Good reasons for becoming a homeowner are listed on signs taped up around the Navajo Partnership for Housing's Gallup, N.M. homeowner education training room: "Financial security. Social recognition. Family security. Sense of accomplishment. Self-respect. A comfortable life."
The scrappy nonprofit, which will mark its 15th year of doing the practically impossible next year, has bucked the housing depression to continue to bring mortgage finance to members of the Navajo Nation on or near their giant reservation, which sprawls across New Mexico, Arizona and Utah.
And, according to executive director Lanalle Smith, the Native CDFI (community development financial institution) has ambitious plans to branch out into housing project development on or near the reservation to go along with its scattered-site financings. To date, NPH, which has its base in a storefront in Gallup, a "border town" adjacent to the Navajo reservation, has arranged or provided 435 loans and grants to 334 families to help tribal members buy, build or rehabilitate a home. Total financing comes to $36.3 million to date. (Belinda Hadley is the group's loan manager.)
To give an idea of what an accomplishment 435 loans on or near the reservation is, it's instructive to remember that before the 1990s, no private bank had ever done mortgage lending on the Navajo Nation, which is the size of West Virginia and has nearly 200,000 residents. In addition, there is no real estate market there as the rest of the country knows it. And, there is very little mortgage infrastructure: no Realtors, no homebuilders, no appraisers, no title plants, no closing attorneys.
And, many potential borrowers there are less than optimal mortgagors. According to a Neighborhood Reinvestment Corp. study of NPH, between 25%-43% of people on the reservation are unemployed, 40% of families are below poverty level, and median household income is $20,000.
Before saluting NPH as high desert miracle workers, it's worth pointing out that more of its volume is done off the reservation than on it, where land status has made it hard for lenders to perfect a security interest. A dispute with the U.S. Department of Agriculture over homesite lease documents (just now resolved) has led to just one Rural Housing Service loan being done in the past several years. Its 2009 balance sheet shows an imbalance between revenues and expenditures. And, like all lenders, NPH has suffered higher rates of delinquency and foreclosure in the recession, and in the fall-off-the-table year of 2008 it managed just seven loans.
But that volume rebounded smartly in fiscal 2009, to 40 loans and grants for $4.2 million, and its fiscal 2010 goal is an ambitious 63 loans (21 have closed to date). If the 13 employees of NPH (11 in Gallup and two at a satellite office in Page, Ariz., another Navajo border town) are not miracle workers, they're not far short of it, either.
Conventional mortgage lending is still elusive on the Navajo. It makes up less than 10% of the NPH total, at 37 mortgages, and no lender has made a conventional mortgage to an NPH client since the mortgage bust began in 2008. (This is in line with a 67% drop in mortgages to Native Americans nationwide since that time.)
Government-insured mortgages are the bulk of NPH financings, with 98 coming through the Department of Housing and Urban Development's Section 184 program, and 99 through three RHS programs. More than 50 financings for downpayment and closing costs have come from Native American Housing Assistance and Self Determination Act (NAHASDA) money.
NPH primes the loan pump for its clients through a vigorous homebuyer education program (NeighborWorks' "Realizing the American Dream") that has completed more than 15,000 orientations to date. (Alvin Billie is NPH's education manager.) Those with credit challenges must first attend seven weeks of financial fitness classes as 309 people have graduated from the fitness classes, and 2,811 from the education course, meaning only about 10% of those graduates have received loans or grants.
NPH also has started to fund Individual Development Accounts for its clients, matching $4 for every $1 contributed, to get them to start saving. To date, 36 IDAs have been started.
Smith said delinquencies have been rising, but NPH works aggressively with borrowers to rework the loans. Two have gone into foreclosure, and another two are pending. She said NPH has success stories of troubled borrowers who have had successful workouts.
The group has recently branched off into development. It has won a contract from the Navajo Housing Authority to develop, market and sell 25 units of the Karigan Estates, a long-planned but slow-to-develop project based in St. Michaels, Ariz., inside the reservation borders. (Mike Burnside is the project manager.) Twenty-three of the units will be townhomes; NPH has the option to develop 26 other units.
Smith said NPH is hoping construction can start in the late fall as it finds families qualified for mortgage finance, probably HUD 184s. This mixed-income project will feature high-income residents as well as the low- and moderate-income residents more typical of NPH's clients.
NPH has about $3.5 million to dedicate to the project, through the housing authority and NAHASDA money, and hopes to raise the rest through bank financing and construction loans from Native Home Capital, Phoenix, and Community Housing Capital, a NeighborWorks affiliate (as is NPH).
It is currently looking around Gallup for a second site to develop, partly seeded by a $470,000 grant from the federal CDFI Fund. The Navajo Nation has purchased properties outside the reservation limits as well, since many Navajo live outside the boundaries of the reservation as defined by the U.S. government.
The group also has a construction effort underway, with 74 new constructions, rehabs or manufactured housing completed.
NPH, under former executive director Richard Kontz (who has since returned as a finance consultant), began to start a real estate market on the Navajo. NPH acquired 18 properties and sold 14, leaving a few that Smith says the group will use as income properties.
Last year, NPH became a mortgage broker in New Mexico, and is applying to become one in Arizona as well. Smith said the group will broker loans for Banc2 of Oklahoma City.
