The Federal Deposit Insurance Corp.'s seizure of IndyMac Bank has put into play what has long been considered one of the premier companies in the reverse mortgage business: the failed thrift's Financial Freedom Senior Funding Corp.

It is not clear whether the FDIC would sell the unit by itself. The regulator has said it prefers to sell all of IndyMac to one buyer, and to do so within 90 days.

The regulator's preferences have not stopped market watchers from considering the merits of a separate deal for Financial Freedom. The unit was one of IndyMac's healthier businesses and observers say its 300-person sales force, servicing portfolio of 150,000 accounts, and proprietary jumbo products would make it attractive to potential buyers, especially insurance companies focused on retirement products. And the agency recently retained Jim Mahoney, Financial Freedom's founder and former chairman and chief executive, to help Lehman Brothers advise the FDIC on how to maximize the value of the unit, according to an insider.

"The FDIC would like to sell this as much in one shot as possible, but I still think there's a possibility it could be broken into pieces," said David Peskin, the CEO of Lender Lead Solutions Inc., a reverse unit of World Alliance Financial Corp. in Melville, N.Y. "It all depends on the buyer."

Several market sources said Massachusetts Mutual Life Insurance Co. is interested. A spokesman for MassMutual said it does not comment on rumors or speculation.

One complication is that any nonbank purchaser would have to get licensed to lend in every state, a costly and lengthy process. (As a subsidiary of a federal thrift, Financial Freedom, of Irvine, Calif., is exempted from having to obtain state licenses.)

Moreover, if the FDIC insisted on selling IndyMac in a single transaction it would turn off potential buyers that do not want the thrift's riskier "forward" mortgage assets, several observers said. David Barr, a spokesman for the FDIC, said its preferred approach of selling the thrift in one piece "may prove viable or unviable."

And for all lenders in the reverse market, business is getting tougher, in part because falling home prices and higher interest rates have forced them to eliminate many products.

Peter Bell, the executive director of the National Reverse Mortgage Lenders Association, said as many as 1,000 companies, from small brokerages to big financial institutions, have entered the reverse mortgage business in the past year, cutting into the market share of established players. The industry's growth rate has fallen from 40% in 2006 to an expected 10% this year, he said.

"Most participants are feeling their market share get squeezed a little right now," Mr. Bell said. "The same amount of business is being originated by a lot more players, and a lot of it is the overall economic uncertainty that has consumers sitting on the sidelines, paralyzed."

Months before IndyMac, of Pasadena, Calif., failed, Michael Perry, then the CEO of its holding company, suggested that potential purchasers were using the housing downturn as an excuse to offer lowball bids for Financial Freedom. On a conference call in February, he called the bidders "pirates" who "want to come in and steal [the unit] from us."

"When you have such a small market cap right now, no one is going to come in and pay us fair value for Financial Freedom," he told analysts.

At the height of the housing boom in 2006, when Mr. Perry was considering spinning off Financial Freedom, analysts had valued the unit at $640 million. That valuation was used to determine the $40 million price that IndyMac ultimately paid Mr. Mahoney that year for the remaining 6.25% stake that IndyMac did not own. IndyMac bought its 93.75% stake and certain assets from Lehman in 2004 for $84.6 million.

Mr. Mahoney's last day as chairman was July 24, according to an internal e-mail obtained by American Banker. He relinquished the co-CEO title last year to Michelle Minier, who remains Financial Freedom's CEO and vice chairman. Financial Freedom referred all inquiries to the FDIC.

In the past year, insurance companies have emerged as logical buyers of reverse mortgage companies because of their focus on senior citizen demographics and retirement products.

In April, MetLife Inc. bought the Bloomfield, N.J., reverse mortgage unit of EverBank Financial Corp., which recorded an after-tax gain of $30 million on the sale last month. Last year, Genworth Financial Inc. paid $50 million for Liberty Reverse Mortgage Inc. of Rancho Cordova, Calif.

IndyMac had arranged before the FDIC took over for the sale of 60 traditional loan production offices to Prospect Mortgage Co. of Northbrook, Ill., in a deal expected to close Aug. 7.

Mr. Bell said Financial Freedom's strongest asset is its servicing portfolio, which he called "the jewel" of the industry with "the richest pool of data." He said the company is known for its jumbo products — those too big to be insured by the Federal Housing Administration. (The FHA's home equity conversion mortgages are the predominant product on the reverse market.)

"The challenge is that the proprietary product has to be funded going forward based on home values that were established under stronger market conditions," Mr. Bell said. "That is one liability that any buyer is going to have to think through."

Scott Stern, the CEO of Lenders One, a St. Louis-based cooperative of mortgage banks that originate reverse and traditional mortgages, said companies with several business channels are receiving "tepid enthusiasm" from potential buyers, and that Financial Freedom would attract more interest if it could be sold separately.

Potential buyers are very concerned about contingent liabilities, particularly the alternative-A products that IndyMac specialized in, Mr. Stern said.

But Mr. Peskin said he expects a large banking company to buy IndyMac just to get Financial Freedom. "Reverse mortgages is the asset you want to own," he said. "I don't see anybody writing down reverse mortgages."

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