Montana’s reverse mortgage program could provide room for industry collaboration

Montana’s unique Reverse Annuity Mortgage (RAM) program is a state-sponsored reverse mortgage, with lower interest rates and yields, along with a higher minimum age that sets it apart from the Home Equity Conversion Mortgage (HECM) program through the Federal Housing Administration (FHA).

Cheryl Cohen, division administrator for the housing department at Montana Department of Commerce and director of the Montana Housing Boardrecently sat around the table HousingWire‘s Reverse Mortgage Daily (RMD) to discuss the role the RAM program plays for the state’s seniors and why it has been more heavily promoted lately.

In the second part of the interview, Cohen discusses opportunities for greater collaboration with the reverse mortgage industry and provides an overview of how “success” is defined for the program.

Addressable cohort and reach

The RAM program and the HECM program retain important differences in scale and qualifications. Cohen previously explained that only 241 RAM loans have been documented since the program was established by the state Legislature in 1989, but that there are also more limited applications in terms of loan amounts and fee structure.

“We have a minimum loan amount of $15,000 and a maximum of $150,000,” Cohen said. “So when we’re talking about borrowers with a larger outstanding mortgage on their home, the financing available per loan may have some limiting factors on who qualifies. If someone has too much debt on their home, this program is probably not the best choice.”

The RAM program has no origination fees, and the state only charges the actual cost of title and appraisal. These are included in the loan amount, which Cohen says helps minimize costs and the ultimate impact on the borrower.

With approximately $5.5 million in outstanding funds currently available in the program, there is capacity for roughly 36 additional loans for the full $150,000 amount, and room for more at lower loan amounts. As more loans are paid off, capacity can increase. There are currently 41 outstanding RAM loans active in Montana, Cohen said.

Potential for collaboration

When asked about the opportunity to raise awareness of the RAM program by partnering with the reverse mortgage industry, Cohen said there is room to explore such opportunities.

“I always think there’s an opportunity for collaboration, and at least to get the word out so we can get another referral stream,” she said. “We want to have a policy conversation with our board. This program is governed by the Montana Board of Housing, which is administratively affiliated with the Montana Department of Commerce. We are the state’s designated Housing Finance Agency, so we have a board appointed by the Governor and confirmed by the Senate.

That board is strictly involved in determining policy and not in budget appropriations; those matters are reserved for the Legislature and the governor’s office. But the board does provide policy input, and something now being discussed is that there could be room to apply the RAM program to apartment buildings, Cohen said.

Most existing loan programs involving apartments require approval through the FHA or the The U.S. Department of Veterans Affairs (VA), but many apartments in Montana do not meet these requirements. Addressing this could lead to more adoption, she suggested.

“One of the policy elements we need to consider is whether we want to give staff the discretion to approve apartments that don’t fall under that framework,” she said. “We must also consider the potential risk of loan repayments if this limits future purchasers of the property to cash buyers or buyers using conventional products.”

Of course, assessing the long-term risk to the state will be critical before making a final decision, but Cohen said there is active interest in this policy conversation. And partnering with reverse mortgage companies or associated trade organizations is an idea she said the state would be open to.

“When we look at other trade organizations or people involved in the reverse annuity mortgage industry, I think there’s always an opportunity to bring those individuals to a board meeting to have a collective conversation about what’s happening in the industry and how we can do that. a better partner moving forward,” she said.

Success statistics

When asked to define key success metrics for the RAM program, Cohen said it ultimately comes down to how long an eligible Montana resident can remain in their home.

“That’s an important measure of success,” she said. “The way we’ve seen the payouts – usually, since we’re talking about seniors 68 or older – the homeowners or borrowers usually die and the property is sold to pay off the loan. We have not had any significant exposure with respect to those loan disbursements.”

But when they do happen, a number of issues can arise, including whether or not the accounts are in escrow. If a borrower has failed to pay property taxes, the board must determine whether to provide these funds and work directly with a borrower to help them catch up.

“This is an element that we are refining with our administration to help people maintain stability,” Cohen said. “That’s another element we’re working on with the RAM Advisory Network – to ensure that the borrowers we serve, if they qualify for other senior real estate tax credits or similar services, get all the resources they may qualify for to keep their money. housing costs manageable and stable.”