of Montana Housing Board is aiming to remind the state’s seniors about a government-administered program designed specifically to help seniors access their home equity — and it should be very familiar to members of the reverse industry. mortgages.

Officials with the state housing authority recently released new materials about the Reverse Annuity Mortgage (RAM) program, which was approved by the Montana Legislature in 1989 and offers a state-subsidized reverse mortgage that limits for residents aged 68 and 68 and older.

“As Montanans face more economic challenges due to inflation, it can weigh heavily on our most vulnerable populations, including senior citizens,” Cheryl Cohen, division administrator for the housing division at Montana Department of Commerce and executive director of the Montana Housing Board, wrote in a recent op-ed.

“Housing costs are rising across the country, thanks in part to a lack of supply matching demand. While many seniors in Montana own their homes and have little or no mortgage debt remaining, they struggle to make ends meet on a fixed income.”

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

Differences with HECM

HousingWireReverse Mortgage Daily (RMD) sent questions to the Montana Department of Commerce about the RAM program and received a response from a spokesperson.

As for how the RAM program aims to address issues that a home equity conversion mortgage (HECM) may not address, the department said many of the goals are the same, but that the RAM program may come with more flexibility in qualifications.

“The Montana Housing Board’s RAM program offers interest rates that are competitive or lower with requirements that are simple and easy to understand,” the spokesperson said. “Board staff and participating advisors work closely with borrowers helping to set up reverse mortgages with closing costs often several hundred to thousands of dollars less than similar programs.”

These closing costs are limited to “actual payments from appraisals and title companies with no administrative costs added by the Board,” and the administration of the reverse mortgage itself is handled by state housing personnel “who can easily be contacted personally with any questions or help. The Montana Housing Board is administratively attached to the Montana Department of Commerce,” the spokesperson said.

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Additionally, Cohen explained in her writing the different types of income available to RAM borrowers.

“The RAM program helps senior Montana homeowners with monthly payments to manage day-to-day expenses while living in their homes,” she said. “Qualified 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-assigned value.

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

Longer pensions

Loan values ​​for the HECM program are generally larger depending on the age of the borrower and the value of the home, with the HECM limit in 2024 reaching $1.1 million. The minimum qualifying age for a HECM is 62, while the minimum for the RAM program is 68. There’s a reason for that, the spokesman said.

“With Montana’s aging population growing and living longer, we find that even with an age limit of 68, many of our borrowers survive beyond 10 years of fixed payments,” the spokesperson explained. “Giving loans to a younger population could add to financial issues as more participants default on those payments.”

The availability of the program is also subject to financial disbursements that the state Legislature makes to the department itself. The origination process also has similarities to the HECM program, with some state-specific requirements.

“Applicants must go through trained RAM advisers from the not-for-profit sector before they are eligible for our funding,” the spokesperson said. Once they have completed the session, housing staff work with the participant to determine funding needs and availability. The staff helps get an appraisal and close the loan and set up payments. The Montana Housing Board is the only entity that provides this service.”

Renewed communication efforts

As for why the state is interested in spreading more awareness about the RAM program now, the spokesperson cited the economic circumstances facing the state’s senior citizens as the main reason.

“The board hopes to increase awareness of this program for Montana seniors and provide this opportunity to help with costs that exceed what can be paid from Social Security or other retirement income,” they said. “Since the proceeds from the RAM do not need to be paid back until the house is vacated, additional funds become available without incurring further debt. We hope these monthly payments provide peace of mind and help improve the quality of life for our RAM participants.”

That said, the reputational issues facing the broader reverse mortgage industry have also been faced by the RAM program, which may have dampened consumer demand, according to Cohen and the department spokesman.

“Reverse annuity mortgages scare some seniors because of the scams that have taken place by some providers of such financing,” the spokesman said. “For this reason, we seek counseling and have staff available to speak directly with participants and their families about any concerns they may have. The payments we can offer often cover medication costs or income-related shortfalls to help pay monthly expenses for food or utilities.”

The spokesperson also cited a borrower success story awarded by the program.

“One borrower mentioned to staff that she needed to sell off some of her furniture to help pay for her medication, but was able to stop when she started receiving monthly RAM payments,” they said.