Reverse Mortgage Firm Buys Transamerica HomeFirst Inc.

Financial Freedom Senior Funding Corp., a reverse mortgage lender, said it has bought Transamerica HomeFirst Inc. for $200 million in cash to expand its U.S. portfolio.

Irvine-based Financial Freedom, a unit of MRCo Inc., will acquire 6,000 reverse mortgage loans and the San Francisco-based company’s mortgage servicing operation, stretching its presence into 35 states, including New York, New Jersey, Illinois and Florida.

Reverse mortgage loans hold no regular payment obligation and are made to elderly homeowners who may not repay the loan until they die or sell the home. The acquisition expands Financial Freedom’s work force by more than 40% to 75 employees, senior vice president Jim Mahoney said. There will be no layoffs, he added.

The company is in “a growth mode” and intends to open a marketing and loan processing office on the East Coast, and add employees at its Irvine headquarters and the HomeFirst office in the Bay Area by the fourth quarter this year.

Financial Freedom markets, sells and processes reverse mortgage loans. HomeFirst services loans until final repayment, Mahoney said.

Financial Freedom will work with Lehman Brothers Holdings Inc., which financed the acquisition, to repackage the Transamerica loans as securities.

Joseph Hu, director in structured finance ratings at Standard & Poor’s Corp., which will rate the issue, said he believes this will be the first securitization of reverse mortgage loans rated by a U.S. credit rating agency.

Transamerica Corp., parent of Transamerica HomeFirst, agreed in February to be bought by Aegon NV for $10.8 billion.