Montana officials continue to push for a specialized reverse annuity mortgage (RAM) program for the state’s seniors, which one official says could be a possibility for those in Montana who want to age in place and get extra cash. It’s a big change.
The program, passed by the Montana Legislature in 1989, offers state-subsidized reverse mortgages limited to residents age 68 and older. It maintains rates that reverse mortgage industry professionals describe as potentially more favorable than those the industry itself offers to area seniors under federally funded programs.
A state housing official recently published an op-ed in local media Republic of Ravalli Aiming to draw more attention to the program.
“The RAM program helps Montana senior homeowners make monthly payments to manage their daily expenses in their home,” wrote Cheryl Cohen, division administrator for the company’s housing division. Montana Department of Commerce and executive director Montana Housing Authority. “Qualifying homeowners can borrow a minimum of $15,000 and a maximum of $150,000.”
Cohen said that under the program’s guidelines, the maximum loan amount is based on “80 percent of the home’s value as determined by the Federal Housing Administration.” “In addition, a one-time advance of up to $10,000 is available at loan closing that can be used to pay off previous mortgages, liens and mortgages, or for accessibility improvements and other home repairs.”
Original creator’s perspective
One Montana-based industry professional recently said general awareness of the program’s existence appears to be low, so getting the word out is a prudent move.
“I’ve been back here for over three years and I’ve never heard of it,” said Curt Larson, a reverse mortgage originator from Montana. VIP Mortgage.
Larson added that he had never heard of the project through industry colleagues, but he thought it was interesting.
“It’s serviced by the state. They hold the paper. There are income limits, so they verify your income and the limits are based on household size,” Larson said. “It’s for seniors with limited resources. The maximum loan amount is $150,000. It’s a first lien, so they pay off the first loan, if there is one.
A key difference is that the loan balance is paid and amortized over 10 years, and it doesn’t have a backup line of credit feature like a traditional loan, Larson said. federal housing administration (FHA)-backed Home Equity Conversion Mortgage (HECM).
“Borrowers receive one monthly payment. If they pay off an existing $50,000, $60,000, $70,000 or $80,000 loan, of course the amount paid over 10 years will be less,” he said.
State Processing Application
Larson said one of the main factors that favored the RAM scheme was the associated interest rate of 5 per cent and the capped loan-to-value ratio of 80 per cent. Larson said the program also does not rely on existing reverse mortgage professionals for distribution. Potential borrowers apply directly through the Montana Housing Authority.
While the program is not available to industry professionals in Montana, Larson said he is excited to learn more about the program in case potential borrowers may not qualify for a traditional HECM.
“I’m excited to learn about this,” he said. “If I’m studying over lunch or talking to a financial planner or talking to the pastor of my church, I can say, ‘You know what? If someone is really struggling and they own a home, in Montana… Very few people in California know of a program that can actually help.
This brings added value to the referral partners Larson relies on.
“No, I won’t get paid for it, but they will understand and want to continue to provide referrals,” he said. “I don’t think it has a big application because of income constraints and so on, but I think it has an application.”
Planning scope
Overall, the program’s rollout has been relatively limited, according to the data Cohen shared in his column.
“since [authorized in 1989], 241 RAM loans have been issued with an original principal amount of $15,477,067; to date, $11,897,555 has been repaid,” Cohen said. “Among currently active RAM loans, the average principal loaned is $107,138; the average cash advance received is $36,395; and the average monthly payment for RAM participants is approximately $741.
Cohen went on to say that a RAM loan may be a viable option for a Montana senior who wants to remain in their home.
“If you are the homeowner of a single-family home in Montana, are age 68 or older, and anticipate living in your home long-term but need more funds to manage expenses, a RAM loan may be right for you. ” she wrote. “Potential borrowers must attend a RAM program counseling session before applying. “
