The Department of Housing and Urban Development’s Section 184 mortgage is the most successful loan ever to target American Indians. To date, 17,220 loans have been made, for some $2.7 billion in finance, and with a tiny 1.5% delinquency rate.
But Tom Wright, director of loan guarantee for HUD, told attendees at the National American Indian Housing Council’s recent annual conference in Anchorage, “I’d like to see more (loans) done on reservations.”
Wright told a session of the meeting that currently, 12% of HUD 184s have been done on reservation trust land or individual allotted land, 5% in urban areas and the balance in “NAHASDA service areas.”
NAHASDA (Native American Housing Assistance and Self Determination Act) areas often are located just outside reservation boundaries, but HUD 184 territory has been expanded so that there is now eligibility in all or select counties in 37 states, according to Betty Shaw, senior vice president at Banc2, Oklahoma City. Twelve states are ineligible, and Hawaii has its own version of the HUD 184, the HUD 184a.
The HUD 184 has a bunch of features that make it attractive to lenders and borrowers. For one, the federal government guarantees 100% of a lender’s outlay. No mortgage insurance is required (a 1% guarantee fee is due, which is even lower than FHA downpayment requirements). And it is not a FICO-driven loan, meaning alternate underwriting can be used.
Lack of credit? Not grounds for rejection, said Rod Whitson, president of Banc2, which is owned by the Chickasaw Nation and specializes in mortgages made to Indians. Alternative credit can be provided, such as utility or rental payment histories. As a fixed-rate only product that floats at market rates, HUD 184s currently can be obtained for less than 4% interest. The mortgage is even assumable.
The Government Accounting Office (as it was known then) studied mortgage lending on reservations for the years 1992 to 1996 and could find just 91 private mortgages made in aggregate for all of Indian Country (which is about the size of Utah) during those five years. The HUD 184 has financed more than 2,000 loans on trust land. That’s a lot better, but still just a beginning.
Bankers and tribal leaders both need to be better acquainted with this innovative mortgage product and a second Indian loan, the Title VI, which to date has provided $166 million to help build or support 2,300 housing units.
