Bellevue's Seattle Mortgage to sell reverse-mortgage unit

One of the nation's biggest banks is turning to a Bellevue company to help broaden its reach with older Americans.

Charlotte, N.C.-based Bank of America said Thursday it plans to buy the reverse-mortgage business of Seattle Mortgage Co. in Bellevue for an undisclosed amount.

Bank of America said it began testing reverse mortgages in Arizona last year. Its purchase, expected to be final by the end of June, would make it the third-largest U.S. provider of reverse mortgages, behind IndyMac and Wells Fargo.

Reverse mortgages allow people 62 and older to convert some of the equity in their homes to tax-free income. The mortgages get their name from the fact the payments are reversed — lenders make payments to borrowers in exchange for equity in their homes and upfront fees.

Such transactions are gaining popularity as baby boomers near retirement age, health-care costs rise and pension benefits often turn out to be less than expected, said David Rupp, a Bank of America executive who will oversee the reverse-mortgage business.

"That's a mix that many of our senior customers are confronting, and we want to help them with that," Rupp said.

The Federal Housing Administration (FHA) insured 9,349 reverse mortgages in February, a record number for the second-straight month, according to the National Reverse Mortgage Lenders Association in Washington, D.C. That was up from 5,841 reverse mortgages a year ago.

Seattle Mortgage entered the business in 1995 and now has 40,000 reverse mortgages with balances totaling more than $4 billion. Many were sold under the Reverse Mortgage of America name.

About 400 employees will join Bank of America, Rupp said. Of those, 200 work in the Seattle area; the others make up a national sales force in 25 states and Washington, D.C.

John Nixon, executive vice president and chief operating officer of Reverse Mortgage of America, a division of Seattle Mortgage, also will join Bank of America, as will Charlie Jones, vice president of loan servicing.

"This is all about growth," Nixon said, "not about cost-cutting for efficiencies. This will allow us additional distribution channels to continue our growth."

Amy Martinez: 206-464-2923 or amartinez@seattletimes.com