Norwich Union, the U.K.'s largest insurance group, will bring a so-called reverse mortgage securitization to market within the next five to six weeks. Adrian Brar, York-based finance development manager, refused to say how large the deal will be. Citigroup is believed to have won the mandate. Brar declined to name the investment bank mandated to arrange the deal, but says Norwich Union may engage an additional bank for distribution. That bank has not yet been chosen.
A reverse mortgage is generally taken out by the elderly who own their own homes. The customer receives a lump sum from the lender, which is then repaid when the house is sold at the time the customer enters long-term care or dies. One London-based investor called reverse mortgages "a disaster waiting to happen" and says he would never buy into these types of deals. Expressing concern over predatory lending and sales practices, he says, "[In the U.K.] we've had an endowment mortgage mis-selling crisis, a pension mis-selling crisis and an equity release (reverse mortgage) mis-selling crisis is the potential next one."
Norwich Union has completed two securitizations of reverse mortgages over the past two years--totalling roughly £500 million. Merrill Lynch and Citigroup were managers on those deals. Going forward, Brar says Norwich Union will execute one deal per year.
