Program promotes Indian home loans

By Jodi Rave, Lee Enterprises | Sunday, January 22, 2006

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Historically, home ownership has languished in Indian Country, leaving less than one-third of reservation families as homeowners, according to the Government Accountability Office.

Although several government-insured housing programs have failed to substantially increase the number of homeowners in Indian Country, one Housing and Urban Development program stands poised to make a difference.

HUD’s Indian Home Loan Guarantee Program, or Section 184, delivered 2,796 loans to Indian homebuyers totaling $296 million since its first home loan on the Fort Hall Reservation in 1995. The program didn’t gain momentum until 1999.

But HUD’s last-quarter figures promise a benchmark for the Indian home loan program. The department guaranteed 224 loans totaling $28 million during the quarter ending Dec. 31 — or 8 percent of all Section 184 home loans since Congress established the program in 1994.

“That’s the key. It’s a 100 percent loan guarantee,” said Roger Boyd, deputy assistant secretary for HUD’s Office of Native American Programs. “The other reason it’s proven to be highly successful is in our ability to market the program not only to lenders but to borrowers as well.”

For eligible applicants, Section 184 offers a government-insured guarantee for Indians to build, buy, remodel or refinance a home on private property or trust lands. Other benefits include: minimal down payments of 1.25 percent to 2.25 percent, no mortgage insurance, no income restrictions, a 100 percent lender guarantee and a maximum loan of 150 percent of the FHA mortgage limit for that county.

The program was established to increase homeownership within reservation boundaries where much of the land is held in trust by the federal government. Tribal trust lands can’t be mortgaged, and individual trust property needs to be approved by the Bureau of Indian Affairs before it can be used as payment security.

Susie Hay, executive director of the Chippewa Cree Housing Authority in Box Elder, Mont., said the tribe is using the program to secure a loan with Wells Fargo — the top Section 184 lender in the country — on 64 housing units on Rocky Boy’s Reservation trust land.

The loan hasn’t closed yet but has been in the works for the past year. “Working on trust properties for the tribes seems to be taking a little longer. It’s a little bit more difficult to do because you don’t have the financial institutions willing to go through the process to get the lease hold on trust properties,” Hay said.

A new regulation is expected to eliminate the need for title status reports from the Bureau of Indian Affairs and could be effective within six months, according to HUD officials. The regulation, however, has been pending for nearly four years.

Even though trust land applications tend to take longer to process, HUD continues to raise awareness of Section 184 while correcting glitches in the program.

Today, about 50 percent of all Section 184 transactions involve homes on tribal or individual trust lands, excluding property in Oklahoma and Alaska where nearly all tribal land is held privately, Boyd said.

In September 2004, a significant change in the home loan program allowed tribes to extend Section 184 benefits to citizens who live near the reservation or in urban areas.

An estimated 750,000 Indians live on reservations, and 1.7 million live outside tribal areas, according to Census figures.

For example, 25 percent of Southern Ute tribal citizens live away from the reservation. To accommodate them, the tribe recently designated the entire state of Colorado an area to be served under Section 184.

“A lot of the Southern Ute members live in cities like Denver,” said Eliza Botone, a Southern Ute Housing Authority manager in Ignacio, Colo. “In order to service their needs, they opened it to members off the reservation.”

Tribes in 18 states have used HUD’s expansion provisions. “It was originally the request of a couple of tribes who were concerned about their tribal people who were not only having trouble obtaining loans on their reservations, but living in border towns off the reservations or in metropolitan areas,” Boyd said.

A process developed since then requires tribes to show traditional land holdings and population data for tribal members. “In some cases, we’ll find tribal members are only in several different counties. Others might have tribal members scattered throughout the state, so we grant the whole state,” Boyd said.

Once a service area expands beyond the reservation, qualified buyers belonging to any federally recognized tribe are eligible for the home loan.

The Ponca Tribe of Nebraska’s service area includes 14 counties in three states. The tribe is among those who advertise Section 184 loan guarantees but also require applicants to participate in homebuyer education classes.

Tribes in states with significant Indian populations — such as North Dakota, South Dakota and Montana — have not sought to extend their service area.

“We haven’t even considered it,” said Jason Adams, Salish and Kootenai Housing Authority executive director. “We are, right now, trying to make sure everyone who lives within the reservation boundaries is taken care of.”

Other government-insured loans aimed at Indian homeowners include Veterans Affairs, Farm Service Agency and Rural Housing Service programs. Yet, data shows challenges remain for Indian homeowners, said Chester Carl, chairman of the National American Indian Housing Council.

Private lenders continue to reject more than half of all Indian home loan applications when compared to white applicants, according to the NAIHC.

HUD officials are banking on increased homeownership through its program. Between 2003 and 2004, Section 184 home guarantees jumped from 271 to 619, respectively.

It’s all about educating borrowers and lenders. “I can’t stress this enough,” said Boyd of the Office of Native American Programs. “We have six regional ONAP offices across the country.”

A staff person in each office is dedicated to teaching others about Section 184. “They have done an incredible job in reaching out to tribes and going out and giving individual workshops about the program and going out to the lenders.

“That’s one of the driving successes behind the program.”

Jodi Rave covers Indian issues for Lee Enterprises. She can be reached at 406-523-5299 or jodi.rave@lee.net.