If you have not yet done so, please read part 1, part 2, part 3, part 4, and part 5 of this series first, then read on.
This week, I’ll offer some of the exaggerated claims made by those who likely don’t even understand what they are talking about.
“ This can be done on your current income, with or without a HELOC (or any other line of credit), regardless of current credit rating–using proven tools and banking systems. Again, much faster than you can do on your own! In fact Jubilee believes you CAN’T do this on your own, and we can show you why, so let’s compare notes!”
They can believe what they will, but I can show that a simple monthly prepayment beats their system. Whether you do it on your own is up to you, of course, but as Kiplinger magazine noted, “Salespeople challenge whether you’ll follow through on your own — as if spending $3,500 for software will ensure that you’ll use it. Tell that to couch potatoes whose high-end exercise equipment gathers dust.”
“Using factorial math, the new version squelches the challenge of ‘I can do this on my own’.”
Factorial Math? Mortgages are nothing of the sort. They use simple arithmetic to calculate interest and payments. Craig Hansen guest posted on the Fraud Files blog and discusses “Factorial Math” in greater detail.
“Unless you’re going to stand there and tell me you can make over 3 million calculations each time you decide to spend a dollar, it’s just not possible to do this on your own. commented Lee Bradshaw of The Jubilee Project.”
No, I’m going to sit here and chuckle. It’s pretty simple, you line up your debt, on an after tax basis. You pay the highest interest debt first. If you can use a 6% (or thereabout) HELOC to consolidate and reduce the rate of higher interest debt, you do so. Let’s recall, the target client has an extra $1000/mo available, and with that much free money, they should have no debt other than their mortgage, so 3 calculations aren’t needed let alone 3 million.
“Q. Why can’t I make extra principal payments to my primary mortgage and achieve the same results?
A. Simply put, the mathematics behind MMA present a sophisticated process that has a substantial financial benefit over increasing your monthly payments. The algorithms in the proprietary MMA system are systematically programmed to create the highest interest savings possible in the least amount of time. The math engines programmed in the MMA system calculate the specific timing and dollar amounts required to produce the most optimum savings possible.”
I’ve already shown (in prior posts in this series) that a simple spreadsheet can beat the MMA system, despite its sophisticated algorithms.
“Q. Is there any risk involved?
A. From a financial standpoint, there is very little risk. No stock market crash or extreme interest fluctuation can completely eradicate the expected outcome. Only homeowners that qualify to significantly reduce their mortgage payoff time and interest will be activated on the MMA program.”
Really? Banks have recently sent notices out limiting and in some cases, canceling, access to further HELOC withdrawals. If you are caught in that cycle, you may find the next minor emergency goes right onto a 24% credit card.
“It is our pleasure to share with you the toughts (sic) on the Money Merge Account from G. Edward Griffin, author of The Creature From Jekyll Island. G. Edward Griffin is not only an author but film producer and established political lecturer.”
Who is endorsing this program? An author and film producer? Wow! Sign me up! Well known authorities such as Dave Ramsey and Clark Howard, along with numerous legitimate financial publications and web sites have both come to the same conclusion as I have. You need to dig pretty deep to want to take financial advice from a science fiction author.
Next week – More smoke, more mirrors, more innumeracy.
Joe
Ah the marketing …. I find it interesting when anyone starts getting analytical about the MMA marketing. First of all – for those that don’t know who I am, I am not a representative of UFF. I agree that paying $3500 (or really anything truthfully) for the MMA product is a waste of money. I say that without much knowledge of the product and service (because it has never been provided and I have never tried real hard to get it) that are provided for the price of $3500. And I really don’t like being on the side of UFF with respect to anything; however, I have a point of view different about the marketing. I have written a piece of software that you can try out for free that does some of what the MMA is reported to do.
Unlike Joe, I don’t find the marketing egregiously exaggerated. They are just a company trying to sell a product. Some marketing that I have seen does seem to cross a line of being fraud at times, but the items listed here don’t bother me and I’ll explain.
