Financial Freedom Senior Funding Corp. said Monday that it plans to buy Transamerica Financial Corp.'s reverse mortgage unit in a deal valued at $200 million.
Financial Freedom said Lehman Brothers provided the capital for the deal.
Reverse mortgage lenders provide senior homeowners with equity from their homes that can be used for living expenses or in-home assistance. The loans, which carry relatively high fees, allow seniors who otherwise might be forced into nursing homes to stay in their houses. When the homeowner dies, the loan comes due.
Transamerica HomeFirst Inc., has over 6,000 reverse mortgage loans, which Financial Freedom would securitize with Lehman over the next few weeks.
Lehman Brothers has deemed the reverse mortgage market "an area of potential growth in the MBS arena," said Craig Corn, the investment bank's senior vice president of mortgage-backed securities.