Anybody know anything about MTA Loans???

bigdyce45 · Joined: 11 Jul 2006 Posts: 25

A friend of mine in New Orleans, started advertising for MTA loans right before the hurricane. I was wondering if anyone knows where I can find information this program. Thanks.

chow · Posted: Thu Jul 13, 2006 9:39 am Post subject:

The MTA-Index (Month Treasury Average) is based on the average annual monthly yields of U.S. Treasury Securities, (T-Bill) adjusted to a constant maturity of one year, as made available by the Federal Reserve. The MTA-Index is determined by adding together the monthly yields for the most recent 12 months and dividing by 12. Because it’s an average, higher yields in some months are offset by lower yields in others.

If you add the current monthly MTA-Index to a Margin and it will equal the current monthly "fully-Indexed" Rate; the Margin never changes. Over the last fourteen (14) years, with the PRIME rate increasing then decreasing the MTA-Index has averaged below 5%. Therefore, if you're worried about the Life Cap (Index + Margin) going up to its max you need to understand how the MTA moves. i.e., if you had a 2.0% Margin, the MTA-Index would be capped at 7.95%, or 9.95% - 2.0% = 7.95%. Remember, this Index has averaged below 5% over the last 14 years. The MTA mortgage is one of the slowest moving Indexes either in the US or Europe (*COFI would be the slowest moving)

1. "Minimum payments"

2. "Interest-only" payment Option.

3. "Fully Indexed" (Index + Margin) payment Option:

4. "15 yr." payment amortization Option.

5. Pay any amount over the "Minimum" pmt. (This option is always left blank on your monthly statement.)

The MTA-Index is one of the safest of all ARM mortgages offered today.

The COFI mortgage would be another choice. Next would come either the COSI or CODI with the LIBOR following. All four programs work the same way, i.e., 5 different monthly payment options, a yearly 7.5% payment cap protection, a Life Cap, a fixed Margin, and a slow moving monthly Index, but there are some differences:

History has proven that the MTA mortgage has offered a lower fully-indexed Rate (Index + Margin) vs. the COFI, COSI and CODI's fully-indexed Rate over the past 10-15 years.

Currently, the MTA fully-indexed Rate is lower than the COFI, COSI and CODI.

MTA and COFI typically offer a lower life cap vs. the COSI/CODI's life cap.

MTA offers the lowest Margins (this is Key.)

MTA typically offers a lower "Starting Rate" vs. the COFI.

The benefits of this Adjustable Rate Mortgage is you have the Option to start off with lower mortgage payments (Minimum pmt. option.) These lower payments could help you to stay out of future credit card debt, or get you out of existing credit card. If you have no debt, you could use the extra cash-flow to buy things for your new house (without having to use credit cards.) Or the lower payments will help you re-build your savings portfolio for your children's college fund or your family's future retirement. Or, if you lose your job and need to take a few months to go back to school for re-training, etc....

If you choose to pay only the "Minimum payments" and you saved and invested the difference between not making the MTA's monthly Principal and Interest payment (Index + Margin) or the Fixed-Rate payment and invested this extra cash into a ultra safe balanced portfolio, this savings could potentially double every 7.2 years if you earned at least 10%. If you earned just 5%, it would double every 14.4 years, etc... Therefore, we believe that you could actually pay your MTA mortgage off faster by making only the "Minimum payments" (IF) you saved and invested just the first 5 year difference in monthly payments into an ultra safe Mutual Fund or better yet the DOW 30 or S&P Indexed Funds. If you were disciplined enough not to touch the initial 5 years savings and re-invested the dividends automatically every month, this money could grow fast enough (if you could earn at least 8% annually) to allow you to pay your mortgage off in about 20 to 25 years (by adding a one time extra pmt. in year 20 to 25), and still have savings left over.

The risk of obtaining this ARM, is the possibility that your future Payments and Interest Rate could move higher then the Fixed Rate you could have chosen. However, when the future Fixed Rates eventually start to move back down, the MTA Index will also start to slowly inch back down. Therefore, you need to keep in mind it's the over-all "average" of the Index + Margin for the last 13, 10, 5 and 1year. With the MTA ARM, you might not need to refinance again. This could also be true if you received your Fixed Rate at an historic low, but what about all the Folks that received their Fixed Rate in 1990, or 1995, or 2001, they thought the then offered Fixed Rate was a great deal. Nevertheless, all of these Folks would have needed to refinance several times just to get down to a 5% or 6% range today, by spending much monies in closing cost and always going back to a 30 year payoff. However, if you had obtained this MTA mortgage in the early 90's, today, you'd have a Interest Rate in the three (3) percentage range (without ever having to refinance.)

Many have been told to stay away from "negative amortizing" (balance can go higher if you make the "Minimum" pmt.) loans. But once they understand that a Home Equity mortgage (2nd mtg.) can also produce negative amortization (mortgage balance increases) they start to look at the "Minimum" payment option in a new light.

