Montana wants to remind seniors about its “Reverse Annuity Mortgage”

“As Montanans face increasing economic challenges due to inflation, this can place a heavy burden on our most vulnerable populations, including seniors,” said Cheryl Cohen, Department of Housing Director for the Montana Department of Commerce and executive director of the Montana Board of Housing, recently wrote in an opinion piece.

“Housing costs are rising rapidly across the country, in part because supply cannot keep up with demand. Even though many seniors in Montana own their own homes and have little or no mortgage debt, they struggle to make ends meet on their fixed incomes.”

This is where the RAM program can come into play. Cohen describes the program as monitoring “low-interest loans [which] enable older homeowners to benefit from an additional source of income from the equity in their home while providing them with the financial flexibility they need to continue living at home.”

Differences to HECM

HousingWire's Reverse Mortgage Daily (RMD) submitted questions about the RAM program to the Montana Department of Commerce and received answers from a spokesperson.

Regarding how the RAM program is intended to solve problems that a Home Equity Conversion Mortgage (HECM) may not be able to solve, the department explained that many of the goals are the same, but the RAM program may be more flexible with qualifications.

“The Montana Board of Housing's RAM program offers competitive or lower interest rates with simple and easy-to-understand requirements,” the spokesperson said. “Board staff and participating counselors work closely with borrowers to help them set up the reverse mortgage, with closing costs often several hundred to thousands of dollars lower than similar programs.”

Those closing costs are limited to the “actual fees of the appraisers and land registry offices, with no administrative costs added by the board,” and the administration of the reverse mortgage itself is handled by state housing agency staff “who can easily be contacted personally with questions or for assistance. The Montana Board of Housing is administratively affiliated with the Montana Department of Commerce,” the spokesman said.

In addition, Cohen explained in her commentary the various types of proceeds available to RAM borrowers.

“The RAM program helps senior homeowners in Montana with monthly payments to help them cover daily expenses while living in their homes,” she said. “Eligible homeowners can borrow a minimum of $15,000 to a maximum of $150,000. The maximum loan amount is determined based on 80 percent of the home's FHA-assessed value.

“In addition, lump sum advances are available at loan closing and up to $10,000 is available to pay previous mortgages, liens and mortgages or for accessibility improvements and other home repairs.”

Longer pensions

Loan values ​​for the HECM program are generally higher, depending on the age of the borrower and the value of the home. The HECM limit is over $1.1 million in 2024. The minimum age for a HECM is 62, while the minimum age for the RAM program is 68. There's a reason for that, the spokesperson said.

“As Montana's senior population grows and ages, we find that even with an age limit of 68, many of our borrowers outlive the 10 years of repayments,” the spokesperson explained. “Lending to a younger population can exacerbate financial problems as more participants outlive those repayments.”

The availability of the program also depends on the financial disbursements made by the state legislature to the department itself. The creation process also has similarities to the HECM program, with some state-specific requirements.

“Applicants must meet with trained RAM counselors from the nonprofit sector before qualifying for our financing,” the spokesperson explained. “After the session is complete, housing board staff will work with the participant to determine needs and financing options. Staff will assist with obtaining an assessment, completing the loan and setting up payments. The Montana Board of Housing is the only entity that offers this service.”

Renewed communication efforts

The spokesman cited the economic situation of seniors in the state as the main reason for the state's current interest in raising awareness of the RAM program.

“The board hopes to increase awareness of this program for Montana's seniors and offer this option to help with costs beyond what can be covered by Social Security or other retirement payments,” they said. “Because RAM proceeds do not have to be repaid until the home is vacated, additional funds are available without incurring further debt. We hope these monthly payments will provide our RAM participants with peace of mind and improve their quality of life.”

However, the RAM program also faces the same reputational problems that the entire mortgage lending industry faces, and this may have led to a decline in consumer demand, according to Cohen and the department spokesperson.

“Reverse annuity mortgages scare some seniors because some providers of such financing have committed fraud,” the spokesperson said. “That's why we require counseling and have staff who can speak directly with participants and their families about any issues that may arise. The payments we can provide often cover the cost of medications or income shortfalls that help pay for monthly expenses such as groceries or utilities.”

The spokesperson also mentioned the success story of a borrower who received a loan under the program.

“One borrower mentioned to staff that she had to sell her furniture piece by piece to pay for her medications, but was able to stop doing so when she started receiving the monthly RAM payments,” they said.

Anna Harden

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