Community Dividend

HUD program is a key to Native American homeownership in District

A profile of the U.S. Department of Housing and Urban Development's Section 184 mortgage program for Native American communities.

Paul S. Jurkowski

Published November 1, 2003  |  November 2003 issue

American Indians who wish to purchase homes on reservations often deal with a set of special concerns, including the trust status of the land and the lack of various elements that facilitate homeownership—like a mature resale market, local appraisers, licensed real estate agents and tribal laws that support mortgage lending. These concerns contribute to a homeownership rate that lags behind that of whites, particularly on reservations.

Organizations such as the Federal Home Loan Banks, the U.S. Department of Housing and Urban Development (HUD), Federal Reserve System, Fannie Mae, some state housing finance agencies, the USDA Rural Housing Services and the Bureau of Indian Affairs (BIA) have recently helped some Native American families become homeowners by sponsoring financial literacy training, homebuyer education, down payment and closing cost assistance programs and legal symposia on reservations in the Northern Plains.

One of these organizations, HUD, has provided $128.6 million in residential mortgage loans to more than 1,300 individual Indians or tribally designated housing authorities. The funds were made available through HUD's Office of Native American Programs Section 184 Indian Loan Guarantee (HUD Section 184), a unique program that can be used to purchase, construct or rehabilitate a home or refinance an existing mortgage on a reservation or in a defined Indian operating area.

HUD Section 184 program highlights

  • One hundred percent guarantee to the lender.
  • Refinancing available.
  • Loans available nationwide on tribal trust, allotted trust or fee simple land in an Indian operating area.
  • New and existing homes are eligible.
  • Single-close construction/permanent loans.
  • Minimal down payments of only 1.25 to 2.25 percent.
  • No maximum income limits.
  • Guarantee fee is only 1 percent and can be financed.
  • Loans are assumable for eligible, qualified borrowers.

HUD Section 184 loans are available to individual Indians. They are also available to tribal housing authorities and tribes for the creation of rental or lease-purchase housing for tribal members. The program requires the borrower to make a minimal down payment, which can be covered by grants or gifts, and pay a guarantee fee of 1 percent. It features flexible underwriting policies and has no income limits. HUD provides the lender with a 100 percent guarantee for the outstanding loan balance and allows some closing costs to be financed. Loans are capped at 150 percent of the Federal Housing Administration's standard mortgage limits, which vary from county to county.

Tribal trust lands are inalienable, meaning they cannot be sold or mortgaged. Therefore, they cannot be encumbered by conventional mortgages, which typically provide for the sale of a property in the event of foreclosure. Trust lands can, however, be leased for specified terms with the approval of the (BIA). The HUD Section 184 program permits the use of leasehold mortgages where a tribe has leased trust land to a tribal member who, in turn, offers the lease as security for a loan. In such cases, the lease must be approved by the BIA and HUD and the tribe must have eviction, foreclosure and lien-priority ordinances in place. These ordinances protect both the lenders' financial interests and the tribes' land ownership interests and ensure that improvements to the property are not sold to nontribal members. In the case of default, the lender has the option to foreclose or assign the defaulted mortgage loan to HUD. Fannie Mae, Ginnie Mae, the Montana Board of Housing, North Dakota Housing Finance Agency and South Dakota Housing Development Authority provide a secondary market for HUD Section 184 loans.

Chippewa housing corporation provides lending alternative

Enrolled members of six bands of the Minnesota Chippewa Tribe have access to mortgage financing from Minnesota Chippewa Tribal Housing Corporation (MCTHC). Established in 1976 by the Minnesota Chippewa Tribe, the corporation offers home loan financing to low- and moderate-income members of the tribe who reside in Minnesota. The corporation will begin participating in the HUD Section 184 program in early 2004.

The corporation is:

  • Funded through Minnesota Housing Finance Agency state appropriations;
  • An approved Federal Housing Administration (FHA) lender; and
  • A nonmember borrower of Federal Home Loan Bank.

MCTHC services include:

  • Low-interest financing for the purchase, construction and rehabilitation of single-family homes. No loans are made to refinance existing mortgages.
  • Low-interest financing for member bands' housing developments;
  • In-house loan servicing; and
  • Technical assistance to member bands in housing-related areas, with an emphasis on helping organizations complete grant applications.

From 1976 through 2002, MCTHC

  • Received $33.2 million in state funding; and
  • Made 1,709 loans, including 822 revolved or paid loans and 887 rehab loans on currently occupied homes. These include 744 homes on one of the six Minnesota Chippewa Tribe reservations, 129 homes located in rural areas off reservations and 14 homes located in urban areas.

