Death of the 30-year mortgage!

Today's mortgage experts are looking for an edge--better trigger leads, faster turn times, an automated valuation model in lieu of appraisals and streamline refinances. They are looking for anything to keep themselves one step above the competition. I have been privileged to be part of several emerging markets over the years, and folks, here comes one big edge! I went into the sub-prime market in 1995 and stayed through May 1998. I then moved onto Web site automation from 1998-2001. In 2001, I went into e-commerce online real estate. Now, years later, I consult companies in sales and operations, and this time, I see a great market for those who can change.

All you have ever heard from your father, mother and friends has been: "Get a 30-year, fixed mortgage." Now, 20 years later, all the baby boomers are close to retirement and trying to expedite their own mortgages. So, let's think! There are adjustable-rate mortgages (ARMs), option ARMs, mortgage treasury ARMs and cost of funds, but they are all ARMs. Then, of course, the standard 15-year fixed, but we are all too afraid of payment shock. So, what's next? I had the privilege to work for a top savings and loan company in the early '90s. They had a great bi-weekly attached to a cost of funds that is paying off my 30-year amortization in 21 years. It always sounds too good to be true. Well, it's not. Sure, it's attached to an ARM, but as the rate may increase, the balance decreases faster. But more than that, the statistics then are still true today. More than 90 percent of all mortgages do not get $1 additional principal put on them in their lifetime. We are all set on track for 30 years. Look at your mom and dad's mortgage. Most likely, they never, until the last payment, paid it down. Then, on the last payment, couldn't wait for the check to clear.

Today, as the lenders fall to the wayside the way they do every seven-10 years, a new era is approaching. The new era is MMA--Money Management Accounts! They come in all shapes, sizes and software. The best thing available to the mortgagee is that he does not have to refinance if he does not need to. I know at this point most mortgage professionals are saying, "How can I make money selling a software system or program?" My answer: The same way you learned to show an amortization schedule of a nine percent mortgage refinancing to 7.5 percent. There are several new variations out there and each has its own sustenance and accolades. All of it seems to be as complicated as a bi-weekly, but without the refinance fees. Yes, I have seen some as high as $10,000, but showing a mortgage finance savings of more than $100,000. Would you invest $10,000 in an electric, water or natural gas conservation device that would cut your utilities bill in half over a 30-year comparison? It all has to be input, reviewed, digested and thought through. I am sure that many people reading this article will scream that MMAs are a scam. Again, these are the same Mortgage Brokers and loan officers who constantly refinance and churn their clients.

There will also be those who say, "I can do that myself by putting $100 a month extra on my monthly mortgage payment." To those, I only ask this: Please show yourself, and me, a print-out from the date of your first payment to today of every month and the $100 check you wrote! I am not being snide in this remark; I am being honest. Life always seems to get in the way. I have been blessed with four children. I am a single father, with my two oldest now in the United States Air Force. But 20 years ago, if I had an extra $100, it went to diapers and baby formula. Then, in the years that followed, came baseball clothes and dancing skirts for my daughter. Then in high school came all the intramural sports, car repairs and now, higher gas prices. So I do not offend anyone, some of you have been able to pay-down your mortgages through bonuses, commissions and some windfalls. But the majority of us keep making our 30-year payments. I am not saying that MMAs are for everyone. Not everyone has a high-definition television (HDTV). That's funny; we can't afford the higher gas prices, but we need to get the new 50-in. HDTV for the one sport or movie we want to see in high definition. Right there is $2,500 spent on improving our movie and sports viewing--just think about that. I feel that if we make an investment that will give us a return on investment in less than one year, it's great. How long will it take to get a return on investment from the HDTV?

In closing, if you, the mortgage professional, can figure out a way to call everyone you know and show them how to refinance their mortgage and try to get a fee against five other mortgage professionals, try an MMA. I know most accountants will call this another fast-buck trick software program. I call it demanding your time to monitor the one and only true physical asset that encompasses you, your family, your car and your quality of life. Now, if you have to decide between a new 50-in. HDTV and an MMA, choose the MMA this year. Then, next year, after you just cut off seven years of interest on your mortgage, buy a 60-in. HDTV, and get the latest model.

Steven Tomaszewski is the CEO and founder of Ebanctrain Consultants, with offices in Chicago, Ill. and Dublin, Calif. He may be reached at (847) 951-3995 or e-mail [email protected].