# Navigating the new Indian housing landscape > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/tribal%3Aho-chunk%3Aac4c5d802c26191a ## Record - **Collection:** Tribal code - **Document type:** Tribal code ## Text Navigating the new Indian housing landscape A s Native populations grow rapidly, tribal leaders are challenged as never before to provide their members decent housing. Expanding homeownership is a huge part of the solution for reservations and Indian areas, but until recently lenders just didn’t extend home loans in Indian Country. The Tribal Leaders Handbook on Homeownership is the essential guide to understanding a process that has so much potential but is still in its infancy. The handbook is your guide to the new mortgage programs (government and private), the new kinds of lenders (loan funds, Native CDFIs), and the new energies that are transforming Indian housing. PUBLISHED BY FEDERAL RESERVE BANK OF MINNEAPOLIS | MINNEAPOLISFED.ORG PRINTED BY FEDERAL RESERVE BANK OF SAN FRANCISCO COVER AND BOOK DESIGN: LORI KORTE ILLUSTRATIONS: MARLENA MYLES WWW.MINNEAPOLISFED.ORG/INDIANCOUNTRY ISBN-13: 978-0-692-14067-3 Edited by Patrice H. Kunesh Forwards by the National Congress of American Indians, the National American Indian Housing Council, and Enterprise Community Partners A publication of the Center for Indian Country Development of the Federal Reserve Bank of Minneapolis and Enterprise Community Partners ©2018 Federal Reserve Bank of Minneapolis – Center for Indian Country Development 90 Hennepin Avenue Minneapolis, MN 55112 www.minneapolisfed.org © 2018 Federal Reserve Bank of Minneapolis and Enterprise Community Partners. This book may be reproduced in whole or in part provided that any reproduction is: 1. Used for noncommercial, personal, or educational purposes only (i.e., not for private gain), and 2. Appropriately credited. ISBN-13: 978-0-692-14067-3 Printed in the United States of America Editor: Patrice H. Kunesh Cover design: Lori Korte and Marlena Myles The views expressed herein do not necessarily reflect the views of the Federal Reserve Bank of Minneapolis or the Federal Reserve System. Introduction 3 Acknowledgments 8 Forwards National Congress of American Indians National American Indian Housing Council Hawaiian Community Assets Enterprise Community Partners 10 Preface A Brief History of Indian Country Land 14 Chapter 1 How Tribal Leaders Can Support Homeownership 18 Case Study Large Scale Tribal Subdivision Black Mesa View San Felipe Pueblo, New Mexico 25 Chapter 2 Historical Housing Programs in Indian Country 28 Case Study Alaska Native Homeownership Bristol Bay Housing Authority, Dillingham, Alaska 32 Chapter 3 Partnering on Homeownership 38 Chapter 4 Assessing Tribal Members’ Needs 44 Case Study Housing Needs Study Cheyenne River Housing Authority, Eagle Butte, South Dakota 48 Chapter 5 Preparing Families for Homeownership 52 Case Study Homebuyer Readiness Program—Salish and Kootenai Housing Authority, Pablo, Montana 57 Chapter 6 Lending Processes to Optimize Homeownership 62 Case Study Native Community Development Financial Institutions Focusing on Homeownership Lending in Indian Country 72 Chapter 7 Navigating Land Issues 78 Case Study HEARTH ACT Implementation—Ho-Chunk Nation Reality Division, Black River Falls, Wisconsin 88 Chapter 8 Homeownership Development: Planning to Drive Change 92 1 TRIBAL LEADERS HANDBOOK ON HOMEOWNERSHIP CO N T E N TS CO N T E N TS Chapter 9 Home Design and Construction— Making the Right Choices 98 Case Study Green Design—Santo Domingo Tribal Housing Authority, Santo Domingo Pueblo, New Mexico 102 Chapter 10 Making Homeownership Affordable 106 Case Study Low-Income Housing Tax Credit—Santo Domingo Tribal Housing Authority, Santo Domingo Pueblo, New Mexico 110 Chapter 11 Manufactured Homes: An Affordable Ownership Option 114 Afterword The Path Ahead—A Shared Future 124 Appendices Glossary of Common Acronyms and Lending Terms 126 Classification of Housing Types 130 Native American Mortgage Products 132 Mortgage Lenders Working in Indian Country 139 Model Housing Needs Assessments 141 The Bureau of Indian Affairs Inter-Agency and Program Mortgage Package Routing Slip 158 The Bureau of Indian Affairs Inter-Agency and Program Mortgage Package Business Process 160 Contributors 161 2 TRIBAL LEADERS HANDBOOK ON HOMEOWNERSHIP Editor's Introduction What would it take to build new communities, and remake old ones, so reservations move more positively toward meeting housing needs and bolstering economic development? I ndian Country connotes an enduring interconnection between land and people. It also is a complex web of historical, legal, and social forces that make it unnecessarily difficult to use trust lands to the benefit of their people. For several generations, housing stock on American Indian reservations has been limited and deficient, adding to the already dire housing crisis throughout Indian Country. Today, the strong demand for homeownership in Indian Country is driving renewed efforts to confront these barriers and unlock the potential of all reservation land. Tribal leaders across the country are at the forefront of this effort. This Handbook is one of those efforts. It came about at the request of the Tribal Leaders Working Group of the National Native Homeownership Coalition, an initiative of the Center for Indian Country Development at the Federal Reserve Bank of Minneapolis. We asked them to consider these basic questions about economic development: What would it take to build new communities, and remake old ones, so reservations move more decisively toward economic development that benefits tribal members? What financial and governance strategies could most effectively overcome barriers to these goals? They immediately identified the need for a comprehensive guide to the homeownership process and the mortgage lending programs available in Indian Country. Thankfully, a good model already existed in Designing and Operating Homeownership Programs on Tribal Lands, a manual prepared by the New Mexico Tribal Homeownership Coalition and published in 2016 by Enterprise Community Partners’ Native American Initiative. This Handbook expands on the Enterprise blueprint. It provides a comprehensive overview of the mortgage lending process, addresses challenges to homeownership on trust lands, and includes “best practice” case studies that show how tribes overcame those obstacles through innovation and perseverance to create homeownership in their communities. Why homeownership? The short answer is people and opportunity. • Growing housing needs of Native communities. Among the 5.2 million American Indians and Alaska Natives, social and cultural connections to Indian Country remain strong. In this rapidly growing population, a high percentage of tribal members (about 60 percent) lives on or near reservations, and Native communities increasingly are looking to address their rising housing needs. 