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I can remember the exact instant I became aware that lenders did not make mortgages on American Indian reservations. 

It was at a 1994 community development meeting in Honolulu co-hosted by the Federal Reserve and the Federal Home Loan Bank of Seattle. Deval Patrick, later governor of Massachusetts but then the U.S. Assistant Attorney General for civil rights, addressed the meeting and then opened the floor for questions. The first one came at him fast and hard.

It went something like this: “I work for the Navajo Nation, which is as big as West Virginia and is located in three different states, and no bank has ever made a mortgage there. What are you going to do about it?”

Mr. Patrick, I’m afraid, was somewhat at a loss for words, clearly unaware of the situation and not knowing what to do about it. I was kind of at a loss as well. I had written about mortgages for a decade by then and I had no idea that mortgage lenders in effect routinely drew big red lines around Native homelands.

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Looking into it further, however, I found it was true. Around that time, the General Accountability Office reviewed mortgage lending on reservations in the lower 48 states and found just 91 mortgages had been made in Indian Country during the years 1992 to 1996. And those 91 mortgages had been made in places where the tribes (like the Tulalip Tribe in Washington and the Oneida Nation of Wisconsin) owned a piece of the banks that provided mortgage loans to their communities.

(Lesson 1: Buy a commercial bank or a credit union, or at least a significant ownership stake. A tribe’s cash flow, especially if it has gaming revenue, should make it a valued customer for mortgages and any other kind of loans.) 

I went home from that meeting and wrote an editorial for National Mortgage News saying, “The pervasive lack of mortgage lending to American Indians on their homelands is a national disgrace.” That was the beginning of 25 years of reporting on this vastly underreported story, mostly for National Mortgage News and Indian Country Today but also publications like American Banker, Credit Union Journal, the Chicago Tribune, the Miami Herald, and now for Tribal Business News.

As retirement looms, I have been looking back over the past quarter century of Native mortgages, both at the very real progress that has been made (it isn’t hard to go up from nothing!) and the continuing need. And I have come to a few conclusions about lessons learned that I think it might be helpful to those who will carry on.

The night Mr. Patrick made his remarks, I sought out the official from the Navajo Nation, James Berg, who had asked the flummoxing question and got my first lesson in how tribes could begin to access finance that routinely had been denied to them. I found the Navajo had used the Community Reinvestment Act recently as leverage to get some benefit from an impending merger in their area.

The tribe had threatened a CRA challenge to Norwest Bank’s acquisition of Citibank Arizona (which happened in 1993), saying that Navajo residents in Arizona were not being adequately served. Banks will often settle such challenges as part of the cost of acquiring a new market or institution. The Navajo got a $60 million lending agreement from Norwest to resolve the challenge as well as a commitment for bank branches at Kayenta, Chinle, Shiprock and Window Rock on the reservation.

(Lesson 2: Don’t be afraid to use consumer-friendly laws like the CRA or, on the rental side, the Fair Housing Act to advocate for housing for tribal members.)

Navajo Nation, the largest reservation in the country, extending into New Mexico and Utah as well as Arizona, proved to be a prominent early testing ground for ideas to resolve the Native homeland redlining problem. 

Two mortgage summits on the Navajo Nation in the early 1990s brought in some high-profile players. These included tribal leaders, lenders, federal Housing Commissioner Nicolas Retsinas, and officials of the Federal Home Loan Bank System, for instance. Navajo Nation is so large that its boundaries were within three different FHLB districts: Seattle (then an independent district but since merged with the Federal Home Loan Bank of Des Moines), San Francisco and Dallas. These meetings ginned up a lot of energy toward resolving the mortgage problem on the nation’s biggest reservation.

The problem was multi-faceted. The trust status of a lot of reservation land made extending mortgages difficult (kind of like trying to mortgage a piece of federal land like Yellowstone Park) as the federal government technically owned the land and held it in trust for Indian tribes and individual Indians. Lots of tribes, not having any mortgages ever made within their boundaries, did not have foreclosure and eviction statutes in their judicial codes. Lenders were mistrustful of tribal courts having jurisdiction when it did come to foreclosure proceedings. Tribes could balk at waiving their sovereign immunity to allow lenders legal standing to sue. Tribes also did not want to see any foreclosures at all as losing land remains a serious red flag for them. (Assumable mortgages helped with this concern. The tribe or a relative could assume the mortgage if you ran into trouble repaying.) As well, poverty and lack of credit made many Indians iffy candidates for loans. Reservations lacked most or all lending infrastructure — no mortgage lenders, realtors, home builders, title insurers, construction firms or closing attorneys. And, prejudice against Natives was a real but intangible barrier.