Item #1:
“This can be done on your current income, with or without a HELOC (or any other line of credit), regardless of current credit rating using proven tools and banking systems. Again, much faster than you can do on your own! In fact Jubilee believes you CAN’T do this on your own, and we can show you why, so let’s compare notes!”
When I analyze this item, I mostly see a statement designed to get a potential customer in the door with the important sentence being: “In fact Jubilee believes you CAN’T do this on your own, and we can show you why, so let’s compare notes!”
It is meant to generate a response on the order of: “Wow! I can’t do this on my own. Well, I guess I better come in and learn about it and decide for myself!” At this point Joe’s point about comparing the system vs. regular extra payments should take over (assuming you have the financial intelligence to understand the situation.) IMO, the statement is designed to get someone in the door – not be the definitely word on the product.
I think the “Again, much faster than you can do on your own!” sentence is missing the “if you never make an extra payment” part of the sentence, but it is just marketing – eye candy to try to get your attention.
Items #2 and #3:
“Using ‘factorial math’, the new version squelches the challenge of ‘I can do this on my own’.”
“Unless you’re going to stand there and tell me you can make over 3 million calculations each time you decide to spend a dollar, it’s just not possible to do this on your own.” commented Lee Bradshaw of The Jubilee Project.”
I don’t know if they use any “factorial math” or not. I think 3 million may a reasonable number to use for the number of calculations they perform. And I will absolutely tell you you can not do this yourself. Let me explain.
What is missing is the context. When they talk about the math and the combinations, I believe that they are saying that every time you enter spending or income information into their software they are making a lot a calculations with the new information provided to determine what the most cost effective amount to take out of the HELOC for the extra payment of the mortgage. This calculation is based on determining what is the least amount of interest you will pay on the mortgage and HELOC based on your currently entered or projected spending for the life of your mortgage. My software does this calculation – I call it the optimal injection amount. My software doesn’t do it every time you enter information and I don’t use any fancy formulas to compute it. I just brute force it. I have never counted how many calculations it does when finding that value but I suspect a number of a few million is quite probable. It turns out that this computation can save a fair amount of money if you get the injection amount right. The difference in total interest paid can be hundreds and even thousands of dollars in savings by using an “optimal” amount verses an suboptimal amount. But it is based on projected future income and expenses. I don’t want to dismiss this number entirely but it is subject to unforeseen future financial events. So their marketing in there area is very defensible. The irony is that some of their strongest statements about their product gets lost and laughed at because some of the weaker statements (and the price) don’t create a sound foundation.
Item #4: The first Q&A interchange
This is the weakest of their marketing items that Joe references. Yes, as I have just defended, their “mathematics behind MMA present a sophisticated process” and I show on my website that the “HELOC Shuffle” can (I repeat “can”) save money over simple regular extra payments. I suspect that a situation can be created and shown that $3500 spent is recouped. But it is defensible. I have worked at several companies with marketing guys that love to take product features and make the sound like the second coming in the advertising. Does it sell products? Hell if I know. But at minimum if helps them justify their salary.
Item #5: The risk Q&A
The risk doesn’t come from the use of the HELOC. The risk comes from financially illiterate people misusing the line of credit and from predatory banks granting lines-of-credit to financially illiterate people. If done in the right circumstances, there is not a lot of risk.
Those are my two cents about some of the marketing. It seems to me that a lot of the noise on the internet about the MMA marketing comes from people who have a very negative opinion about the $3500 fee to begin with and don’t really start with an unbiased opinion when analyzing the marketing. (And I don’t mean to put you that same category Joe.) They just don’t express themselves in an objective manner. If they would start by showing the weakness of the MMA as a product with a bad price and then question what the impact of successful marketing of the product on the financially illiterate, I would have a higher opinion of their hyperbole. A real case can be made about the cost effectiveness of the product and whether the term “scam” should be associated with it.
Greg
I believe you win the award for the longest comment on my blog. It’s longer than any of my posts. I approved it, uncensored, only fixing minor obvious typos.