Now ask me how many of these things I sold when I was a LO? None! Great Program if you know what you're doing with your money. I don't think this loan is good for people who may be in a declining value area, and moving every 5-7 years.

bigdyce45 · Joined: 11 Jul 2006 Posts: 25

Thanks a lot, you're the first person to break it down to a level that I can understand. I'm not a Loan Officer (yet), but my girlfriend is and I'm just trying to help out by looking into some other loan programs that she can push or at least use to spark some interests.

I didn't think about the angle of using the savings to payoff the mortgage faster, but it makes a lot of sense. I was planning on selling it more to investors.

Do you know of any lenders that offer these products? Are the harder to qualify for than a standard ARM or IO?

Thanks again.[/quote]

chow · Posted: Thu Jul 13, 2006 6:13 pm Post subject:

World Savings offers them.

Haplo · Joined: 20 Jan 2005 Posts: 2422 Location: Springfield, IL

I don't understand them at their detailed levels either, but I understand the basics, and that most of my customers wouldn't want to do them ;)

bigdyce45 · Joined: 11 Jul 2006 Posts: 25

Haplo -

Why is that? Too complicated for most homebuyers or too risky? Other than risk, what do you see as being the biggest disadvantage?

Chow - Thanks :wink:

chow · Posted: Fri Jul 14, 2006 1:25 am Post subject:

Well, here is the issue. My husband sent me this link.

http://www.forbes.com/2006/02/09/cx_sc_0210homeslide_6.html?thisSpeed=6000

It's a link of what value to remodels do for an area, and what the comps are saying. Depending on where you are at- you could actually lose value.

Haplo and I live in the middle section of the US. the Plains, Ohio Valley areas. We aren't exactly a coastal community. (Having grown up on the Great Lakes- this is Land Lubber area where I'm at now!) Coastal areas always keep a value, but for the last several decades, they have grown in value at double digit pace. Some areas suffered a slump, but the high end housing was always there for value. Who ever heard of buying a house one day and the next month it was worth 30% more of what you paid? Well, we have all went through this. Some of it is false values-some of it is drove by market needs. Las Vegas, is the flip investor capital. You build a house, and before you close the construction loan-you're selling it-at a profit of 35% more, at least. Phoenix is about the same.

The "Bubble" has burst in a few areas. Or it's a slow leak, or it's just there-lingering. When this slow down started, and we had a refi boom in the early 2000's I told my husband because of where we live, the cheap subdivisions going up, and default rates rising-we may have to bite the bullet on what our house is actually worth, if we needed fast cash.

Your house is only worth what someone will pay for it. If you're going to move-and you're upside down because you only paid interest on the loan, and then your builder sold the last few homes off lower than yours...then throw in the people who got foreclosed on...Is this a good loan for a average middle income person? ONLY if they reinvest the money.

People make payments, they pay what is due. Are you the type of person to make a $1000.00 payment if the bill due this month is $600? Will you take that $400, that you didn't pay on the house and invest it in a good money making instrument? :wink:

Haplo · Joined: 20 Jan 2005 Posts: 2422 Location: Springfield, IL

Quote: Why is that? Too complicated for most homebuyers or too risky? Other than risk, what do you see as being the biggest disadvantage?

Both ;)

We don't even offer them, so I haven't really gone into too much detail about the product. Had it available when I was a broker, but that was a couple years back, and never really got into the product. Overall, I'm pretty glad I never convinced anyone to get one, they'd be beating my door down right now.

The Wizard · Joined: 02 Apr 2006 Posts: 48 Location: So. Cal

Haplo,

I think the key word you used was convinced. No one should need to be convinced to use this product.

As Chow stated most people get in a pattern of making a minimum payment. This product is not for those type of people. This product is the the finanical savvy who have a firm understanding of the outcome of making the neg. payment, the I/O payment and the 15 and 30 yr. payment.

Haplo · Joined: 20 Jan 2005 Posts: 2422 Location: Springfield, IL

Yes'm. That was my point.

Hey speaking of which, you're not in the San Diego area, are you? I'm going to be down there beginning of next month.

chow · Posted: Sun Jul 16, 2006 9:27 am Post subject:

Can I come along with? (Breeze, Ocean, Shopping)

(oh I forgot I get to go to Orlando-Where it's going to remind me of where Ilive at-hot and muggy!) :roll:

The Wizard · Joined: 02 Apr 2006 Posts: 48 Location: So. Cal

Hey Haplo,

I am in Los Angeles, but San Diego is a nice place. Carlo from GetLeads is down there.

Orlando is way to humid, we have nice dry heat....lol...like their is such a thing as a good or bad heat.

Haplo · Joined: 20 Jan 2005 Posts: 2422 Location: Springfield, IL

Well darn! I'm going to be there a whole week and don't even get to meet up with the amazing wizard!!

The Wizard · Joined: 02 Apr 2006 Posts: 48 Location: So. Cal

Hey I am willing to make the drive!!!!