seller told me this is where the $1,400 per month comes from. (Please don’t don’t hurt yourself when you fall over laughing.)
MMA does not simply add $200 a month to a client’s mortgage payment (surely only an idiot would pay $3,500 for that); it uses the HELOC’s simple open-interest (pay only for the amount you use) against the mortgage’s amortizing, closed-end interest (100% interest in the beginning; 100% principal at the end). A “5% mortgage” is only a true 5% on its last day because it is all interest for the first several years.
This has the effect of supercharging the $200 discretionary funds; essentially, the client is going to borrow money from the Heloc and make much larger payments to mortgage principal than they otherwise could and then pay off the Heloc draw the next month with employment income and discretionary income. The math algorithms within the software that make those calculations and suggestions are what clients pay for (and as I mentioned, the large amount of commissions paid out by the company for its MLM structure).
Merely a shred of common sense would tell someone that the MMA tool couldn’t magically multiply that $200 each month by seven to make a $1400 extra payment on the mortgage. But the trick MMA uses is to tell the consumer that this is all a result of a “complicated algorithm” that optimizes their money. If you don’t have facts on your side, I guess you’re left to dazzle people with fancy sounding (but false) words.
If you wonder how consumers get conned into wasting $3,500 on this stupid software, it’s easy to see…
- Turning $200 into $1400 each month sounds very enticing.
- Even the company’s own representatives don’t understand what they’re selling and can’t comprehend how wrong the analysis provided to customers is.
The truth is that the money shuffle U1st Financial has people do via the Money Merge Account saves the average consumer about $20 or $30 a month, at best. Any savings beyond that can only come from making extra payments on principal each month… and that money comes straight out of your pocket.
The analysis provided to the consumer by the MMA representative is fraudulent, plain and simple.
UPDATE: The UFF representative still contends that only $200 cash each month is put into the mortgage by the consumer, and that the use of the HELOC and complicated equations in the MMA software turn it into the $1400 per month shown on the side-by-side analysis.