Montana officials continue to advocate for a state reverse mortgage program
Montana officials continue to promote the state’s specialized Reverse Annuity Mortgage (RAM) program for seniors, with one official saying it could be a big difference maker for those in Montana who want to age in place while gaining access to extra money.
The program was passed by the Montana Legislature in 1989 and offers a state-subsidized reverse mortgage limited to residents age 68 and older. It maintains interest rates that have been described by reverse mortgage industry professionals as potentially more favorable than what the industry itself can offer to area seniors under federally sponsored programs.
Recently a state housing official wrote an op-ed at a local point of sale Republic of Ravalli which aims to draw more attention to the programme.
“The RAM program helps senior homeowners in Montana with monthly payments to help them manage daily expenses while living in their home,” wrote Cheryl Cohen, division administrator for the Department of Housing. Montana Department of Commerce and director of the Montana Board of Housing. “Eligible homeowners can borrow a minimum of €15,000 and a maximum of €150,000.”
Under the program’s guidelines, the maximum loan amount is determined based on “80 percent of the FHA-assessed value of the home,” Cohen said. “In addition, lump sum cash advances are available at loan closing, and up to $10,000 is available to pay for previous mortgages, liens and liens or for accessibility improvements and other home repairs.”
The creator’s perspective
Getting the word out is a wise move, as an industry professional living in Montana recently said that general awareness of the program’s existence seems very low.
“I’ve lived here for over three years and never heard of it,” said Curt Larson, a Montana-based mortgage lender with VIP mortgage.
Larson added that he had never heard of it through his industry colleagues, but he describes the program as interesting.
“It is managed by the state. They hold the paper. There are income limits, so they verify your income, and the limits are based on the number of people in the household,” Larson said. “It is aimed at older people living with limited resources. The maximum loan amount is $150,000. It’s a first lien position, so they’re paying off the first loan, if there is one.”
One key difference, Larson says, is that the loan balance is paid out and amortized over a 10-year period, and it doesn’t have a standby line of credit like traditional loans. Federal Housing Administration (FHA)-Backed Home Equity Conversion Mortgage (HECM).
“The borrower receives a monthly payment. “If they pay off an existing loan of $50,000, $60,000, $70,000 or $80,000, then obviously the amount paid out over the 10 years will be reduced,” he said.
The state processes the applications
One of the key elements in favor of the RAM program, Larson says, is that the associated interest rate is at 5% and the loan-to-value ratio is capped at 80%. According to Larson, the program also does not rely on existing reverse mortgage lending professionals for distribution. Potential borrowers apply for the loan directly through the Montana Board of Housing.
Although it is not available to industry professionals in Montana, Larson said he would like to learn more about the program in case a potential borrower may not qualify for a traditional HECM.
“I’m glad I have the knowledge about this,” he said. “When I’m having lunch and learning, talking to financial planners, or speaking to pastors in churches, I can say, ‘You know what? If you have someone who is really struggling, and he or she owns a home, there is a program in Montana that very few people know about that can really help.”
This provides added value to the people Larson relies on for referral partnerships.
“No, I’m not going to get paid for it, but they will understand and hopefully refer,” he said. “I don’t think there is a big application for it because of the income limits etc., but I do think there is an application for it.”
Program range
Overall, the program’s scope has been relatively limited, according to data Cohen shared in her op-ed.
“Since [authorized in 1989]241 RAM loans have been issued totaling $15,477,067 in original principal amount; To date, $11,897,555 has been repaid,” Cohen said. “Of currently active RAM loans, the average principal amount borrowed is $107,138; the average advance received is $36,395; and the average monthly payment to RAM participants is approximately $741.”
Cohen went on to say that a RAM loan could be a viable option for a Montana senior who wants to remain in his home.
“If you are a homeowner, age 68 or older, of a single-family home in Montana, and expect to live in your home for a long time, but need more money to manage expenses, a RAM loan may be right for you. u,” she wrote. “Potential borrowers must attend a RAM program counseling session to apply.”
