IndyMac Eyes IPO For Its Reverse-Mortgage Business
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By Steve Gelsi
IndyMac Bancorp Inc. (NDE) said Monday said it is considering an initial public offering for its Financial Freedom Senior Funding Corp. as net income at the reverse-mortgage unit doubled in the first quarter.
The Pasadena, Calif.-based IndyMac Bancorp Inc. said the IPO would drive "growth and opportunities" for Financial Freedom, help attract and retain talent, raise cash and enhance shareholder value.
Shares of IndyMac rose 25 cents to $48.57 Monday.
The Financial Freedom unit, which employed 984 people as of March 31, nearly doubled its net income to $8 million from $4.2 million in the first quarter, as it lined up $1.1 billion in reverse mortgages, up from $507 million in the year-ago period.
IndyMac said Monday its board of directors authorized management to "evaluate and plan" for the "potential sale" of about 20% of Financial Freedom Senior Funding, which holds an estimated 56% in reverse-mortgage originations and 53% of reverse-mortgage servicing.
According to reversemortgage.org, a reverse mortgage enables homeowners aged 62 and older to convert part of the equity in their homes into tax-free income without having to sell the home, give up title, or take on a new monthly mortgage payment.
Since reverse mortgages tap into the value of a home, they don't require income verification.
Critics charge that reverse mortgages only pay up to 80% of the value of your home and that they charge interest on what is essentially your own money.
"A quick thumbnail calculation shows you could gain more by selling your home, moving into a rental or less expensive house and putting your money in ultra-safe Treasury bills. This would eclipse any reverse mortgage calculation," Thomas Kostigen, author of MarketWatch's Sophisticated Investor, said in a recent column.
Nevertheless, mortgage industry insiders see rapid growth ahead for reverse mortgages amid a demographic shift to senior citizens as Baby Boomers approach retirement age.
The population of citizens 65 years and older is projected to increase by 147% between 2000 and 2050, according to the U.S. Census.
"Reverse mortgages can be an ideal source of additional income for these consumers who don't wish to sell their assets to meet the rising cost of living," said a recent statement from Seattle Mortgage.
-Steve Gelsi; 415-439-6456; AskNewswires@dowjones.com
(END) Dow Jones Newswires
May 01, 2006 10:56 ET (14:56 GMT)
Copyright (c) 2006 Dow Jones & Company, Inc.- - 10 56 AM EDT 05-01-06 |
