Reverse Mortgage Lending Sees Consolidation, Stimulus Boost

Local reverse mortgage lenders have seen some shuffling among their ranks.

As the financial crisis crippled some, others have become larger, with investors showing interest in startups.

Reverse lenders cater to seniors, lending money based on the equity borrowers have built up in their homes.

The loans are paid back once a home is sold or when a borrower dies or moves into assisted living.

Under government rules, only those 62 and older are permitted to take out reverse mortgages. Many borrowers use the cash to supplement Social Security payments or to offset losses in retirement investments.

Irvine-based financial Freedom Senior Funding Corp., a unit of Pasadena’s Indymac Bancorp, used to dominate reverse mortgages.

IndyMac now goes by OneWest Bank after it failed last year and was bought by a group of private investors.

The company’s reverse mortgage unit, which once did about half of the sector’s lending, now goes by Financial Freedom Acquisition. It does about a third of the reverse mortgages it used to, according to John Lunde, a former employee who now runs Aliso Viejo-based Reverse Mortgage Insight, a market researcher.

Financial Freedom now ranks third in reverse mortgages, with about 2,300 loans made through July, according to Reverse Mortgage Insight.

San Francisco-based Wells Fargo