3 TRIBAL LEADERS HANDBOOK ON HOMEOWNERSHIP Legend Ç Federally Recognized Reservation Ç Alaska Native Village Statistical Area Ç Oklahoma Tribal Statistical Area Ç Other Tribal Area Source: Housing Assistance Council • Strong and unmet demand for homeownership. According to the Census Bureau, in 2016, just 52.9 percent of all Natives were homeowners, down from 55.5 percent in 2000. In tribal areas, there is a strong and as yet unmet demand for homeownership among Native households: 75 percent report a strong desire to own their home. Concerns about chronic housing shortages, quality, and overcrowdedness suggest additional demand for new investments in private homes in Indian Country. • Reservation economies. Expanding homeownership options on trust land can help improve reservation economies and the well-being of tribal members. Building new homes and preserving old ones employs a wide range of workers and provides opportunities to develop a 4 TRIBAL LEADERS HANDBOOK ON HOMEOWNERSHIP skilled workforce. These activities have a wide ripple effect as jobs are spread over other sectors of the community, including manufacturing, retail, and business services. • Governance and infrastructure. Creating homeownership in Indian Country involves fundamental economic and governance issues such as access to capital, workforce capacity, and spending power within the reservation. • Unlocking the potential of reservation lands. The tasks before stakeholders working to strengthen tribal economies through homeownership include: 5 TRIBAL LEADERS HANDBOOK ON HOMEOWNERSHIP ° Grounding a system of housing finance and development in tribal housing programs to address the community’s housing needs, including enabling Native households to purchase or rent quality homes on their reservations, or to build their own. ° Assembling land parcels in ways that can support infrastructure investment to serve the quality development of housing and other community amenities. This can be achieved by targeting funding for land purchases and streamlining lease processes for housing development, so tribal and trust lands can be accessed for housing more easily. ° Developing a system of infrastructure finance that can serve new and existing community development and projects. ° Aligning education, workforce development, and reservation job sectors to grow the share of Native workers filling reservation-based jobs, thus creating a market for higher-quality housing choices. ° Attracting reservation investments and consumer spending in reservation enterprises. Some good progress has been made in meeting Indian Country’s unmet demand. The HUD Section 184 Indian Home Loan Guarantee Program has greatly expanded the supply of mortgage credit to Native borrowers. Loans under this program have grown from less than 600 per year before 2005, to over 4,000 loans in 2015 and an aggregate total of more than 6,000 as of 2017. However, most of this growth bypassed trust lands, resulting in 93 percent of HUD 184 loans being made on fee land in recent years. Other federal programs support mortgage lending on trust lands, such as the USDA Rural Housing Services 502 Direct Loan Program and the VA Native American Direct Loan Program. On a smaller but vitally important scale, CDFIs (community development financial institutions) and tribally owned financial institutions, including banks, credit unions, and internal mortgage offices, provide loan products and mortgage services to Native borrowers. Nevertheless, developing trust lands for homeownership remains a serious challenge and involves a lengthy and often burdensome process that reduces the appeal of lending on tribal trust land, even with the federal guarantee. Who should use this handbook? • All tribal leaders interested in creating homeownership programs, in leveraging government and private mortgage programs and resources, and in developing partners to help maneuver between lending and development processes for their Native communities. • Banks and mortgage lenders interested in how homeownership on trust land is not only possible but also can be a successful business opportunity. 6 TRIBAL LEADERS HANDBOOK ON HOMEOWNERSHIP • Housing advocates, state and government agencies, and community builders interested in working with Native communities across the country and supporting tribes in managing the mortgage lending process. Providing quality, safe, and affordable housing is an integral component of reservation economic development and community well-being. It supports a healthy, educated, trained workforce. Most importantly, it strengthens Native peoples’ ties to their history, to their land, and to their language and culture. We hope this Handbook will be a catalyst to create opportunities for housing choice and progress across Indian Country. 7 TRIBAL LEADERS HANDBOOK ON HOMEOWNERSHIP Acknowledgments T he Tribal Leaders Handbook on Homeownership is a remarkable resource, made with many hands and hearts in Indian Country. It reflects extensive work and research from several contributors: the Center for Indian Country Development at the Federal Reserve Bank of Minneapolis and members of its National Native Homeownership Coalition, Enterprise Community Partners, NeighborWorks America-Rocky Mountain Western Region, and NeighborWorks Alaska. HUD and USDA Rural Development assisted with the data on their 184 and 502 programs, a significant contribution to providing affordable housing options to many Native communities. The Public Affairs department at the Federal Reserve Bank of Minneapolis was instrumental in creating the design and layout of the Handbook. We would not have this book but for the printing and publication shop at the Federal Reserve Bank of San Francisco. Many individuals deserve thanks for their work in the Coalition and on the Handbook. My thanks go to the chapter authors, case study contributors, and Coalition leads (Jason Adams, Steve Barbier, Tawney Brunsch, Matthew Carriaga, Joanna Donohoe, Fred Fisher, Russ Kaney Leslie Newman, Jim Nordland, Craig Nolte, Nikki Pieratos, Dick Todd, Sharon Vogel, and Denise Zuni) for participating in this project and for their willingness to help explore and navigate the complex maze of mortgage lending in Indian Country. The artistic vision of Marlena Myles, and Lori Korte has made the Handbook more visually appealing and inviting. Journalist Mark Fogarty provided keen review and editing of our manuscripts. About the Center for Indian Country Development The Center for Indian Country Development at the Federal Reserve Bank of Minneapolis was established in 2015 to help self-governing communities of American Indians across the country attain their economic goals. The Center’s work focuses on engagement in four main areas (land, education, housing and homeownership, and business and entrepreneurship), buttressed by research around economic development issues of vital importance to Native communities. About the National Native Homeownership Coalition The Center for Indian Country Development established the National Native Homeownership Coalition (NNHC) in 2016 to bring together housing systems leaders to help resolve the multidimensional challenges to homeownership on trust lands. The NNHC’s goals are to: • Enhance access to mortgage credit. • Maximize housing choice. • Streamline the lending process. • Provide data and research on mortgage lending. 