The state of Montana has been more heavily promoting its state-based Reverse Annuity Mortgage (RAM) program for seniors. Unspent funds allocated to the program can be put to use by assisting the state’s older residents with reverse mortgage financing at a relatively low interest rate when compared to either Federal Housing Administration (FHA)-backed Home Equity Conversion Mortgages (HECMs) or proprietary product options.

This is according to Cheryl Cohen, division administrator for the housing division at the Montana Department of Commerce and executive director of the Montana Board of Housing. Cohen has been writing op-eds and other promotional materials for the RAM program over the course of the summer. She sat down with HousingWire’s Reverse Mortgage Daily (RMD) to offer more details about the push and the unique elements of the RAM program.

Role of the RAM program

Previously, RMD profiled the RAM program and highlighted its differences with the HECM program. A spokesperson for the state explained that the RAM program could have more flexibility in terms of qualifications, lower closing costs and commensurately lower loan limits when compared to the national limit attached to the HECM program.

When asked about its ability to meet the needs of the state’s seniors, Cohen said the RAM program is uniquely suited to the task for older Montanans.

“The main purpose of the program, when it was enacted by the state legislature in 1989, was to recognize that many elderly homeowners in Montana are persons of lower income and could benefit from an additional source of income through the equity of their homes,” she said. “This program aims to provide that option. With rising costs and inflation, particularly affecting seniors in Montana — especially those on fixed incomes — this program is a valuable resource.”

Many of these seniors, she said, have paid off their mortgages or maintain very low balances, and the RAM program can add additional stability to their financial situations. Similar to other types of reverse mortgages, the proceeds are often applied to other goals that the senior homeowner may have.

“Some of the borrowers we work with use a small cash-out option to make accessibility improvements to their homes, which also helps them remain in the communities of their choice for as long as possible,” she said. “This, in turn, contributes to the overall stability of the housing market here in Montana.”

A new, public push

For her part, Cohen joined the Montana Board of Housing in 2018 and assumed her current role in 2020. Cohen researched the various programs the board received funding for as she went into her first legislative session in her current role.

“That’s when I learned about this very small reverse annuity mortgage program,” she said. “It had an available balance, which is rare because very few of our programs have available funding, and I certainly don’t like to leave any resources on the table when we need to be deploying them to serve our citizens.”

Recent op-eds, editorials, press releases and interviews are all being sought in recognition of an outstanding amount of cash that is available to fund more RAM loans, she explained.

“So, right now, the reverse annuity mortgage program has about $5.5 million available to support Montana seniors,” Cohen said. “That’s really the impetus behind the marketing campaign, the push and the op-eds that have come out — because, hey, we’ve got this resource, and we want to make sure we’re deploying it and getting it out to the people who could be best served by the program.”

Unique distribution

Some of the same kinds of educational impediments present for both public and private entities on the HECM side are also factors for Cohen and the state of Montana. These include a lack of product awareness and reputational challenges for reverse mortgage products. But RAM loans have fundamentally different distribution pipelines, Cohen explained.

“I think one of the elements that makes our RAM program pretty unique is that we’re not using the typical loan originator pipeline,” Cohen said. “When we receive a call from an interested applicant or their family member, we refer them to a group of counselors within an aging and disabilities framework organization. These are either agencies on aging or senior services, and the counselors are specifically trained to support seniors and to work with our RAM program in particular.”

This means that RAM applicants contact the state directly as opposed to working with a loan originator and a lender. Like the HECM program, counseling is a key element of the qualification process, and the state uses dedicated State Health Insurance Assistance Program (SHIP) counselors who also support Montana seniors with assistance for other programs like Medicare.

“The counselor helps them complete the paperwork, which is then submitted to the Montana Board of Housing staff,” she said. “We review the application for eligibility and compliance with our program requirements, and then we execute and service the loan directly ourselves. I think that’s a fairly unique setup in the RAM environment — it’s a state-administered program that doesn’t involve direct collaboration with the private sector, unlike most other HECM or other loan products.”

The reach, of course, is far more limited. In an op-ed earlier this summer, Cohen shared that only 241 RAM loans have been issued since initial authorization by the legislature in 1989. These loans total $15,477,067 in original principal, with $11,897,555 having been paid back as of late July.

Editor’s note: Look for more soon from Cheryl Cohen on the RAM program, including potential opportunities for reverse mortgage industry collaboration and an outlook on the program’s success metrics.