Is the Ufirst Money Merge Account (MMA) a Scam? Read on...

If you haven't heard about the UFirst MMA yet, you probably will soon. There's a new mortgage system out there that purports to reduce your mortgage term substantially by a complex method of using a Home Equity Line of Credit (HELOC) to manage all your finances while advising on when to advance additional prinicipal payments to your mortgage, shaving years off the term. Due to the nature of the amortization schedule for mortgages, in fact, making additional payments above and beyond your minimum monthly payment certainly reduces the life of the loan. However, this system is completely unnecessary and uses deceptive materials to trick the consumer into believing they need this "sophisticated software system" to fulfill their real estate dreams, as I'll show you. I will also highlight how much this will ACTUALLY cost you in the long run, not to mention the other more beneficial uses of your additional funds each month.

About the Company and the System: RED FLAGS

I can't really say I know much about the UFirst Financial other than this system and its agents or "associates". I can say that they employ the usual multi-level marketing scheme that many similar companies do (remember Amway, ACN and the other organizations approaching cult-like fervor in their zeal?) to get footsoldiers to sell a service or system to friends, family and co-workers, entice them to sign on as an "associate" for an entry fee and the pyramid of promises builds from there. A friend of a friend tried to entice me into dolling out the $3,500 for the system and I politely shot holes in his presentation to the point we agreed it didn't make sense for me (that was the easiest "tough sell" I've ever encountered).

In looking for the company on the Better Business Bureau's website, I found something interesting. In sifting through the page of "United First Financial"s that came up, I found that they have duplicate websites. The one that is Satisfactory with BBB is a .net address, while if you Google "UFirst MMA", the .com site comes up. The sites are very similar save for one minor detail. On the .com site (which is the one most commonly frequented by you and I), the company's location is nowhere to be found. On the .net version, which is covered under the BBB, the location is in the upper right hand corner. What's more interesting is if you click on a link to join or learn more, the .net site directs you to the .com site. Guess what else I found? Among the myriad companies that come up in the BBB search, I found one with the .com site listed as its website. Guess what it's rating is? No Rating. I wonder why that is. While this is conjecture on my part, is it possible that the .net site is there to provide for a satisfactory rating with no complaints, while the .com site handles the transactions and could potentially be affected by a poor rating? I wonder. Why wouldn't the site that handles the traffic and the transactions be listed with BBB? I can't think of another logical explanation for directing your traffic AWAY from a satisfactory site TO a site with no rating. Can you?

While perusing the site, I noticed that they make mention of their writeup in "Mortgage Planner Magazine", as if it's a resounding endorsement. What about CNN, Money Magazine and BusinessWeek? These are credentials that the Prosper.com (a true financial innovation) was able to emphasize when it was launching; UFirst can only come up with this accolade? Essentially, there is no legitimate source (major business outlet, famed economist, not even a washed up sports star in a commercial) I could find that would endorse this system.

The UFirst MMA System - Hocus Pocus

Now, for the system itself: It's all based on tricking you into the fear of large numbers by showing you the future value of dollars you'll be paying in interest payments over the life of a loan. In the video example (link below), at 3:00 in to the video, they show an example. On a 200K loan at 6% interest, you pay $1199 monthly, or $431,677 over the life of the 30 year loan. Since you borrowed $200K, your interest payments over the life of the loan are $231K. $231K is a ton of money, right? Well, not over 30 years. In fact, $431K is simply the present value of $200K at 6% interest! Not rocket science, but without an excel spreadsheet and to the uniniated, this really sounds like a scary number. They fail to make any mention of the present value of money. That's where they prey on the gullability of the common consumer. But readers of Everyday Finance won't be duped that easily right :>

At 5:43 in the video, they highlight what happens if you pre-pay $5,000 of your own money into the mortgage. What's laughable is that there's no mention of the $3,500 that you pay for some silly software package. What if you just took that fee and put it right toward your mortgage instead? The video goes on to explain that by using the UFirst MMA sophisticated software, it advises on when to transfer money out of a Home Equity Line of Credit (HELOC) account to your mortgage based on your discretionary spending. If you make 5K a month after taxes and routinely spend $4k, the system will tell you when to transfer the $1K excess funds to your mortgage. Where it seems to be a bit complex is when your spending varies and in some cases, exceeds your income. The system has already transferred funds to your mortgage and the HELOC now takes over so you don't overdraw your account. What gets little attention in the video or the face to face presentation is the fees you'll incur with the HELOC. This amounts to hundreds of dollars per year! When you add the $3500 "software fee" and these HELOC payments, you are now paying "Thousands upon Thousands of Dollars" in future dollars...the same future dollars UFirst quotes when showing the evils of the standard amortized mortgage!

