Mortgage limits hurt Utah Valley

Utah’s representatives in Washington should push the Federal Housing Authority to make adjustments to loan limits that unfairly impact north Utah County and threaten the sputtering market in local real estate.

The FHA recently raised its limits on home loans in some areas — meaning a buyer can get a larger loan at a lower interest rate. The move is part of the economic stimulus package Congress passed earlier this year. But the agency has denied a request to raise such loan limits in Utah County.

Interest rates from government lending enterprises have long varied by county, and Utah County’s loan limits have been lower than Salt Lake County’s. But it’s time for this to change. There just isn’t any meaningful difference between higher-priced homes in northern Utah County and those of Salt Lake County.

To bolster the nation’s wobbling housing market, Congress this year approved a measure allowing special lower rates for costlier mortgages, but only in more expensive markets. Homes are grouped according to the government’s metropolitan statistical areas, or MSAs. The MSAs provide census data that is useful for many things, just not for real estate.

For example, Salt Lake City’s MSA includes not only Tooele County but also Summit County, with its pricey homes. So people in the Salt Lake MSA are eligible for government enterprise loans up to $729,750.

That means qualifying homeowners in Draper or Bluffdale can get relatively low-rate mortgages, but cross the county line a short distance to Alpine or Highland and the approved amount plummets to $323,750. Commercial mortgage rates are a full point or more higher than FHA, for example, which means hundreds of dollars a month in mortgage costs to North County homeowners who, by most measures, are no different from their Salt Lake neighbors.

The domino effect is that uneven limits can hurt home sales more widely in Utah County. Home buyers will naturally tend to look first where the higher-limit government loans are available.

Part of the problem is that Utah County is judged as a whole. Inexpensive housing in Provo and Orem, especially student housing in Provo, drags down median prices. But nobody thinks Alpine fits a lower-price mold.

A deeper problem is how the lines were drawn. Looking back at how the loan limits were raised, it’s apparent the measure was drawn up hastily, as a panicky Congress looked at the slide in home prices and decided it had to act fast.

The economic stimulus measure was grafted onto the existing loan procedures, and — voila! — new guidelines for loans, based on the MSAs.

But MSAs seem to be meant for more general purposes by the Census Bureau, not for the narrow application in the stimulus law. Look at the oddities produced in the Salt Lake MSA. Now a bungalow in South Salt lake or a house in the western part of Tooele county is eligible for the same loans as a ritzy home in Park City. That underlines how arbitrary these numbers are.

Arbitrary numbers can and should be changed. If Park City can be considered a natural part of the Salt Lake City area, so can Alpine and Highland.

The Utah County Realtors organization plans to press its case again in mid-May with U.S. Dept. of Housing and Urban Development officials at the annual convention of the National Association of Realtors. Local realtors will argue that, based on the most up-to-date sales figures for Utah County, the government loan limit should be raised from $323,750 to $729,750.

They have a solid case, and we urge federal lawmakers to grant this request. It’s time for the federal government to follow the spirit of the economic stimulus plan, and not get hung up in the fine print of outmoded regulations when it comes to Utah County.

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