Erik V. Pedersen, left, an investor, and John Brodrick, president of Your Home For Life, at the company’s Westwood headquarters.

When the mortgage market started going underwater last year, John Brodrick and the staff at his Westwood mortgage broker company were already out of the pool.

“We started the transition in 2005 to reverse mortgages,” explained Brodrick, whose company has since changed its name and specialty – and attracted outside investment interest.

The former First Service Home Mortgage, which originated standard mortgage loans, is now known as Your Home for Life and sells reverse mortgages almost exclusively. And they’ve doubled their numbers each year since making 24 loans in ’05.

Brodrick isn’t sorry he switched focus.

“This business really makes me feel good,” he said.

Reverse mortgages are available exclusively to senior citizens, allowing them to draw upon equity in their homes and receive either a lump sum or monthly payments to be used as the borrower sees fit. Consumer advocates call the product complicated and expensive.

Borrowers pay about $16,000 in up-front costs, including up to $6,000 in origination fees. Len raymond, founder and executive director of homeowner options for Massachusetts Elders, based in Braintree, said he knows some seniors who have taken out reverse mortgages to pay off subprime loans and tapped out their available equity entirely.

But Brodrick insists they’re safe. “Borrowers can’t default,” he said, “because there’s no payment requirement.”

And for what they get – the financial security to stay in their home – the mortgage is worth the cost, he said.

Peter Bell, executive director the National Reverse Mortgage Association in Washington, D.C., said more than 90 percent of reverse mortgages are backed by government loan guarantor Fannie Mae, although Wall Street investors are interested.

Business is break-even right now, but Brodrick believes the future will be profitable – quite simply because today, “people need [this product]” like never before.

More banks and mortgage companies are becoming interested in reverse mortgages, but what makes Brodrick unusual is the outside interest.
A group of venture capitalists, led by the founder of Needham financial research firm TowerGroup, recently made a “mid-six-figures” investment in Your Home For Life, its founder said.

“My experience at TowerGroup and my background in consumer financial services helped me understand that reverse mortgages [will have] long-term growth,” said Diogo Teixeira, who founded Revmore Investment Group in 2007 to back reverse mortgage ventures.

Reverse mortgages are exciting to investors because U.S. senior citizens own two to three trillion dollars in home equity, an asset heretofore largely untapped by most but likely to be more in demand as seniors live longer and costs go up, he said.

A 65-year-old purchaser could live another quarter-century on nothing but retirement income, he said, and for many, that won’t be enough.
Falling real estate values potentially affect the current picture, as borrowers have less equity to draw upon and investors – who earn a profit when they’re paid back that equity plus interest – earn less as a result.

But real estate appreciates over time, Teixeira said, and that’s what’s important in the long run.

Revmore investor Erik V. Pedersen predicted the country’s next generation of retirees will have a great need for reverse mortgages once their income stops and they can’t get traditional refinance loans.

“The Baby Boomers have this ‘spend now, pay later’ mentality,” he said. “So our group is projecting tremendous growth in this area.”
Banking industry consultant Jim Jones, president of First Wellesley Consulting Group in Wellesley, agreed that’s a likely scenario.

“Boomers consume at a very high level,” he said.

Teixeira said just 2 percent of seniors today have reverse mortgages, but estimates that number will grow to 20 percent within a decade.

If confidence is expressed in new-hires, Brodrick is also feeling pretty good about his prospects. He’s taken on four new staff this year, increasing Your Home for Life’s payroll to 11 at a time when most mortgage companies are laying off.

His smiling face grins out at visitors to Revmore’s Web site, but not because he’s a board member or founder.

Rather, as he describes it “I’m their first investment – their poster child.”

One who represents a business investment both hope will pay off well.