Why Montana is promoting its state-run reverse mortgage program more heavily

The state of Montana has been more heavily promoting its state-based Reverse Annuity Mortgage (RAM) program for seniors. Unused funds allocated to the program can be used by helping the state’s older residents with reverse mortgage financing at a relatively low interest rate compared to either Federal Housing Administration (FHA)-backed Home Equity Conversion Mortgages (HECMs) or proprietary product options.

This is according to Cheryl Cohen, department administrator for the housing department at Montana Department of Commerce and director of the Montana Housing Board. Cohen wrote op-eds and other promotional materials for the RAM program over the summer. She sat down HousingWire‘s Reverse Mortgage Daily (RMD) to provide more details about the push and the unique elements of the RAM program.

Role of the RAM program

Previously, RMD profiled the RAM program and highlighted its differences from the HECM program. A state spokesperson explained that the RAM program could have more flexibility in terms of qualifications, lower closing costs and commensurately lower loan limits compared to the national limit associated with the HECM program.

When asked about the ability to meet the needs of the state’s seniors, Cohen said the RAM program is uniquely suited to the task of older Montanans.

“The main purpose of the program, when it was passed by the state Legislature in 1989, was to recognize that many older homeowners in Montana are lower-income people and could benefit from an additional source of income through the equity in their homes.” she said. “This program aims to offer that opportunity. With rising costs and inflation impacting Montana seniors – especially those on fixed incomes – this program is a valuable resource.”

Many of these seniors, she said, have paid off their mortgages or have very low balances, and the RAM program can add additional stability to their financial situation. As with other types of reverse mortgages, the proceeds are often used for other purposes that the senior homeowner may have.

“Some borrowers we work with are using a small cash-out option to improve the accessibility of their homes, which also allows them to stay in the community of their choice for as long as possible,” she said. “This, in turn, contributes to the overall stability of the housing market here in Montana.”

A new, public impulse

For her part, Cohen joined the Montana Board of Housing in 2018 and assumed her current role in 2020. Cohen examined the various programs for which the board received funding as she entered her first legislative session in her current role.

“Then I heard about this very small reverse annuity mortgage program,” she said. “There was an available balance, which is rare because very few of our programs have funding available, and I certainly don’t like leaving resources on the table when we need to deploy them to serve our citizens.”

Recent op-eds, editorials, press releases and interviews are all being sought in recognition of an outstanding amount of cash available to fund more RAM loans, she explained.

“So right now the reverse annuity mortgage program has about $5.5 million available to support seniors in Montana,” Cohen said. “That’s really the driving force behind the marketing campaign, the push and the op-eds that have come out – because, hey, we have this resource, and we want to make sure we leverage it and get it out there. people who can best be served by the program.”

Unique distribution

Some of the same types of educational barriers that are present for both public and private entities on the HECM side are also factors for Cohen and the state of Montana. These include a lack of product awareness and reputational issues for reverse mortgage products. But RAM loans have fundamentally different distribution pipelines, Cohen explained.

“I think one of the elements that makes our RAM program quite unique is that we don’t tap into the typical lender pipeline,” Cohen said. “When we receive a call from an interested applicant or his family member, we refer him to a group of care providers within a framework organization for the elderly and disabled. These are aging or senior services agencies, and the counselors are specifically trained to support seniors and in particular to work with our RAM program.”

This means that RAM applicants contact the state directly, rather than working with a lender and lender. Like the HECM program, counseling is a key element of the credentialing process, and the state uses special counselors from the State Health Insurance Assistance Program (SHIP), who also support Montana seniors with assistance for other programs such as Medicare.

“The counselor helps them complete the paperwork, which is then submitted to the Montana Board of Housing staff,” she said. “We review the application for eligibility and compliance with our program requirements, and then we directly originate and service the loan ourselves. I think this is a fairly unique setup in the RAM space – it is a state-run program that does not involve direct collaboration with the private sector, unlike most other HECM or other loan products.

The range is of course much more limited. In an op-ed earlier this summer, Cohen shared that only 241 RAM loans have been issued since the Legislature’s initial approval in 1989. These loans total $15,477,067 in original principal, with $11,897,555 repaid by the end of July.

Editor’s note: More coming soon from Cheryl Cohen on the RAM program, including potential opportunities for collaboration among the reverse mortgage industry and an outlook on the program’s success rates.