Bank Of America Expanding Reverse Mortgage Business by Purchasing Seattle Mortgage
Bank of America is purchasing Seattle Mortgage Co. from Seattle Financial Group for an undisclosed amount. Seattle Mortgage had been doing business as Reverse Mortgage of America since 1995 having written over 40,000 reverse mortgages and over 4 billion in outstanding balances.
Is this another example of the big boys moving in during a slowdown, or is it a market that Bank of America thinks is ripe as the baby boomers gray?
Bank of America Corp. has agreed to buy the reverse-mortgage business of Seattle Mortgage Co., a subsidiary of Seattle Financial Group Inc. Seattle Mortgage markets its reverse mortgages under the name Reverse Mortgage of America.
Charlotte-based BofA (NYSE:BAC) has been piloting reverse-mortgage products with customers in Arizona since November. “Seattle Mortgage has been a pioneer in developing mortgage products and services that address the senior population’s growing need for greater financial liquidity,” says Floyd Robinson, president of BofA consumer real estate. “This is in line with Bank of America’s desire to grow its consumer real estate business by utilizing our significant advantages in size and scale.” via the Charlotte Business Journal:
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Comment by Anonymous on 27 April 2007:
This is probably a bailout. There’s been a lot written on other boards about the problems with the “negative amortization” in Option ARMS. Well, in reverse mortgages, every dime of interest due is negative amortization.
These mortgages are suppose to be written with very low loan-value ratios, and then the ratios can creep up somewhat for older borrowers. They aren’t suppose to be written above ratios of about 80%, even for people in their 80s. But you can bet they were, especially with bogus inflated appraisals. Imagine writing a reverse mortage on an 80 year old at an 80% ratio, except the real estate appraisal was inflated by 20%. Then, the home value drops by 10-15%. Then, every year, the mortgage principal increases by the negative amortization (unpaid interest) at an interest rate of 8-9%. Then, the old coger lives to 100. Man, you are looking at some very serious, long-term negative amortization hits that somebody will have to take.
Comment by Anonymous on 27 April 2007:
This is probably a bailout.
There’s been a lot written on other boards about the problems with the “negative amortization” in Option ARMS. Well, in reverse mortgages, every dime of interest due is negative amortization.
These mortgages are suppose to be written with very low loan-value ratios, and then the ratios can creep up somewhat for older borrowers. They aren’t suppose to be written above ratios of about 80%, even for people in their 80s. But you can bet they were, especially with bogus inflated appraisals. Imagine writing a reverse mortage on an 80 year old at an 80% ratio, except the real estate appraisal was inflated by 20%. Then, the home value drops by 10-15%. Then, every year, the mortgage principal increases by the negative amortization (unpaid interest) at an interest rate of 8-9%. Then, the old coger lives to 100. Man, you are looking at some very serious, long-term negative amortization hits that somebody will have to take.