The Navajo Nation and Fannie Mae, a federal mortgage agency, initiated a long and complicated negotiation in the first half of the 1990s to start a “secondary” mortgage market like the kind that has added much liquidity to home loan lending in markets around the country. Barriers to a deal included the Navajo Nation’s refusal to grant a waiver of sovereign immunity so Fannie Mae could perfect a security interest in its mortgages (meaning, they could foreclose on a default). The tribe never did grant the waiver (Fannie Mae accepted a statement from the Navajo judicial system saying it would grant the agency standing to foreclose) and an influential memorandum of understanding (MOU) was signed in 1996. Trust land status had a neat solution: a lender could foreclose on the improvements (the house) but not the land beneath it, in a “leasehold” mortgage. Even there, though, 25-year leases didn’t fit Fannie Mae’s 30-year mortgage timetable, so adjustments had to be made.

(Lesson 3: Nonprofits can be key players in helping tribes develop housing and mortgages for members.)

Also, 1996 saw the opening of a successful housing and mortgage nonprofit on the reservation. Called the Navajo Partnership for Housing (now the Native Partnership for Housing, NPH), the group, part of a Neighborhood Housing Services effort called NeighborWorks, put a lot of energy into homeownership counseling for tribal members to get them ready for mortgages.

As of 2018, NPH had produced more than $60 million in loans and down payment assistance, provided education to nearly 4,000 families, and assisted close to 700 families.

There are many, many other nonprofits filled with people passionate about making houses bloom in the desert or hang off the side of mountains, as I saw at the Mescalero Apache reservation in New Mexico. 

NPH is a Native community development financial institution (CDFI) . Native CDFIs are nonprofits that lend but do not take deposits, and nearly 100 of them have been hatched and funded through money from the federal CDFI Fund and other sources.

(Lesson 4: Look for underused programs, like Title VI, the “hidden jewel of NAHASDA.” As of June 30, 2017, relatively few Title VI loans had been made for just $239 million in finance. But one development by the Cherokee Nation of Oklahoma secured a $50 million Title VI loan in a bid to acquire and construct 500 homes. Another big loan was $15.7 million to the Yakama Nation Housing Authority, for housing and infrastructure construction on 68 homes.)

Indian Country still needed a financing mechanism to get around the trust land issue. Indian Country had a nominal federal mortgage program, the Federal Housing Administration section 248 mortgage, but it was moribund. The 1992 Housing and Community Development Act introduced the HUD 184 Indian mortgage, 100 percent insured by the federal government. Lending didn’t start in the program until 1995, but as of November 2018, $7.2 billion of lending had been done through 42,766 loans. True, much of the lending turned out to be off-reservation (though a good bit of it was in border areas outside reservation boundaries). But a significant amount was on reservations, and some of them were substantial deals, as loans could be made to tribes or their housing entities, as well as individual Indians.

Once mortgage lending got its first tentative legs in Indian Country, there was a lot of discovery to be done, and not a little creative financing. In Arizona, at the remote Fort Apache reservation of the White Mountain Apache tribe, a whole baseball team of financial institutions (10 by my count) got together to finance a truly ambitious project to build 250 new homes in the desert. I called the deal “a patchwork quilt” in National Mortgage News. (Unfortunately it was a one-of-a-kind deal, and not really portable to other reservations).

These unlikely partners decided to tap the capital markets, which were not real big players on reservations at that time, and cobbled together a $25 million mortgage revenue bond as well as funding from the HUD 184 program and Title VI, the second kind of HUD Indian loan intended to be project loans to finance infrastructure or construction. Both types of HUD lending were used at Apache Dawn, a project which went nicely over budget, according to the White Mountain Apache Housing Authority’s website: 317 homes have been built rather than the original plan of 250.

(Lesson 5: Think big. If tribal need is 500 houses, make a plan for that many and then look for the money needed to build that many from tribal, state, federal and private sources. Make the big plan look like an inevitability rather than a Hail Mary pass.)

Another lesson I think tribes can learn is to go for the win. If your waiting list is 500 families, make a plan for 500 units of housing as the Cherokee did and then build them section by section, if necessary, while looking for finance for the next section.

A good example of this is on the San Felipe reservation in New Mexico, where the local housing authority under Isaac Perez has cobbled together federal, state and private money to build multiple sections of houses in the desert outside of Albuquerque.

When the first 28 modular units were dedicated at the Black Mesa View project there, they were the first housing construction done on the reservation in 40 years. Funding included a loan from Bank of America (a HUD Title VI loan), federal stimulus (American Recovery and Reinvestment Act) money, HUD housing block grant money, and funds from the New Mexico Mortgage Finance Authority, Enterprise Community Partners, and others. Another patchwork quilt!

