Hello, LOs!
The U.S. mortgage system was practically constructed to extend credit to high-earning Americans with ordinary financing. And such borrowers have thousands of lenders to choose from should they finance the purchase of a home. In most cases, the process will wrap up in a month or two.
On Native American reservations, it could take years.
The Wall Street Journal has a fantastically well-reported feature on the immense challenges borrowers face in obtaining home loans on reservation land, many of which are considered "credit deserts."
Very few lenders will even offer mortgage products, largely because the parcels of land on reservations are held in trusts, which prevents the servicer from staking a claim if the mortgage isn't paid.
Across the U.S., Native American homeownership rates are just 57%, versus 72% for whites. In 2020, lenders sold under $900 million worth of loans through the federal program that supports Native American homebuyers, less than 1% of the estimated $4.3 trillion of mortgage originated in 2020. One lender, 1st Tribal, a division of Mid America Mortgage, made more than $500 million of those loans, according to Inside Mortgage Finance.
One of the key difficulties comes in navigating Section 184 of the Indian Home Loan Guarantee Program, administered by the Department of Housing and Urban Development. The program allows a loan to be made against land leased from the trust, though it requires approval from the reservation, and the Bureau of Indian Affairs. Stops-and-starts are common.
And finding appraisers and contractors who can navigate the byzantine Section 184 process can be just as challenging.
"When it's easier to violate indigenous people's rights by building pipelines through our land, by mining uranium on our land, than it is to get a mortgage, you know something is wrong," Nick Tilsen, a member of the Oglala Lakota Nation and president of NDN Collective, an Indigenous-led nonprofit focused on advocacy, told the Journal.
LOs, I'd love to hear from you. Have you had experience working with borrowers on Native American lands? Please email me at jkleimann@housingwire.com.
James Kleimann
Managing Editor, HousingWire
EmoticonEmoticon