Montana’s unique Reverse Annuity Mortgage (RAM) program is a state-sponsored reverse mortgage, with lower interest rates and proceeds along with a higher minimum qualifying age that distinguishes it from the Home Equity Conversion Mortgage (HECM) program through the Federal Housing Administration (FHA).
Cheryl Cohen, division administrator for the housing division at the Montana Department of Commerce and executive director of the Montana Board of Housing, recently sat down with HousingWire’s Reverse Mortgage Daily (RMD) to discuss the role that the RAM program plays for the state’s seniors and why it has been more heavily promoted of late.
In the second part of the interview, Cohen touches on the potential for greater collaboration with the reverse mortgage industry and gives an overview of how “success” is defined for the program.
Addressable cohort and reach
The RAM program and the HECM program maintain key 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 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, if we’re talking about borrowers with a more sizable outstanding mortgage on their home, the available funding per loan can have some limiting factors on who is eligible. If someone owes too much on their house, this program is probably not the best fit.”
The RAM program has no origination fees, and the state only charges for the actual costs of title and appraisal. These are included in the loan amount, which Cohen says helps to minimize fees and the ultimate impact on the borrower.
With roughly $5.5 million in outstanding funds available in the program today, there is capacity for roughly 36 more loans at the full $150,000 amount, and room for more at lower loan amounts. As more loans are paid off, the capacity can rise. There are currently 41 outstanding RAM loans active in Montana today, Cohen said.
Potential for collaboration
When asked about the possibility of getting the word out further about the RAM program by collaborating 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 a minimum, getting the word out so we can have a different referral stream,” she said. “We are looking to bring a policy conversation to our board. This program is under the Montana Board of Housing, which is administratively attached to the Montana Department of Commerce. We’re the state’s designated Housing Finance Agency, so we have a board that’s appointed by the governor and confirmed by the state Senate.”
That board is strictly involved with setting policy and is not involved in budget appropriations; those matters are reserved for the Legislature and the governor’s office. But the board does provide policy input, and something being discussed now is that there could be room to apply the RAM program to condominiums, Cohen said.
Most existing loan programs involving condos require approval through the FHA or the U.S. Department of Veterans Affairs (VA), but many condos within Montana do not have 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 condos that are not under that framework,” she said. “We also need to consider the potential risk of loan repayment if this limits future buyers of the property to cash buyers or those using conventional products.”
Of course, assessing the long-term risk to the state will be key before any final decision is made, but Cohen said there is active interest in having this policy conversation. And collaboration with either reverse mortgage companies or associated trade organizations is an idea she thinks the state would be open to.
“If we’re looking at other trade organizations or folks involved in the reverse annuity mortgage space, I think there’s always an opportunity to bring those individuals to a board meeting to have a collaborative conversation about what is happening in the industry and how we could better partner moving forward,” she said.
Success metrics
When asked to define the key success metrics for the RAM program, Cohen said it ultimately boils down to how long an eligible Montana resident can stay in their home.
“That’s a key measure of success,” she said. “As we’ve seen payoffs — typically, since we’re talking about seniors 68 or older — the homeowners or borrowers usually pass away and the property is sold to pay off the loan. We haven’t had any significant exposure with respect to those loan payoffs.”
But when they do happen, some challenges can emerge, including whether or not the accounts are escrowed. If a borrower has failed to pay property taxes, then the board has to determine if it will front these funds and work directly with a borrower to help them catch up when they fall behind.
“This is an element we’re refining with our board, to help people maintain stability,” Cohen said. “That’s another element we work on with the RAM counseling network — to ensure that the borrowers we’re serving, if they’re eligible for other senior property tax deductions or similar services, are getting all the resources they could qualify for to keep their home expenses manageable and stable.”