8 TRIBAL LEADERS HANDBOOK ON HOMEOWNERSHIP Through collaboration and partnerships with its more than 200 members, the NNHC is addressing a broad spectrum of issues with the goal of improving the mortgage lending systems on trust land and creating more housing options for Native families. About Enterprise Community Partners Enterprise’s mission is to create opportunity for low- and moderate-income people through affordable housing in diverse, thriving communities. Within Enterprise are entities that lend funds, finance development, and manage and build affordable housing. Enterprise improves communities and people’s lives by making well-designed homes affordable. By bringing together nationwide know-how, partners, policy leadership, and investment, Enterprise multiplies the impact of local affordable housing development. On a personal note, I am sincerely grateful to the many Native nations and Native peoples who work ardently and tirelessly to bring safe and affordable housing to their communities. They are creating a place to come home to and preserving an enduring culture. —PHK 9 TRIBAL LEADERS HANDBOOK ON HOMEOWNERSHIP Forwards The National Congress of American Indians he ability of a tribal nation to fully exercise its sovereignty in order to achieve social, cultural, and economic prosperity depends to a large degree on the ability of the individuals and families who make up that nation to achieve self-sufficiency. Homeownership represents a vital pathway in that pursuit, yet across Indian Country it is underutilized, poorly resourced, and not fully understood. T With this Handbook, the Center for Indian Country Development enhances tribal nations’ understanding of the opportunities for homeownership by their people – and empowers them to seed those opportunities. Presenting cutting-edge data, tribal best practices, leading models, and useful tools, the handbook presents tribal leaders and key decision makers with a suite of relevant resources they can use to forge comprehensive, tribal approaches capable of meeting the homeownership needs of their people not just today, but for years to come. It also articulates the central roles that lenders and community development and housing advocacy organizations can and should play in this formative process, and the critical need for tribal nations to fully engage these partners every step of the way. With Native people being one of the fastest-growing populations in the country, removing the many barriers that keep them from owning a home grows more urgent by the day. Given this reality, it is incumbent upon tribal leaders and key decision makers to plan and act now to remove those barriers. When they succeed in doing so, they not only support the building of personal and familial wealth, they strengthen culture, community, and economy by enabling more tribal citizens to participate by working and living at home in tribal communities. This Handbook shortens the learning curve for tribal nations about what works and what doesn’t, and it provides them proven blueprints for strategic action. —Jacqueline Pata, Executive Director, National Congress of American Indians 10 TRIBAL LEADERS HANDBOOK ON HOMEOWNERSHIP National American Indian Housing Council For many generations, traditional Native communities worked together to ensure that each family had a safe home of their own. Today, quality, affordable housing opportunities are far too scarce in Indian Country. A 2017 report by the Department of Housing and Urban Development found that 68,000 new units are needed to alleviate issues of overcrowded and substandard homes in tribal communities, and may well underestimate the true need. Inadequate housing contributes to a number of the problems facing our communities. Lack of housing options also impacts the health and safety of our Native communities, particularly for the young and elderly. Creating new homeownership opportunities will be a vital component as we work to address this housing crisis in Indian Country. The Tribal Leaders Handbook on Homeownership is designed to take a community wide approach to address homeownership in the present day. Rather than thinking of homeownership as a single mortgage transaction or single construction job, communities are learning that a comprehensive approach to community development can solve not only our housing shortage, but also do so in a way that revives and sustains tribal economies. This comprehensive approach means everyone must work together – from the individual learning the importance of building good credit, to the tribal housing counselor guiding the way through the maze of homeownership programs and mortgage options, to the tribal leader who knows that developing the legal and physical infrastructure in their community creates greater homeownership and economic development opportunities. These new homeownership opportunities create jobs, improve education and health outcomes of the community, and help recruit professionals to move to the communities. All of this can drive further development and sustained economic progress across Indian Country. Nonetheless, addressing the dire housing needs in Indian Country – really tackling the systemic challenges to developing trust lands and offering better lending options – will require more. The United States Congress, federal agencies, and our partners in the housing and banking industries all have an essential part to play to create real housing opportunities for our Nation’s first nations. I appreciate the work of the National Native Homeownership Coalition, the Center for Indian Country Development, and the Federal Reserve Bank of Minneapolis in developing this Handbook. Its comprehensive approach will serve our tribal communities well as we strive to provide greater housing and homeownership opportunities for Native