SMART loans do several things. I have one and I have sold many.
Here's the thing: SMART is about saving on the total cost of your mortgage. No one promised you a lower rate -- no one promised you 'guaranteed' approval. What you should have been promised (but perhaps were not, unfortunately) is a mortgage the lowers your total cost of ownership. I had a 30-year mortgage at a LOWER interest rate of 6.5% and refinanced my home and all my debt at 7.25 with my SMART.
Yes, if I took all 30 years to pay off my home I would have paid more. By enrolling in the SMART bi-weekly payment, I will pay off my home in 18 years -- AND pay $180,000 less in interest bringing my total cost of ownership down. The reason most of us never own a home outright is because we never get to the principal of the loan, we're only paying interest, the SMART loan gets you there faster.
I would like to correct one post I saw here.
There is a prepayment requirement on the SMART loan -- it is comprised of a clause that says if you pay off the loan in the first three years there is a penalty IF you don't buy another home through Citimortgage. So if you're trading up (or down), as long as you get another SMART loan, you're good!