Baby-boom boom.

With the completion last week of its acquisition of Financial Freedom Holdings Inc., Pasadena mortgage lender IndyMac Bancorp Inc. became the largest originator of reverse mortgages in the nation.

Rising health care costs and aging baby boomers could fuel demand for reverse mortgages, which IndyMac expects will make up 15 percent of its earnings by 2008.

Though reverse mortgages typically involve hefty fees, they allow seniors to tap into their home equity by receiving a lump sum or monthly payments. The loans do not have to be repaid until the borrowers move or die.

The danger, of course, is that home prices decline after the run-up of the past several years, evaporating the equity that protects mortgage lenders. In the case of reverse mortgages, the home's residual value is the first resort, not the last, when it comes to repayment.

Pamela Marsh, a spokeswoman for IndyMac, said the company believes home prices will continue to remain at lofty levels. IndyMac is protected on the downside because Federal Housing Administration insurance (paid for by the borrower) guarantees against losses to the lender. FHA insurance has a mortgage limit cap that varies from $82,000 to $161,000, depending on local housing costs.