Chart of the Day: Philadelphia Bucks the Downward Reverse Mortgage Trend

NewImage.jpgDespite reverse mortgage volume being down 31% during fiscal year 2010, Philadelphia has managed to see an increase in volume according to data from Reverse Market Insight.

According to RMI, Philadelphia is the only city in the top 10 growing year to date (4.3%).  So why is the city of brotherly love seeing more volume than others?  Refinance volume.

During 2009, there were only 39 refinances compared to 119 in 2010.

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Industry Trends – August 2010

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  • The 31% decrease nationally is over a 12 month period beginning 10/1/2009. The stats for Philly per the chart above are for 1/1/ /2010 to 8/31/2010, not exactly a comparable timeframe.

    The real question is why were there so many refis especially in a period when PLFs were 10% lower than the prior fiscal year? The HUD OIG might be looking into that matter, especially if the refis are concentrated in just a few lenders.

    So why weren’t the other 4 months used in the Philly stats? Do they make the picture brighter or worse?

    • The comparable figure is -37.7% for national decline vs. 4.3% Philly increase (both based on YTD figures: Jan-Aug 09 vs. Jan-Aug 10). We use a consistent format each month on the Industry Trends report to let people get familiar and quickly find what they’re seeking, as well as avoid skewing the numbers for a story in any given month. You can find the YTD figure in our original article and on page 1 of our report.

      We don’t pretend to know precisely why refinance pockets have been happening in specific locations this year, but we suspect it has a lot to do with a combination of relatively stable property markets (as linked to Zillow trend chart in our report) and a few lenders continuing to market for refinances after the initial lending limit increase marketing push by many in the industry.

      To your specific question about the last 4 months of 08/09 being used for a 12 month comparison, the chart above gives you a good general sense that they would roughly cancel each other out. The precise number for Philly is a -1.9% decline for the 12 months ending August 2010 vs. -28% decline nationally for same period. -31% decline figure is for 12 months ending in Sep 2010 (federal fiscal year).

    • If you refer to the original article on our site, you’ll see that we think the bigger story is that non-refinance transactions were down substantially less than the national average (-11% in Philly YTD vs. -36% nationally). The extra refinances are just the icing on the cake to put Philly back in the positive for growth YTD.

      • John,

        Have you done any analysis on the refis and what is causing their proliferation in that particular geographic corridor?

  • I’ve been active in that area recently, and a couple weeks ago funded a Jumbo-to-HECM refinance. The homeowners primary goal was to move to a fixed interest rate, but they were also able to access additional cash. Since Jumbo’s made more sense in that area 3 years ago, I wonder what the split is between Jumbo-HECM verses HECM-HECM refinances.

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