Bank of America to buy reverse mortgage unit

(New throughout)

NEW YORK, April 26 (Reuters) - Bank of America Corp. (BAC.N: Quote, Profile, Research, Stock Buzz) said on Thursday it agreed to buy the reverse mortgage business of Seattle Mortgage Co. for an undisclosed price to offer more loans to older Americans.

Reverse mortgages are a kind of home equity loan popular among people 62 years of age and older. They let people borrow against the equity in their homes and convert it into cash. Loan advances are not taxable, and loans typically need not be repaid during homeowners' lifetimes.

Charlotte, North Carolina-based Bank of America said the purchase will make it the third-largest U.S. provider of reverse mortgages. IndyMac Bancorp Inc. NDE.N of Pasadena, California, is by far the largest reverse mortgage provider.

Seattle Mortgage markets its reverse mortgages under the Reverse Mortgage of America brand. It has 40,000 reverse mortgages with balances exceeding $4 billion.

The company is an indirect unit of Seattle Financial Group Inc., which is based in Seattle. Reverse Mortgage of America is based in nearby Bellevue.

The product is considered riskier than ordinary "prime" mortgages, though less risky than the "subprime" mortgages that have battered many lenders. Bank of America, one of the largest mortgage lenders, does not make subprime home loans.

About 400 Seattle Mortgage employees, including more than 200 sales associates in 25 U.S. states and Washington, D.C., will join Bank of America. David Rupp, a Bank of America home equity executive, will oversee the business.