Montana’s unique Reverse Annuity Mortgage (RAM) program is a government-sponsored reverse mortgage with lower interest rates and proceeds and a higher minimum age that differentiates it from the Home Equity Conversion Mortgage (HECM) program through the Federal Housing Administration (FTA).
Cheryl Cohen, Department Head of Housing at Montana Department of Commerce and Managing Director of Montana Housing Authorityrecently met with HousingWire‘s Reverse Mortgage Daily (RMD) discusses the role the RAM program plays for the state’s seniors and why it has received more promotion recently.
In the second part of the interview, Cohen discusses the potential 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 have significant differences in scope and qualifications. Cohen previously stated that only 241 RAM loans have been documented since the state legislature created the program in 1989, but there are also fewer applications in terms of loan amounts and fee structure.
“We have a minimum loan amount of $15,000 and a maximum loan amount of $150,000,” Cohen said. “So if these are borrowers with a larger mortgage on their home, the available financing per loan may have some limiting factors for eligibility. If someone owes too much on their home, this program is probably not the best fit.”
The RAM program has no processing 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 fees and the final impact on the borrower.
With about $5.5 million in outstanding funds available in the program today, there is the ability to make about 36 more $150,000 loans, and there is also room for more loans at lower amounts. As more loans are paid off, capacity can increase. There are currently 41 RAM loans outstanding in Montana, according to Cohen.
Potential for collaboration
When asked about the possibility of collaborating with the reverse mortgage industry to raise awareness of the RAM program, Cohen said there is scope to explore such opportunities.
“I always think there’s an opportunity to collaborate and at least an opportunity to get the word out so we have another referral stream,” she said. “We want to bring a policy discussion to our board. This program is under the Montana Board of Housing, which is administratively under the Montana Department of Commerce. We are the state’s designated housing finance agency, so we have a board that is appointed by the governor and confirmed by the state Senate.”
That panel is involved solely in policy-making, not budget approval; those matters are reserved for the Legislature and the governor’s office. However, the panel does provide policy input, and there is currently discussion about whether there might be scope for applying the RAM program to condominiums, Cohen said.
Most existing condo loan programs require approval from the FHA or the U.S. Department of Veterans Affairs (VA), but many condos in Montana don’t have those requirements. Addressing that issue could lead to greater adoption, she suggested.
“One of the policy issues we need to consider is whether we want to give staff the ability to approve condominiums that do not fall within this framework,” she said. “We also need to consider the potential risk of loan repayment if it restricts future buyers of the property to cash payers or conventional buyers.”
Of course, assessing the long-term risk to the state will be critical before a final decision is made, but Cohen said there is a lot of interest in this policy discussion. And she believes the state would be open to working with mortgage lenders or related trade organizations.
“When we look at other industry organizations or people who are involved in the reverse annuity mortgage space, I think there is always an opportunity to invite those individuals to a board meeting to talk together about what is happening in the industry and how we can work better together in the future,” she said.
Success metrics
When asked about the key metrics for the RAM program’s success, Cohen said it ultimately comes down to how long an eligible Montana resident can stay in their home.
“That’s an important measure of success,” she said. “As we’ve seen with the repayments — since we’re talking about seniors 68 and older — typically the homeowners or borrowers die and the property is sold to pay off the loan. We haven’t had any significant experience with those loan repayments.”
When this happens, however, some challenges can arise, including whether or not the accounts are held in escrow. If a borrower has not paid property taxes, the board must decide whether to advance those funds and work directly with a borrower to help them catch up if they fall behind.
“This is one element we are refining with our board to help people maintain stability,” Cohen said. “That’s another element we’re working on with the RAM counseling network – to make sure that the borrowers we serve, if they are eligible for other senior property tax deductions or similar services, are getting all the resources they could qualify for to keep their housing costs manageable and stable.”