peoples across the country. — Tony Walters, Executive Director, National American Indian Housing Council 11 TRIBAL LEADERS HANDBOOK ON HOMEOWNERSHIP Hawaiian Community Assets Homeownership in native communities is about more than personal wealth. It is about perpetuation of culture, preparing future generations, and building collective wealth. The Tribal Leaders Handbook on Homeownership is a groundbreaking publication that provides tribal housing authorities with tools for understanding land and finance requirements for homeownership and creating sustainable housing programs – all rooted in a native way of thinking that promotes collective wealth over personal wealth and gain. — Jeff Gilbreath, Executive Director, Hawaiian Community Assets 12 TRIBAL LEADERS HANDBOOK ON HOMEOWNERSHIP Enterprise Community Partners Enterprise Community Partners has an ambitious vision: that one day, every person will have an affordable home in a vibrant community, filled with promise and the opportunity for a good life. Since 1982, our work in communities has been grounded by the belief that safe, affordable housing is critical to helping low-income people move out of poverty. We strive to connect housing to communities of opportunity, where residents have access to a good education, an affordable place to live, a job, and quality health care. The need for this comprehensive approach to housing and community development is evident on reservations and pueblos across the country. Native Americans living on tribal lands face extreme hardships, and as a result, tens of thousands of Native American families are housing insecure—burdened by high housing costs, doubled-up in poor quality homes, or struggling with homelessness. Added to that, much of the existing housing is located away from centers of employment, education, and cultural activities, further compounding the challenges Native Americans face. For more than 20 years, Enterprise has worked with tribal governments to develop culturally appropriate affordable housing options for Native Americans. During that time, we have invested more than $100 million in tribal housing programs through grants, loans, tax credit investments, technical assistance and training. We have also established critical partnerships, including with the Center for Indian Country Development at the Federal Reserve Bank in Minneapolis. CICD’s work has brought a strong focus to improving homeownership and asset building strategies for Native Americans, and is founded on our shared belief that homeownership provides financial security and a pathway out of poverty that can extend for generations. This manual, and our partnership with CICD, is an effort to support the work of Tribal leadership as they develop, launch and administer homeownership programs. It provides broad guidance on how to get started, and case studies of programs that have worked across the country. It is intended to be accompanied by individualized technical assistance that will help you navigate the resources and challenges ahead. As you read through this guide and access the materials on-line, we are hopeful that it will stimulate your creativity and inspire your own homeownership program. If it does, we look forward to partnering with you to bring that program to life. —Terri Ludwig, Chief Executive Officer, Enterprise Community Partners 13 TRIBAL LEADERS HANDBOOK ON HOMEOWNERSHIP Preface A Brief History of Indian Country Land H ow did Indian land get the complicated status it has today? This historical overview lays out the origins of the land tenure system in Indian Country – providing a basic primer on both the history and the law behind the property ownership patterns throughout Indian Country. Original Tribal Property Rights to Colonization Prior to European contact, Native peoples abided by their own systems for recognizing and enforcing property rights to their territory and resources. These rights, including individual property rights, were regulated by each tribe’s customs and norms. When Europeans arrived in North America, they encountered a vast array of tribal nations with well-established property systems. European legal doctrine asserted a form of dual sovereignty in the Americas. On the one hand, European states asserted the right to exclude all outside powers (e.g., other European nations and nationals) from territories they claimed or acquired from other European powers. On the other hand, within these areas, Europeans recognized tribal ownership and self-governance over their own lands, so that those lands could only be acquired by Europeans through purchase from tribes or the concept of “just war.” The term Indian Country was first used in the Royal Proclamation of 1763, following Great Britain's acquisition of French territory in North America. Drawing a line referred to as the “Proclamation Line” along the spine of the Appalachian Mountains, the Proclamation formally reserved land west of the Appalachian Mountains as Indian Country, and forbade non-Indian settlement in this territory. After the formation of the U.S., the line quickly moved westward, and the term then became more closely aligned with the Indian reservations created by treaties, statutes, and executive orders. The U.S., Treaties, Laws, and the Supreme Court The early treaties between European nations and tribes reflected a nation-to-nation relationship, where trade and commerce, and agreements of protection were formalized in treaties. In these dealings, tribes were recognized as sovereigns, having the authority to cede, transfer, or convey their lands. After the American Revolution, while the U.S. assumed Britain’s ownership rights of lands previously purchased or acquired, the U.S. did not acquire title or rights of ownership to all lands within its broader boundaries. The new national government continued to recognize tribal ownership and self-governance over unceded lands and that those lands could only be acquired through purchase. 