Only a handful of reverse-mortgage securitizations have been done so far, but conditions are "ripe for the market to explode," according to a new report from Standard & Poor's Ratings Services."As this product continues to evolve, investors will become more comfortable with reverse-mortgage securitizations," said credit analyst Waqas Shaikh, a director in S&P's Residential Mortgage group. "This in turn will lead to more securitizations backed by these loans. In addition, the secondary markets will continue to add certain efficiencies to the process, reducing the costs associated with originating reverse mortgages." The report, titled "For Seniors, Equity Begins at Home," says reverse mortgages do pose risks, however. Obtaining such a mortgage means that homeowners begin accumulating debt again after years of paying down their mortgages. Moreover, as interest accrues, the borrower's equity continues to decline, reducing the potential inheritance of the borrower's heirs. "For lenders, the risk is that the principal outstanding, together with accrued interest for the loan, could exceed the value of the home," said Terry Osterweil, a director in the Residential Mortgage group and a co-author of the report. S&P can be found online at http://www.standardandpoors.com.

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