There’s too much here for me to offer a counterpoint to each of your points, which are well reasoned. I’d like to talk about the HELOC shuffle for a moment, though. I guest posted on Fraud Files Blog and went into this a bit more. I think I did a decent job admitting the value of the shuffle, but proving that it cannot create enough value to even pay the $3500 fee. The system which you sell (linked to your name in the comment) costs $30 as compared to the UFF product which costs nearly $38/mo. So, I’d suggest that your system, if it saves the user even a couple hours over the course of their mortgage, is certainly not overpriced. Fair enough?
Joe
Absolutely fair enough. Good series so far Joe. I’m looking forward to rest.
Dave – thanks again for the kind words, a link is always appreciated, it helps me expand my audience. The series still has a number of posts to go, should wrap up by the new year.
Joe
Joe, as usual stellar thinking on this product. If you don’t mind I am going to link to this post from my blog!
Joe, It is very interesting that those “experts” that have a problem with the $3500, price tag never research the MMA any further. They are usually happy to make assumptions without any facts.
I think that you will agree that most people out there in the market today are flying blind. One piece of evidence that proves this is the fact that the average mortgage holder in the U.S. refinances every three to seven years. The costs of refinancing is usually much more than $3500. So if we teach our clients to break this cycle and focus on getting their mortgage paid off, instead of starting over every three to seven years, we will save them thousands. This is not calculated in the MMA analysis. Most American don’t see that there is a light at the end of the tunnel. Let alone that the tunnel could be a lot shorter that thirty years. Lets face it we are all creatures of habit. Unfortunately financially they are, in most cases, bad habits. The MMA does help our clients to realize that they have those bad habits.It helps them formulate an exit strategy. My average client has read all the negative garbage on the internet and still made up their minds that the MMA benefits greater than I had “hypnotized” them to believe.
If this product is so terrible where are all of the disgruntled clients. One of the naysayers on one of these blogs says they are all idiots. My average clients save over $150,000. in interest and is on track to pay off their mortgage in one half to one third of the time.
As for the factorial math. If a client has just a mortgage our product may be over kill. But the average household as thirteen open lines of credit.
This is all I need to say for now. Remember monuments are never built to honor critics. If you build a better program I would be happy to look and compare it to what I offer my clients.To many times people act like a bunch of crabs in a bucket. Pulling the one back in as he is just about to escape.
Lee, I am honored by your visit, as you are somewhat of a celebrity in these here parts. I agree that people are in trouble, the saving rate is low if not negative. If you start and end with MMA helping people see their spending habits clearly, I might not object so much. Still a hefty fee, but an important lesson to learn. Lee, most agents, Jubilee included, use hyperbole which borders on fraud. A fine line between marketing hype and simple lies. The discussions surrounding HELOC shuffle and its mechanics seems to only confuse the clients and are beyond most agents comprehension. The Jubilee site references a mortgage broker’s recommendation and it’s clear that he doesn’t understand the difference between principal, interest, average balance or month end statement balance.
There is no other word for the reference to the Factorial Math other than bullshit, plain and simple. One who has 10 credit accounts needs help of course, no argument there. They are least likely to qualify for a HELOC, but regardless, they need to pay off the highest interest debt first and work their way down. No software or person can give better advice than that, pay the highest rate debt off first. If they are able to get a HELOC, fine, they still should simply line up their remaining debt highest rate to lowest and pay according to the after tax rate on each debt. This is not rocket science.
I’d be happy to understand how Nick’s endorsement is anything but an approval of one very confused client.
Respectfully,
Joe
Could you please send me your spreadsheet template?
Lee,
I think everyone should have problem with the $3500 price. With a little education, anyone can figure out how to pay off their debt early. Whether you just make extra payments or implement some version of the HELOC shuffle, all it takes is understanding, commitment, and control of your finances. $3500 is superfluous. Now, if you want to provide the service of financial consoling for a fee to provide the education, no one would object (since it shouldn’t cost $3500 for that education.)