14 TRIBAL LEADERS HANDBOOK ON HOMEOWNERSHIP Conflicts over the validity of title and ownership of lands acquired from tribes quickly escalated to the new U.S. Supreme Court. In 1823, the Court decided Johnson v. M’Intosh, a historic decision that forever altered the property rights of all tribes, as well as the relationship between them and the new government. The case involved a conflict between two non-Indian parties who claimed ownership of the same large tract of land, one obtained directly from tribes and the other through a federal land patent. In simple terms, the Supreme Court recognized the superior power of the federal government to acquire lands from Indians. The legal significance of the decision, however, was profound. Tribes no longer held absolute title and authority over their lands – they had a mere beneficial right of occupancy. How had the federal government acquired the underlying legal title in Indian lands? The Court’s decision rested on international principles of European “discovery” and conquest, which “extinguished” absolute Indian title in the land. It also was based, in part, on racial stereotypes and economic biases that Indians did not use their lands efficiently enough to be considered full property owners. The decision created the first explicit limitations on Indian sovereignty in the law of the land. Although limiting sovereignty, the Court also attempted to protect tribes’ rights to occupy their lands. Indeed, a few years later, the Supreme Court reinforced these protections in Worcester v. Georgia, finding that state laws did not apply on tribal lands. These early Supreme Court decisions not only recalibrated federal-tribal relationships, they also sanctioned rapid westward expansion through large-scale acquisition of Indian lands and the creation of the reservation system. The continued demand for more Indian lands for settlement led to a chaotic era of dispossession, forced removal, and relocation to a new or modified land base. It culminated in the General Allotment Act of 1887, another significant shift in federal Indian policy aimed at, once again, diminishing tribal landholdings and disrupting tribal governance. The effects of the reservation system and allotment policies still cast a shadow over reservation economies. The General Allotment Act to the Indian Reorganization Act Until the 1887 General Allotment Act (also known as the Dawes Act after the bill’s sponsor, Sen. Henry Dawes), land on Indian reservations was held in common by all members of an Indian nation. Many believed that Indian people should take up agriculture, break away from their tightly knit families, and adopt the “civilized” lifestyle of white settlers. Many also believed that Indian nations occupied too much land, and they were eager to see those lands opened up for settlement, railroads, mining, or forestry. 15 TRIBAL LEADERS HANDBOOK ON HOMEOWNERSHIP The objectives of the General Allotment Act were straightforward: Abolish tribal and communal land rights of Indians, stimulate their assimilation into mainstream American society, and transfer vast areas of their land to white settlers. Individual ownership of land and subsistence farming were seen as an essential first step to both civilization and independence. To this end, reservation lands were divided into parcels, typically of 160 acres, and each tribal member was designated as owner of a parcel or “allotment.” Individual Indian allotments were to be held in trust for a period of years, often 25 years, after which the land was to be transferred to fee simple ownership. Once in fee status, Indian land could be sold or mortgaged. Lands that were not allotted were declared “surplus to Indian needs.” Tribes were forced to cede those lands to the federal government for a nominal payment, after which the government opened much of them to non-Indian homesteaders, sold it to railroads, or converted it to public lands. The “Oklahoma Land Rush,” for example, was the direct result of the Dawes Act. Between 1888 and 1934, about 90 million acres of land were transferred from Indian reservations to non-Indian and out-of-Indian management, leaving about 56 million acres and resulting in a reduction of about 60 percent of an already diminished land base. Centuries of tribal land ownership and social structure quickly unraveled. Most new allottees were unfamiliar with land ownership. Many received allotments that were too small or unsuitable for profitable farming or became the target of speculators, and they eventually lost their lands. For what remained of tribally held lands, the federal government delegated its authority over the management of the land and its assets to the BIA in the U.S. Department of the Interior. During the Great Depression, the federal government repudiated the allotment program in the Indian Reorganization Act of 1934. This “New Deal” legislation for American Indians renewed their rights to organize and form their own governments. It also stayed the trust period of allotted lands, but by then, the allotment process had drastically altered the land tenure status and configuration of Indian reservations. What remained was a checkerboard pattern of Indian and non-Indian lands interspersed throughout the reservation, making it difficult to decipher jurisdiction over a particular plot of land. Moreover, the federal government impeded or made little provision for estate planning of allotted lands. Consequently, with each generation, the number of co-owners of a parcel increases while each heir’s interest decreases, resulting in a highly fractionated ownership of many parcels that now makes it nearly impossible to govern or efficiently manage the use of these lands since a majority of owners must agree on it. Indian Country Defined In 1948, Congress defined the term Indian Country to help clarify the territory over which tribes exercised their jurisdiction. Codified at 18 U.S.C. § 1151, Indian country includes: • “All land within the limits of any Indian reservation under the jurisdiction of the United States Government, notwithstanding the issuance of any patent, and, including rights-of-way running through the reservation; 16 TRIBAL LEADERS HANDBOOK ON HOMEOWNERSHIP • All dependent Indian communities within the borders of the United States whether within the original or subsequently acquired territory thereof, and whether within or without the limits of a state; and • All Indian allotments, the Indian titles to which have not been extinguished, including rightsof-way running through the same.” Consistent with this statutory definition, as well as federal case law, lands held in trust for Indian tribes outside formal reservations also are considered Indian Country, such as in Oklahoma. Furthermore, even outside the formal contours of Indian Country, tribes in Alaska, for example, have considerable jurisdiction and authority to manage internal tribal affairs and protect tribal members. Understanding this complex land tenure system in Indian Country is essential to successful economic and community development activity, much depends on the status of the land. Today, about 60 million acres of Indian land are held in trust by the federal government and managed by the BIA on behalf of the Secretary of the Interior for the use and benefit of the 573 federally recognized tribes. Social and cultural connections to the land remain strong for the 5.2 million American Indian and Alaska Native peoples. A high percentage of this rapidly growing population (about 60 percent) lives on or near reservations, and Native Communities are looking for opportunities to unlock the economic potential of their lands. 