In 2000, MCTHC made 66 loans through revolving funds and state funds totaling approximately $5 million. Thirteen of these loans were FHA-guaranteed and totaled $777,366.

For more information on MCTHC, contact Rick Wuori, program director, at (218) 335-8582 or mcthl@paulbunyan.net, or visit www.mnchippewatribe.org/housing.htm.


Fiscal Year 2003 has seen some modest success for HUD Section 184. HUD's Office of Loan Guarantee, located in Denver, issued $40.3 million in loan commitments and guaranteed $27.2 million in closed loans. These numbers represent increases of 58 percent and 63 percent, respectively, over the previous year.

What is the Native American homeownership rate?

As the article points out, the homeownership rate among Native Americans lags behind that of whites. But how big is the difference?

According to the U.S. Census Bureau, 55 percent of American Indian and Alaskan Native households owned their own homes in 2002, versus 72 percent of white households. But the homeownership rate for Native Americans on reservations or trust lands, which is what HUD Section 184 is designed to address, is much lower. According to a National American Indian Housing Council press release from late 2002, a study funded by the Fannie Mae Foundation and conducted by Rutgers University found that 41 percent of Native Americans living on reservations or trust lands are homeowners, compared to 74 percent of the total white population in the U.S.


More than 20 lenders in the Ninth District participate in the program, including Bremer Bank in Bayfield, Wisconsin; Union State Bank in Hayzen, North Dakota; and Chippewa Valley Bank in Winter, Wisconsin. Ronan State Bank in Pablo, Montana, is a newly active HUD Section 184 lender serving the Salish and Kootenai Tribes of the Flathead Reservation. U.S. Bank continues to participate in the program in Wisconsin, and Wells Fargo Home Mortgage in Sioux Falls, South Dakota, has assisted each South Dakota reservation and produced the largest amount of HUD Section 184 loans nationwide. To date, over $20.4 million in HUD Section 184 loans have been guaranteed in the Ninth District with 24 different tribes.

Tribal land definitions

Indian Country. The U.S. Congress has defined "Indian Country" as land inside the boundaries of Indian reservations, communities made up mainly of American Indians and Alaskan Natives, and Indian trust and restricted fee land.

Reservation. An Indian reservation is land a tribe reserved for itself when it relinquished other land areas to the U.S. through treaties. More recently, executive orders, administrative acts and acts of Congress have created reservations.

Tribal trust land is land for which the federal government holds legal title as trustee, with the beneficial interest on the land retained by a tribe. Because the federal government retains legal title to trust land, state and local tax, zoning and land-use laws do not apply. Tribal trust lands may be leased, subject to the approval of the Secretary of the Interior, but may not be mortgaged or sold.

Restricted tribal fee land is land for which a tribe holds legal title but which is subject to legal restrictions against alienation (i.e., being sold) or encumbrances (such as leases or easements). Like tribal trust land, restricted fee land may be leased, subject to the approval of the Secretary of the Interior, but may not be mortgaged or sold.

Individual trust land, like tribal trust land, is land for which the federal government holds legal title, with the beneficial interest on the land held by an individual Indian. Restricted fee landmay also be owned by individual Indians. Both individual trust lands and individually owned restricted fee lands are lands that were originally removed from tribal ownership and allotted to individual tribal members during the late nineteenth and early twentieth centuries. Both are subject to restrictions against alienation or encumbrance and therefore cannot be sold, leased or mortgaged without approval from the Secretary of the Interior. Unlike tribal trust and restricted tribal fee lands, individual trust and restricted fee lands can, with the appropriate approvals, be mortgaged, subjected to liens and foreclosure and—in some cases—sold to nontribal members.

Fee simple land in Indian Country may be held by a tribe, an individual Indian or a non-Indian. Generally, it does not carry the same restrictions as trust or restricted land, and in most cases can be readily sold, mortgaged or otherwise encumbered. Use of tribally owned fee simple land as security for a loan may require approval from the Secretary of the Interior.

Sources: Holland & Hart LLP and the Internal Revenue Service.


For more information on HUD Section 184, contact the Office of Native American Programs at (800) 561-5913 or visit www.hud.gov/offices/pih/ih/homeownership/184/.

Paul S. Jurkowski is the director of the Office of Loan Guarantee for HUD's Office of Native American Programs.

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