X Bill #: S3322-1A Complete Date: 04/05/06. X Chief Author: BERGLIN, LINDA. X Title: REVERSE MORTGAGE INCENTIVE PROGRAM Tax Revenue X

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1 Consolidated Fiscal Note Session Fiscal Impact Yes No State Bill #: S3322-1A Complete Date: 04/05/06 Local Chief Author: BERGLIN, LINDA Fee/Departmental Earnings Title: REVERSE MORTGAGE INCENTIVE PROGRAM Tax Revenue Agencies: Human Services Dept (04/05/06) Housing Finance Agency (03/29/06) This table reflects fiscal impact to state government. Local government impact is reflected in the narrative only. Dollars (in thousands) FY05 FY06 FY07 FY08 FY09 Net Expenditures General Fund Human Services Dept Housing Finance Agency Revenues General Fund Human Services Dept Housing Finance Agency Net Cost <Savings> General Fund Human Services Dept Housing Finance Agency Total Cost <Savings> to the State FY05 FY06 FY07 FY08 FY09 Full Time Equivalents General Fund Human Services Dept Housing Finance Agency Total FTE Consolidated EBO Comments I have reviewed this Fiscal Note for accuracy and content. EBO Signature: DOUG GREEN Date: 04/05/06 Phone: S3322-1A Page 1 of 7

2 Fiscal Note Session Fiscal Impact Yes No State Bill #: S3322-1A Complete Date: 04/05/06 Local Chief Author: BERGLIN, LINDA Fee/Departmental Earnings Title: REVERSE MORTGAGE INCENTIVE PROGRAM Tax Revenue Agency Name: Human Services Dept This table reflects fiscal impact to state government. Local government impact is reflected in the narrative only. Dollars (in thousands) FY05 FY06 FY07 FY08 FY09 Expenditures General Fund Less Agency Can Absorb -- No Impact -- Net Expenditures General Fund Revenues General Fund Net Cost <Savings> General Fund Total Cost <Savings> to the State FY05 FY06 FY07 FY08 FY09 Full Time Equivalents General Fund Total FTE S3322-1A Page 2 of 7

3 NARRATIVE: SF A Bill Description This section modifies AC eligibility requirements by permitting individuals who have exhausted a qualifying reverse mortgage (or have used the proceeds for 24 months or in an amount of $15,000) to qualify for AC expanded criteria for age, income, and assets. It also permits them to be eligible without premiums or estate recoveries. Assumptions Given that the number of reverse mortgages is likely to be quite small, and given that the time necessary to implement this bill, take out reverse mortgages, and exhaust a mortgage (or meet the 24-month / $15,000 test) must pass before there can be an effect on the AC caseload, no consequential effect on AC caseload or costs is anticipated. Implementation date of July 1, 2006, with one provision pending federal approval process. Expenditure and/or Revenue Formula Human Services Administration:.5 FTE: DHS will: develop an interagency agreement with Minnesota Housing Finance Agency (MHFA) and administer transfer and accounting of program funding dedicated to housing component. Provide a grant for development of training and consumer outreach materials and assistance through Senior LinkAge Line (SLL). develop and coordinate changes to both the reverse mortgage incentive program and the alternative care program eligibility, access, and training for local lead agencies and partners, including MMIS programming and training. MMIS programming: moderate expenses for implementation, including RM and AC eligibility criteria, screening document activity, and related edits. Interagency agreement with MHFA: Reverse Mortgage Incentive Program Expenditures: Estimated participation 25 loans per fiscal year, initial mortgage insurance premium limited to $1,500/loan, payments to reduce service set-asides uncertain based on need for federal approval. RFP for participating lenders and reverse mortgage counselors MHFA estimates 200 hours staff time for coordination with DHS on materials and training for consumers and reverse mortgage counselors, which the agency will absorb. Admin Activity BACT FY06 FY07 FY08 FY09 DHS administrative costs AC program costs to manage 85 $0 $57 $47 $47 interagency agreement/funding, RM and AC program eligibility, docs, MMIS, forms, and training.5 FTE RMI and AC program material costs; 85 0 $100 $50 $50 eligibility, docs, brochures, training SLL client tracking system update 70 0 $25 $0 $0 Interagency agreement with MHFA Mortgage insurance 85 0 $38 $38 $38 MHFA coordination costs, training, 0 $0 $0 $0 materials, distribution (MHFA to absorb) MMIS systems costs 51 $18 $18 $18 Total General Fund $0 $238 $153 $153 admin non-ded Rev for non-systems admin 40% $0 $78 $54 $54 TOTAL $0 $160 $99 $99 S3322-1A Page 3 of 7

