Different property types
Mr. Larson grew up in Big Sandy, a small town north of Great Falls. He joined the mortgage industry in 1990 and moved to Reverse Channel in 2002. He lived in various states over the years but moved back to Montana with his family in 2020. Every region has its own unique challenges in launching a reverse mortgage, and Montana is no exception.
“Montana has never had mass-market housing built, unlike more densely populated areas like Phoenix or Los Angeles,” Larson explains. “Those areas built 500 subdivision lots in the 1930s and 1940s, with two models, each 7,500 square feet. Montana just didn't have the population, market or labor for that. Here, everything is custom built or prefabricated, or privately built log homes.”
Several challenges arise in the reverse mortgage space because many of the properties for which borrowers are seeking financing are highly diverse.
“You might find a single-family home on 25 acres, which is very unusual in other markets,” he says. “It can be difficult to get comparisons and appraisals for these properties. Here, appraisers are good at coming up with similar values, but it can be difficult. There are log homes, prefab homes, custom-built timber frame homes and more, all with different values.”
Persistent challenges
DeWolf, a fifth-generation Montana resident, said he finds it harder to do reverse mortgages in the state than in other parts of the country.
“In California, you're primarily dealing in multifamily properties, so it's relatively easy to find comparables and you don't often come across unique situations,” he says. “Montana is the complete opposite. Historically, most homes in Montana have been custom homes.”
Multifamily housing may be on the rise in densely populated areas like Bozeman and Billings, but that's a relatively recent trend, DeWolf explained. The burgeoning challenge is related to manufactured housing.
“Many people buy prefabricated homes, build them on foundations, and don't deed them,” he says. “In Montana, they're automatically declared real property once they're permanently attached, but the government requires deed paperwork. This can get complicated when ownership changes hands, especially when the previous owner passes away.”
Home prices and large tracts of land
Home prices can also vary widely, and because Montana is a popular travel destination, there is a wide range of prices.
“Where I live, the median home price is $2.4 million. It's a resort area with a lot of luxury properties,” Larson says. “The range of properties is wide, and even in a town of 700 people, we can get a request for a reverse mortgage and have to go a 100-mile radius to find comparable properties. The main challenge is the variety of property types and values.”
Land area is also a common issue for DeWolf, especially when state rules conflict with those of the Federal Housing Administration (FHA).
“The FHA has a maximum of 50 acres, but Montana's 'mini-ranch' rules apply to larger lots and require a mortgage instead of a deed of trust, which the FHA does not recognize,” he said. “There are also many spec homes along dirt roads with private rights-of-way and no recorded road covenants, which can cause problems.”
Like Larson, DeWolf has struggled to find comparable properties in the state's rural areas, where other properties have wells with high mineral content that can require water testing.
“Montana's popularity, fuelled by shows like Yellowstone, has led to an increase in custom-built and off-the-grid homes,” he explained. “These properties come with their own unique challenges, but my years of experience in the industry help me navigate them.”
Product Type
Larson said while home prices can be in the multi-million dollar range, he has found that a core Home Equity Conversion Mortgage (HECM) offering is sufficient, especially under the 2024 HECM limits.
“In Montana, a state of about 1 million people, rural communities haven't seen a lot of value growth,” he said, “but popular areas like Bozeman, Missoula and Whitefish have recreational areas, ski resorts, lakes and rivers that attract a lot of people.”
While Larson is exploring the prospects for its own products, he said most of the business it has done so far has been focused on HECM products, but he and DeWolf both explained that they see great potential in HECM for Purchase (H4P).
“I definitely agree that this product has a lot more room to grow,” DeWolf said, “but I just don't know how to get traction yet. I know how to get excited about it, but I don't know how to keep people thinking about it.”
“In real estate, you're seeing more and more younger agents as older agents retire. The younger agents are great. They're proactive and hard-working. But I'm not sure they're connecting well with older clients.”