Here's a little food for thought:

Present value of upfront fee: $3500.

Future value in 30 years at 6%: $20,000!

Present value of example HELOC fees in just year 1 alone: $800.

Future value in 30 years at 6%: $4,600

This means for the First year alone, you're spending almost $25,000 in Future Dollars. That's Year 1! While I don't want to beguile you with these large numbers in red, I am simply putting these future value dollars in the same context in which UFirst displays the future value of interest payment dollars. Now, that's a level playing field!

Is Pre-Paying a Mortgage Even a Good Idea If I Could Afford It?

The usual answer is No. At its most basic level, in this environment of low interest rates, you would be well served in investing any additional income as opposed to paying down a low interest rate mortgage which has the additional benefit of a tax deduction. According to Bankrate.com's rates as of May 22, 2008, the average 30 year loan rate is under 6% at 5.8% and the average 15 year rate is 5.36%, which may include points. For the sake of argument, let's say you're in a 30 year mortgage at 6% like the video portrays. If you're in the 25% tax bracket and you're early in the mortgage, the majority of your payments go toward principal, so you're getting a tax break of say, 20% on your payments. On 6%, you're now effectively paying under 5%. Since the long run U.S. stock market average is 8-9% over long periods and with some diversification via international stock exposure, high yield stocks and other alternative investments, you can pretty easily attain a 7% return without a great deal of risk over multi-year time horizons. This is especially true if you're investing in a tax-advantaged account like putting more toward your 401K or investing in a self-directed IRA (I've included a link here to my self-directed IRA account holdings). This is a much better use of excess funds than paying down a low rate loan at less than 5% effective rate.

Even more importantly, if you have any high interested debt, paying that down is absolutely your best investment, as you're not going to earn the 20%+ you might be paying on credit card debt in any reasonable risk-adjusted return investment.

If you do feel compelled to pay down your mortgage early, you could simply do this on your own by making voluntary additional payments as your budget allows, as opposed to relying on this unnecessary system at exorbitant costs

Finally, if you want something easy to cut your mortgage in half, why not just consider a 15 year mortgage, where you're likely to get a lower rate than the 30 year conventional you took on to begin with? According to recent data, the 15 year rates are close to 50 basis points lower than the 30 year rates. Why would you take on a higher rate 30 year mortgage, pay what equates to multiple points in this $3500 fee + HELOC fees when you could simply have a lower rate and a 15 year mortgage, still with the flexibility to pre-pay as you see fit?


I wish I wrote this article sooner, but I was awaiting completion of my documentation outlining my blog as a Limited Liability Corporation. As such, Everyday Websites, LLC acts as a barrier between the content here and my personal holdings in the event of legal action. While everything I've stated here is based on facts as I understand them, I've seen the message boards with rather aggressive and sometimes outrageous minions of UFirst MMA Associates attacking anyone highlighting the deficiencies of the system. As my blog isn't worth much (and a lawsuit liquidating its assets wouldn't be devastating to my family), and I have this new level of protection, I feel compelled to highlight this article to my readers. Incidentally, I used the Company Corporation to form my LLC. For anyone publishing content in print or on the internet, I highly recommend you form one yourself. It's quick and easy and you'll sleep better at night. You may find that you're no longer inhibited in writing that scathing review next time that idea pops in your head. Here's the link:




To answer the opening question, I wouldn't go as far as classifying the Ufirst Money Merge Account as a scam, since they do provide enough transparency and disclosure to understand what the gaps are and the unnecessary nature of the system to investigative readers. However, I think it's completely unnecessary and was devised to intentionally appear sophisticated and useful, when all that's needed to accomplish the same result is some old-fashioned discipline.

Sources:

Company Website: http://www.u1stfinancial.com/

The video I referenced can be accessed from their website