If your bank operates in or near Indian Country, you probably know that the need for housing on reservations is acute, and the demand for homeownership is strong. You may already have recognized the potential for lending in Indian Country as well as the related challenges. Unlocking this potential and addressing these challenges are the main objectives of the Tribal Leaders Handbook on Homeownership. A financial institution could find the Handbook useful for various parts of its business, including but not limited to its Community Reinvestment Act (CRA) program, as discussed below.
The Handbook, published in 2018 by the Center for Indian Country Development at the Federal Reserve Bank of Minneapolis, provides a comprehensive overview of the mortgage lending process, examines challenges to homeownership on trust lands, and presents best-practice case studies showing how tribes have addressed challenges through innovation and perseverance to foster homeownership in Indian Country.
The Handbook shares strategies for tribes or tribal organizations and their partners, including lenders, to build a framework to support success in unlocking home lending potential in Indian Country. Components of this homeownership framework include community needs assessments, home buyer counseling, land planning, financing, and construction. This article discusses examples of how lenders can serve as partners within the framework, with the objective of supporting financial capabilities of people in Indian Country.
Home buyer education and homeownership counseling
According to the Handbook, many Native Americans who are prospective homeowners have little experience with home buying and mortgage lending processes. Lenders can support financial education efforts through activities such as:
- Providing access to relevant gap or assistance programs, such as for down payment or closing costs.
- Coaching and classes to help potential borrowers improve credit scores or achieve financial goals.
- Explaining the mortgage leasehold process.
As discussed in the Handbook, lending is at the heart of homeownership. The Handbook explains two primary considerations unique to lending in Indian Country: land status (e.g., trust land) and the laws applicable to lending and recourse within tribal jurisdictions. Ways that lenders can support the flow of public and private capital to homeownership in tribal communities include:
- Sharing financial experiences and expertise with members of tribal communities.
- Channeling available capital, such as from federal agencies and secondary market investors.
- Matching borrowers with loans that best fit their needs.
- Engaging in early intervention, when needed, while servicing mortgage loans.
In addition, lenders can use the Handbook to identify strategies relating to opportunities for or obstacles to lending in Indian Country and ways to partner with tribes and tribal housing organizations or programs. The Handbook also is a good training tool to enhance bank staff’s knowledge about the capital needs and lending processes in Indian Country. For example, the Handbook devotes entire chapters to land status information and manufactured housing. Finally, the Handbook serves as a resource for identifying loan programs and lenders working in Indian Country.
Importantly, commercial banks can also find the Handbook a useful resource for their CRA programs. Under the CRA, a commercial bank has an obligation to serve the credit needs of its communities, including those parts of its communities that are low and moderate income. The Handbook could help a bank identify ways to engage in community development activities (loans as well as investments or services) in Indian Country. CRA defines community development as the following:
- Affordable housing for low- and moderate-income people.
- Community services targeted to low- and moderate-income people.
- Economic development activities.
- Revitalization and stabilization efforts in low- and moderate-income areas as well as some rural, middle-income areas and disaster areas.
Overall, the Handbook can serve as a catalyst for a commercial bank interested in new or better ways to serve low- or moderate-income borrowers or census tracts in the parts of Indian Country that are within its CRA assessment area(s).
Housing is an integral component of economic development and community well being. We hope you will review the Handbook as a gateway to opportunities that are appropriate for your lending institution or commercial bank and support housing efforts in Indian Country.
Additional Indian Country resources are available on the Minneapolis Fed’s website:
Reservation Profiles. Key demographic and economic indicators for American Indian reservations with at least 2,500 residents.
Native American Financial Institutions. An interactive map of Native-owned banks and credit unions as well as community development financial institutions serving Indian Country, with their asset data.
Indian Country Resources and Organizations. A list of nations, organizations, and agencies engaged in Native American communities and economic development.
Homeownership in Indian Country. Resource page.
Information relating to the Community Reinvestment Act is available on the Federal Financial Institutions Examination Council’s website