Native Americans living on reservations who want to buy homes are significantly more likely to have high-priced mortgages, and those mortgage rates average nearly 2 percentage points higher than for non-Native Americans outside reservations.
The bottom line? A Native American family purchasing a $140,000 home on a reservation could pay $107,000 more over the course of a 30-year loan than a non-Native American purchasing a home outside a reservation would pay.
That’s according to a new study from the Federal Reserve Bank of Minneapolis’ Center for Indian Country Development (CICD).
“This report should serve as notice to policymakers, lenders, and housing advocates that there is an urgent and deeply troubling issue around housing and mortgage costs across Indian Country,” said Minneapolis Fed Assistant Vice President and CICD Director Patrice Kunesh.
Written by CICD research economist Donna Feir and data analyst Laura Catteneo, a new working paper, “The Higher Cost of Mortgage Financing for Native Americans,” confirms that affordable access to capital and quality housing is a daunting challenge facing Native Americans, particularly those who live on or near reservations.
Feir and Catteneo’s research finds:
- Almost 30 percent of loans made to American Indian and Alaska Natives (AIAN) for reservation properties were higher cost—that is, costing more in interest rates than those available to non-Native Americans.
- Only 10 percent of loans in the same time period made to non-Native borrowers for properties near reservations were higher cost; thus, three times the proportion of Native borrowers faced higher-cost loans than did non-Native borrowers.
- While these higher-cost home loans are predominately found on reservation lands, manufactured homes account for 25 percent to 35 percent of the difference in the cost of financing.
“We believe further investigation around the manufactured home financing market structure might be necessary if home loans are going to be made equally affordable for AIAN borrowers,” said Feir.
The report concludes: “These results potentially suggest that without other institutional market reforms, promoting homeownership as a method of increasing Native American equity and assets may be less effective than for other populations.”
The Federal Reserve Bank of Minneapolis is one of 12 regional Reserve Banks that, with the Board of Governors in Washington, D.C., make up the Federal Reserve System, the nation’s central bank. The Federal Reserve Bank of Minneapolis is responsible for the Ninth Federal Reserve District, which includes Montana, North and South Dakota, Minnesota, northwestern Wisconsin and the Upper Peninsula of Michigan. The Federal Reserve Bank of Minneapolis participates in setting national monetary policy, supervises numerous banking organizations, and provides a variety of payments services to financial institutions and the U.S. government.