Bank of America buys Seattle reverse mortgage unit

NEW YORK (Reuters) - Bank of America Corp. (BAC.N) said on Thursday it agreed to buy the reverse mortgage business of Seattle Mortgage Co. for an undisclosed price to offer more loans to older Americans.

Reverse mortgages are a kind of home equity loan popular among people 62 years of age and older. They let people borrow against the equity in their homes and convert it into cash. Loan advances are not taxable, and loans typically need not be repaid during homeowners' lifetimes.

Charlotte, North Carolina-based Bank of America said the purchase will make it the third-largest U.S. provider of reverse mortgages. IndyMac Bancorp Inc. NDE.N of Pasadena, California is by far the largest.

"As the baby boomer segment ages, the demographics are clear to everyone, and this product will be more and more important," said David Rupp, a Bank of America executive who will oversee the new business, in an interview.

Seattle Mortgage markets the product under the Reverse Mortgage of America brand. It has 40,000 reverse mortgages with balances exceeding $4 billion.

The company is an indirect unit of Seattle Financial Group Inc., which is based in Seattle. Reverse Mortgage of America is based in nearby Bellevue, Washington.

Reverse mortgages are considered safer than many "subprime" mortgages that have battered lenders.

Bank of America is one of the largest mortgage lenders, but does not make subprime home loans.

Rupp said a majority of the reverse mortgages at Reverse Mortgage of America are home equity conversion mortgages. These are insured by the Federal Housing Administration, which is part of the U.S. Department of Housing and Urban Development.

About 400 Seattle Mortgage employees, including more than 200 sales associates in 25 U.S. states and Washington, D.C., will join Bank of America.

"The idea is to combine Reverse Mortgage of America with our branch network, balance sheet scale and brand," Rupp said.

Bank of America is the second-largest U.S. bank. It ended March with 5,737 branches and $1.5 trillion of assets.

The bank expects the transaction to close this quarter, pending regulatory approval. It said UBS Investment Bank advised Seattle Mortgage on the transaction.