My favorite example of “think big” in Indian Country is at the Cheyenne River Sioux Tribe in South Dakota. Though not a housing project, the CRST’s success in building a big new hospital could be transferred to the housing arena. The CRST, needing a new health facility, planned for one three times as big as its current one. It was rewarded when some $80 million in federal money became available through the ARRA program, the stimulus package put in place against the Great Recession of 2008. The feds were looking for shovel-ready projects that could get started immediately to bring the anticipated economic stimulus. The CRST’s facility got the necessary money, because it was ready for Freddie.

(Lesson 6: Look for the least complicated land status on the reservation to build houses.)

Another successful strategy is to take the easy way out. Financing trust land isn’t easy. But many reservations are “checkerboarded,” meaning areas of them have been sold over the years, taking the land out of trust status and into “fee simple” or private property status. Fee simple is a lot easier to deal with, and there’s a lot of it in Indian Country, an unfortunate legacy of greed for land meeting need for cash among Indian landowners. A good example of this is the Karigan Estates at St. Michaels, Ariz. on the Navajo Nation. More than 150 units of housing were planned on 113 acres of fee simple land, and while the project has been in process for 20 years, the Native Partnership for Housing has been active there in recent years developing housing in conjunction with the Navajo Department of Economic Development.

Over my 25 years covering Indian housing, I have been gratified to see a market building, barriers being overcome and passionate people collaborating to get deals done. I made a rough back-of-the-envelope calculation of how many mortgages had been made on reservations using the federal loan programs and came up with roughly 5,000, a fiftyfold increase from the pitiful few the GAO counted a generation ago.

Of course, that’s not nearly enough. Another fiftyfold increase in the next generation would help. A 2017 HUD study estimated the housing need at 68,000 new or rehabbed units. At $150,000 per construction, that would come to about $10 billion. Add some more to serve the quickly expanding Indian population, and round it up to 75,000. Even at $200,000 per unit, that would be only $15 billion, less than was allocated for the reconstruction of Iraq after our war there.

(Lesson 7: Look for buy-in from tribal government.)

Since tribal housing authorities get housing money directly from the federal government, there is often a tension between tribal governments and IHAs. In my experience, removing that in-fighting and having both entities pulling on the same oar can yield spectacular results. A good example is the Confederated Salish and Kootenai Tribes in Montana. The tribe started an in-house mortgage program in the years after World War II, and tribal resolve to emphasize homeownership has made mortgage lending taken off, to the point where it is estimated that 70 percent of tribal members on the reservation have a mortgage. The tribes have an active IHA, eliminated a bottleneck by establishing a local land records office, and own a bank: Eagle Bank in Polson, Mont.

(Lesson 8: Know how to work the programs.)

I was truly pleased to be invited to the Bay Mills Indian Community on the Upper Peninsula of Michigan, where more than 20 percent of tribal members, living on trust land on the shores of Lake Superior in a remote rural area, had mortgages. How was this done? Cheryl Causley, the executive director of the housing authority, had learned the lay of the federal mortgage land during her years with the National American Indian Housing Council and had skillfully guided members to available mortgages, like those available through the U.S. Department of Agriculture and the HUD 184.

I am not Native, and I had to find my own way around and get to be trusted by Indian housing people, who by and large have proved to be extremely generous in the sometimes-slow process of bringing me up to speed. Advice to others embarking on similar journeys: Go to Indian Country as yourself. Don’t pretend to be something that you’re not. The BS detectors are pretty acute on reservations.

I have been richly rewarded over these many years by being able to visit lands of breathtaking beauty and to meet people with a driving passion to bring better housing and mortgage finance to places that never knew it might be possible. I hope they will forgive me for not mentioning all their names as I want to be sure not to leave anyone out. (You know who you are!)

I will never forget my time in Indian Country. Though Indian mortgage lending was just a small percentage of the work I did covering the home finance industry for 35 years, it was by far the most satisfying part of my portfolio. As far as retiring goes, I’m sure I will retain an interest in this subject forever. I’m reminded of what a Native housing advocate said when asked when she would retire: “Not until all my people have decent housing.” I’m afraid it will take a long time to accomplish that, but it shouldn’t take forever.

And if I win the big lottery (perhaps I should buy a ticket!) or make that big movie sale of one of my books, don’t be surprised if I put together my own patchwork quilt to put up a few houses in or near Indian Country.

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About The Author
Mark Fogarty
Author: Mark Fogarty
Contributing Writer
Mark Fogarty is a contributing writer for Tribal Business News. He has covered Native American finance for the past 25 years. His work has appeared in Indian Country Today, American Indian Report, the Chicago Tribune, the Miami Herald, National Mortgage News, American Banker and Multi-Housing News.
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