For example, the mma100 movie on UFF’s web site shows an example of “interest cancellation” achieved by their MMA/HELOC scheme. The HELOC sees the following withdrawls and deposits — -$3,500 to pay for the MMA software, -$4,000 to pay mortgage principal and a +$5,000 deposit of income, giving a net -3,500-4,000+5,000=-$2,500 borrowed from the HELOC. It then states the client has borrowed $7,500 from the HELOC while paying interest only on $2,500. Wow, sounds good, doesn’t it? This false statement suggests the MMA/HELOC scheme has enabled the client to trick the bank into lending him $7,500 while charging interest on only $2,500. The truth is the client only borrowed $2,500, not $7,500, from the bank and was properly charged interest only on the amount borrowed. Here’s an alternative explanation of what really happened. The client has $5,000 of income in his hands. He goes to his mortgage lender and pays $4,000 towards his mortgage principal; he now has 5000-4000=$1,000 in his hands. He then goes to his MMA agent and pays him $1,000 for the MMA software only to be told the software costs $3,500 and he still owes 3500-1000=$2,500. The client goes to his bank and borrows $2,500 (the amount the MMA agent told him) from his HELOC, goes back to the MMA agent and gives him the money. How much did the client borrow from his HELOC? It’s $2,500, not $7,500, because he already had $5,000 in his hands to begin with. The bank charges the client interest on $2,500 because that’s the amount he borrowed and the amount on which the bank can legally charge interest. If the bank charges interest on $7,500 for a $2,500 loan, some bank manager(s) may have to go to jail for fraud. If the bank charges interest on $2,500 for a $7,500 loan, some bank manager(s) may have to be fired for incompetance. The statement made in the movie that the client has borrowed $7,500 is ABSOLUTELY FALSE.

In another example, the 15-minute movie on UFF’s web site really pushes the message that enormous amounts of mortgage interest is “saved” by the MMA. “Saved” amounts are irrelevant and misleading, and here’s an example to prove this. If you paid $18,000 for a sticker-priced $20,000 car, you’d saved $2,000 but would you be happier if the car had been sticker-priced at $25,000? You would have saved $7,000 then but so what? The real issue is the $18,000 and associated loan interest you paid for the car because these are actual dollars leaving your pocket. The $2,000 or $7,000 isn’t leaving your pocket, the $18,000 is. If you think the car is worth $18,000, then buy it; if not, then don’t. Whether you saved $2,000 or $7,000 is completely irrelevant. The dealer did not lose any money at the sale price of $18,000. If he did, he wouldn’t sell it (under normal business conditions). If I were a dealer, every car on my lot would be sticker-priced at 1 million dollars and I’d save my customers huge amounts of money by giving them ridiculously hearty discounts.

I’ve made several comparisons between the traditional method of principal prepayment and the MMA using the little MMA data gleaned from various blogs and when the same term is preserved, the traditional method always has lower total cost than the MMA when the cost of the MMA software is accounted for. In general, total interest cost decreases with a shorter term; hence it’s important to remove term length as a variable to expose the real effectiveness of the HELOC. The comparison uses the same mortgage, the same length of time to pay it off, and asks what the total costs are for the traditional and HELOC methods. The HELOC has lost every comparison. You’ll generally LOSE money if you use a HELOC whose interest rate is generally higher than the mortgage’s so unless you need/want an alarm clock to tell you when to make an extra payment to principal, stay away from the MMA or similar software.