Officials in Montana continue to promote the specialized Reverse Annuity Mortgage (RAM) program for the state’s seniors, with one official saying that it could be a big difference-maker for those in Montana looking to age in place while gaining access to additional cash.

The program was passed by the Montana Legislature in 1989 and offers a state-subsidized reverse mortgage that is limited to residents ages 68 and older. It maintains interest rates that have been described by reverse mortgage industry professionals as potentially more beneficial than what the industry itself can provide to area seniors under federally sponsored programs.

Continued promotion

A state housing official recently penned an op-ed in local outlet Ravalli Republic that aims to bring more attention to the program.

“The RAM program helps senior Montana homeowners with monthly payments back to them to manage everyday expenses while living in their homes,” wrote Cheryl Cohen, division administrator for the housing division at the Montana Department of Commerce and executive director of the Montana Board of Housing. “Eligible homeowners can borrow a minimum of $15,000 up to a maximum of $150,000.”

Under the program’s guidelines, the maximum loan amount is determined based on “80 percent of the FHA-determined value of the home,” Cohen said. “Additionally, lump sum advances are available at loan closing, and up to $10,000 is available for payment of prior mortgages, liens and pledges or for accessibility improvements and other home repairs.”

Originator’s perspective

Getting the word out is a prudent move as one industry professional who resides in Montana recently said that general awareness of the program’s existence seems very low.

“I’ve been back here for more than three years, and I’ve never heard of it,” said Curt Larson, Montana-based reverse mortgage originator with VIP Mortgage.

Larson added that he’d never heard of it through his industry colleagues, but he describes the program as an interesting one.

“It is serviced by the state. They hold the paper. There are income limits, so they do verify your income, and the limits are based on the number of people in the household,” Larson said. “It’s oriented for older folks who are living with limited resources. The maximum loan amount is $150,000. It’s a first-lien position, so they pay off the first loan, if there is one.”

One key difference, Larson said, is that the loan balance is paid out and amortized over 10 years, and it doesn’t feature a standby line of credit feature like a traditional Federal Housing Administration (FHA)-backed Home Equity Conversion Mortgage (HECM).

“The borrower receives a monthly payment. If they pay off an existing loan of $50,000, $60,000, $70,000 or $80,000, then the amount paid out over the 10 years is, of course, reduced,” he said.

State handles applications

One of the major elements in the RAM program’s favor, Larson said, is that the associated interest rate sits at 5% and the loan-to-value ratio is capped at 80%. The program also does not rely on existing reverse mortgage professionals for distribution, according to Larson. Potential borrowers apply for the loan directly through the Montana Board of Housing.

While it’s not available to industry professionals in Montana, Larson said he is excited to know more about the program in the event that a potential borrower may not qualify for a traditional HECM.

“I’m excited to have the knowledge around this,” he said. “If I’m doing lunch and learns, talking to financial planners or speaking with pastors at churches, I can say, ‘You know what? If you have somebody really struggling, and they own their home, there’s a program that very few people know about in Montana that could really help.’”

This brings added value to the people Larson relies on for referral partnerships.

“No, I’m not going to get paid on it, but they’re going to understand and, hopefully, continue to give referrals,” he said. “I don’t think there’s a huge application for it because of the income limits, etc., but I think there is an application for it.”

Program reach

Overall, the outreach for the program has been relatively limited, according to data shared by Cohen in her op-ed.

“Since [authorized in 1989], 241 RAM loans have been issued totaling $15,477,067 in original principal; $11,897,555 has been paid back to date,” Cohen said. “Of currently active RAM loans, the average principal amount loaned is $107,138; the average cash advance received is $36,395; and the average monthly payment to RAM participants is around $741.”

Cohen went on to say that a RAM loan could be a viable option for a Montana senior looking to remain in their home.

“If you’re a homeowner, 68 years old or older, of a single-family home located in Montana, and anticipate staying in your home for a long time but need more money to manage expenses, a RAM loan may be right for you,” she wrote. “Potential borrowers must attend a RAM program counseling session in order to apply.”