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
HUD Section 184
- 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
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
- An approved Federal Housing Administration (FHA) lender;
- 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
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 email@example.com, or visit
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
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
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
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
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.