17 TRIBAL LEADERS HANDBOOK ON HOMEOWNERSHIP The tribal chairman told me, “Let’s build some houses.” But he wanted me to leverage our Indian Housing Block Grant so we could build more homes for tribal members at every income level. —VICTOR VELASQUEZ, Executive Director, White Mountain Apache Housing Authority 18 TRIBAL LEADERS HANDBOOK ON HOMEOWNERSHIP C H A P T E R How Tribal Leaders Can Support Homeownership 5 C H A PT E R 1 T ribal leaders strive to ensure healthy, safe, and productive lives for the next seven generations. They aim to preserve their community’s way of life through their culture, language, and traditions. Above all, they seek to create opportunities for tribal members to live their lives to their fullest potential. Promoting homeownership in tribal communities can help tribal leaders to fulfill each of these objectives. What can tribal leaders do to support homeownership? The most important step that elected and appointed tribal leaders can take in promoting homeownership opportunities is to understand how homeownership impacts the social and economic health of the community. They also can ensure they have the appropriate legal infrastructure and land management systems in place to provide certainty for lenders, homebuyers, and other stakeholders involved in the home buying and mortgage processes. Finally, they can create an environment that fosters vibrant mortgage and residential construction markets within their communities. Following are three strategies to support homeownership in Native communities: STRATEGY 1 Understand how homeownership impacts the social and economic health of a tribal community. • Homeownership provides secure shelter. The serious lack of housing stock on reservations, seen in data on residential crowding, underscores the need for a mechanism that allows families who can afford to use mortgage financing to build, purchase, or rehabilitate a home that provides a roof over their heads and a place to live in a location near their extended families, jobs, businesses, farms, ranches, or educational opportunities. • Homeownership strengthens tribal sovereignty. When tribal governments create the legal infrastructure necessary to govern the residential construction and mortgage markets within their 19 TRIBAL LEADERS HANDBOOK ON HOMEOWNERSHIP jurisdiction, they are exercising their right to self-governance and creating a legal framework designed to support the tribal government’s vision for the future of their community, rather than deferring to federal or state laws and regulations. • Homeownership stimulates tribal economies. Providing opportunities for tribal citizens to live and work on reservation stimulates the local economy. Rather than commuting from border towns, tribal workers can relocate back home, keeping their dollars circulating within the community. Increasing homeownership expands workforce development, employment, and small business growth in the residential construction industry. It also boosts the demand for housing-related goods and services, such as appliances, furnishings, and home improvements. In addition, homeowners can accumulate equity in their homes as they pay down their mortgages, which is the primary way most families build personal financial wealth and one of the most common sources of small business start-up capital. • Homeownership promotes family stability and self-sufficiency. Because many tribal communities face severe housing shortages, second- and third-generation families are forced to share homes with their extended families, even if they can afford to support their own household. Increasing homeownership opportunities could provide relief from overcrowded housing situations along with more family stability. Obtaining and managing mortgage financing also provides opportunities for families to enhance their financial capability, money management skills, and self-sufficiency through personal finance and homebuyer education. Lastly, one of the most attractive benefits of homeownership for many Native families is the opportunity to invest in an asset that can be passed down to future generations. • Homeownership leverages scarce housing resources. Notwithstanding the federal government’s trust responsibility to provide safe and healthy housing for tribal citizens, many tribal leaders struggle with inadequate resources to meet the needs in their communities. Providing homeownership for tribal citizens who can afford it allows tribes to supplement and leverage their Indian Housing Block Grant funds provided through the U.S. Department of Housing and Urban Development (HUD). Homeownership allows tribal leaders to offer housing options for working families of all income levels and helps to address shortages by opening low-income rental units to families who really need them. STRATEGY 2 Prioritize the governmental functions that provide certainty for lenders, homebuyers, and other stakeholders involved in the homebuying and mortgage processes. Tribal governments that exercise their sovereignty and prioritize the governmental functions necessary to support a mortgage market and a residential construction industry can increase access to homeownership in the communities. Tribally designated housing entities (TDHEs) or housing departments have an important role to play in promoting homeownership, but certain governmental functions cannot be delegated and require leadership and action from elected or appointed tribal leaders. 20 TRIBAL LEADERS HANDBOOK ON HOMEOWNERSHIP • Enact legal infrastructure. Mortgage transactions are generally governed by a combination of state and federal law. As sovereign nations, tribal governments may need to enact their own codes to govern the residential construction and mortgage processes on tribal land. This may include mortgage, foreclosure, and residential building codes. These laws must be institutionalized and should not change when a new administration comes into office. Mortgage agency Fannie Mae has a model “memorandum of understanding” that may give tribal leaders information on this. • Identify a clear path for civil claims involving mortgage foreclosure and eviction. In addition to enacting laws governing the mortgage process, it is critical for tribal governments to have court systems in place, free from political interference, that provide a mechanism for laws to be enforced and a venue for all parties to seek legal remedies. Lenders may be reluctant to do business in a jurisdiction where they are not familiar with the tribal