4 Long-Term Fiscal Consideration Unknown; determined by consumer response to available incentives. Local Government Costs None. References/Sources National Council on Aging HUD MHFA Agency Contact Name: Lisa Rotegard FN Coord Signature: STEVE BARTA Date: 04/05/06 Phone: EBO Comments I have reviewed this Fiscal Note for accuracy and content. EBO Signature: DOUG GREEN Date: 04/05/06 Phone: S3322-1A Page 4 of 7

5 Fiscal Note Session Fiscal Impact Yes No State Bill #: S3322-1A Complete Date: 03/29/06 Local Chief Author: BERGLIN, LINDA Fee/Departmental Earnings Title: REVERSE MORTGAGE INCENTIVE PROGRAM Tax Revenue Agency Name: Housing Finance Agency This table reflects fiscal impact to state government. Local government impact is reflected in the narrative only. Dollars (in thousands) FY05 FY06 FY07 FY08 FY09 Expenditures General Fund Less Agency Can Absorb General Fund Net Expenditures General Fund Revenues General Fund Net Cost <Savings> General Fund Total Cost <Savings> to the State FY05 FY06 FY07 FY08 FY09 Full Time Equivalents General Fund Total FTE S3322-1A Page 5 of 7

6 Bill Description This bill provides incentives for certain individuals to obtain a home equity conversion or reverse mortgage and to expend the proceeds for items and services necessary to remain in the home rather than a nursing home. The incentives are payment of initial mortgage insurance premiums and eligibility for alternative care services without regard to age, income, or assets, no payment of a monthly participation fee and an exemption from an estate claim for alternative care services. An additional incentive of reduced service fee set aside requires federal approval. To be eligible, an individual must be: 62 years old or older; eligible for Medical Assistance within one year of admission in a nursing home; not eligible for Medical Assistance and meets certain income requirements; has a home valued at less than $150,000; and obtains a reverse mortgage and uses the proceeds for items and services that help the person remain in their home and avoid nursing home admission. Assumptions MHFA relies on DHS for the assumption about volume of loans. Approximately three hours of staff time will be required per payment of mortgage insurance premium. Approximately 80 hours of staff time each year will be required to develop an RFP and related process to select lenders to participate in the incentive program. Approximately 40 hours of staff time will also be needed to work with DHS on the development and implementation of the information and referral system. The costs of training home equity conversion counselors on the incentive program will be covered from non-state resources. Expenditure and/or Revenue Formula The cost of the mortgage insurance premium incentive and marketing brochures is included in the fiscal note from DHS. Approximately 200 hours of staff time will be needed in the first year and approximately 160 hours the second year. Modifications to the web site will be required. The expenditure reflects the average salary, benefits, direct and indirect costs of an employee at a support staff level. Staffing requirements in the future will depend on the level of participation by borrowers. Long-Term Fiscal Considerations Costs related to payment processing and lender participation will be ongoing; the volume of loans is unknown. Local Government Costs References/Sources Agency Contact Name: TONJA M. ORR ( ) FN Coord Signature: JULIE STAHL Date: 03/29/06 Phone: EBO Comments S3322-1A Page 6 of 7

7 I have reviewed this Fiscal Note for accuracy and content. EBO Signature: KEITH BOGUT Date: 03/29/06 Phone: S3322-1A Page 7 of 7