laws or court system. By providing a clear, transparent, and predictable process for civil claims, tribal leaders can help to address these concerns without sacrificing their sovereignty. • Negotiate with federal and state agencies, private lenders, and investors to access government and conventional loan programs. To provide the authority for certain lenders to do business or use certain federal programs in a tribal jurisdiction, tribal governments may need to enter into agreements with those lenders or the relevant federal agencies. To make the full range of public and private mortgage loan products available to their citizens, tribal leaders should seek to enter into those agreements and negotiate terms that recognize the tribe’s sovereignty, consider the interests of the borrowers, and address the requirements and concerns of the lenders. • Define the tribe’s role in the event of a mortgage delinquency, default, foreclosure, and/or eviction. Many first-time homebuyers are faced with the challenge of staying current on their mortgage loan payments. Borrowers who are behind on their payments are considered delinquent. In most cases, providing counseling and other interventions early during a delinquency can help to keep borrowers on track. After a certain amount of time, however, lenders may determine that a borrower is in default, which means they have failed to make loan payments according to the terms of their mortgage agreement. Being in default could cause the lender to terminate the agreement and could lead to foreclosure and eviction from the home. On trust land, addressing delinquencies, defaults, foreclosures, and evictions can become a lengthy, complicated, and costly process for lenders and borrowers. Some tribes are taking an active role in helping to minimize delinquencies and prevent defaults and foreclosures in their communities. When foreclosures do happen, these tribes may choose to assist with property disposition to ensure that the transaction is resolved consistent with tribal law and in the best interest of the community. For example, a tribe or its housing department may help to find another tribal family who meets the loan qualification requirements to move into the house and take 21 TRIBAL LEADERS HANDBOOK ON HOMEOWNERSHIP over the mortgage payments, so that the lender need not open a trust land home to nonmember ownership. If another qualified borrower is not identified, the tribe may decide to purchase the home to add to its own housing inventory rather than allow the home to remain vacant and face the possibility of becoming vandalized and the site of criminal activity. • Develop a land management program that supports the mortgage process. Access to homeownership in Native communities can be impacted by a tribal government’s approach to land management. Tribal leaders who have undertaken comprehensive land-use planning that involves geographic information systems (GIS) mapping; residential, agricultural, and commercial zoning; transportation planning; and the installation of physical infrastructure such as water, sewer, and other utilities have made it easier for individual homebuyers and other builders to construct new homeownership units. In addition, mortgage-based homeownership has become even more accessible where tribal land departments have implemented a streamlined leasing process that allows tribal citizens to obtain a lease and use that leasehold interest as collateral for their mortgage loan in an expeditious manner that recognizes the time sensitivity and collateral requirements of lending transactions. In communities where the Bureau of Indian Affairs (BIA) adds another layer of complexity in the leasing and land title clearance processes, some tribes have adopted their own residential leasing process pursuant to the authority provided under the HEARTH Act, or compacted or contracted the Land Title and Records Office (LTRO) function from the BIA. STRATEGY 3: Create an environment that fosters vibrant mortgage and residential construction markets within their communities. Tribal leaders can actively engage in bringing resources and partnerships to their communities to expand homeownership for tribal citizens. As one of the largest investors in their community, a tribal government can leverage its influence with local lenders and other partners to benefit prospective mortgage financing opportunities. Mortgage markets can be fostered in many other ways as well. • Set the tone. Tribal leaders can certainly set the tone for promoting and supporting homeownership as an important component of the tribe’s housing plan. Creating certain expectations in the community may help to set this tone and may include: ° Requiring residents to pay full rental amounts, according to income guidelines; ° Encouraging residents to attend financial and homebuyer education courses, especially those whose income puts them near the rent ceiling; ° Enforcing the timely payment of all tenants accounts receivables (TARs); and ° Promoting the message that homeownership is possible for anyone committed to the process, even if no one in their family has ever been a homeowner. 22 TRIBAL LEADERS HANDBOOK ON HOMEOWNERSHIP • Identify a lead entity. Although the homeownership process may involve many tribal departments, tribal leaders should identify one entity to spearhead the effort. That entity could be the TDHE, another tribal department, or a local nonprofit. This entity can help to identify and navigate the leasing and mortgage processes and leverage resources to support homebuyers. • Allocate financial resources. As resources are available, tribal leaders can allocate funds to support homeownership by funding down payment and closing costs assistance, gap financing or subsidies for residential construction, or homebuyer education programs, among other related needs. • Provide opportunities for tribal citizens to expand their financial capability and homebuyer readiness. In some communities, tribal leaders offer tribal employees the option to attend financial education courses “on the clock” as an employee benefit. Tribal leaders also have embedded financial education opportunities into other tribal services such as Head Start, social services, temporary assistance for needy families (TANF), youth programs, summer internships, or K-12 schools. • Develop relationships with lenders. Tribal leaders can leverage existing relationships with financial intuitions with which the tribe already does business. A lender that holds a tribe’s bank deposits might be more open to a considering how to expand that banking relationship to include support for a mortgage program for tribal citizens. In some cases, tribes may consider creating a new Native community development financial institution (CDFI) that would help to increase access to mortgage financing. Or they may choose to invest capital in an existing Native CDFI serving their community. TRIBAL LAW • Recruit insurance providers and other private sector providers. Tribal leaders can support the mortgage process by building relationships with insurance providers, appraisers, inspectors, and contractors who understand the process of working on trust land. By coordinating their engagement in the community, homebuyers may benefit from cost savings through lower transportation costs. • Encourage tribal citizens to become residential construction professionals. To address the shortage of housing stock on the reservation, some tribal leaders have supported training for More than 60% of tribes have court systems 23 TRIBAL LEADERS HANDBOOK ON HOMEOWNERSHIP tribal citizens and employees to become certified as residential construction professionals such as inspectors and appraisers. These efforts could be coordinated with tribal colleges, TDHEs, nonprofits, workforce development programs, and tribal employment rights offices (TEROs). • Make the most of the link between homeownership and economic development. Tribal leaders could explore ways that tribal enterprises and tribal citizen-owned businesses in the residential construction field could support the development of housing stock and promote both the economic development and homeownership goals of the community. In addition, as new tribal enterprises require labor, tribal leaders could simultaneously consider developing homeownership opportunities for those new employees. By examining the economic and social impacts of homeownership, prioritizing key government functions, and creating an environment that fosters a vibrant mortgage and residential construction market, tribal leaders can plan an active and meaningful role in promoting homeownership opportunities in their communities. This handbook provides guidance and resources to support those efforts. Tribal governments exercise their right to self-govern by establishing the legal infrastructure necessary to govern the residential construction and mortgage markets within their jurisdiction. 24 TRIBAL LEADERS HANDBOOK ON HOMEOWNERSHIP CASE STUDY Large-Scale Tribal Subdivision Black Mesa View San Felipe Pueblo, New Mexico A ORGANIZATION San Felipe Pueblo, New Mexico CASE STUDY TOPIC & FOCUS Large-Scale Tribal Subdivision Black Mesa View Project SERVICE AREA Sandoval County, New Mexico NUMBER OF TRIBAL CITIZENS ENROLLMENT 3,377 few years ago, a visit to San Felipe Pueblo, north of Albuquerque in the New Mexico desert, would have shown only a few plans to build houses. Plans often do not translate into actual houses. A visit to the pueblo a few years later would show a couple of dozen new houses standing in the desert. Now after several years of steady progress, San Felipe has built hundreds of new houses and has achieved its vision of creating homeownership opportunities for its community. The presence of private lenders and HUD 184 mortgages, considered impossible just a generation ago, now erased much of the tribe’s entire housing need. LENDING PORTFOLIO In 2000, the San Felipe Pueblo Housing Authority (SFPHA) of the San Felipe Pueblo became the tribally designated housing entity (TDHE) by tribal resolution. INDIAN HOUSING BLOCK GRANT $556,756 SFPHA provides affordable housing for income qualified individuals working with the HUD through the Native American Housing Assistance and Self-Determination Act (NAHASDA). $10 MILLION ANNUAL BUDGET $3.6 Million NUMBER OF EMPLOYEES Nine Project description The Black Mesa View project was the first big housing project on the San Felipe Pueblo in over two generations. The hugely ambitious project of building 150 housing units started with careful planning for infrastructure and financing. The project is an exceptional example of a successful large-scale tribal subdivision that was designed not just to provide housing for tribal members, but also jobs and economic development. 25 TRIBAL LEADERS HANDBOOK ON HOMEOWNERSHIP Being creative and forward thinking, the pueblo acquired a parcel of 100 acres adjacent to a new school, which benefitted from having the pueblo’s original investment in the school infrastructure. Since the original ribbon cutting in August 2012 for 28 modular housing units, representing the first large housing development in over 40 years at the pueblo, the Black Mesa subdivision has added 12 stick-built homes. Total build-out of the subdivision will include 150 housing units consisting of 135 single-family homes and 15 multifamily units for elder housing. In addition, acreage has been set aside for planned retail development. Promising approach With a tribal contribution of 100 acres, it was imperative that the site have a master plan to include single family-house lots, a multifamily site, a plaza-like central park, and smaller “pocket” parks incorporated into the neighborhoods, all connected by greenway paths. The key to the success of the project was good communication between tribal leadership, the Housing Authority, and the community. The pueblo leveraged the new infrastructure (wastewater treatment plant, natural gas lines) for a new school so that the housing site, adjacent to the school parcel, could take advantage of the overcapacity built into the wastewater treatment plant. With a large tract of land, the construction and development were designed to be completed in phases. So far, the home ownership phase of 110 homes has been the highest priority. Impact • Homeownership has become a reality among tribal members, particularly to members who lived outside the pueblo but desired to return home but for the lack of availability housing. Members have returned from as far away as California. • The project provided up to 70 construction jobs in the initial construction phase. • The project was planned and “shovel ready” when funding became available. • The project is using natural gas as an affordable heat and energy source. Prior to the new school and housing project, natural gas had not been available at the pueblo. Lessons learned • Initial waiting list of over 300 households provided demand that required both large-scale and long-term thinking. • Leverage current and proposed infrastructure for other uses to include housing, retail space, parks, institutional buildings (school, clinic, etc.). • Tribal members want to move back to the pueblo but may be inhibited by lack of and choice of housing. 26 TRIBAL LEADERS HANDBOOK ON HOMEOWNERSHIP Ongoing challenges • Funding to construct multiple units at the same time. • Infrastructure funding to prepare a new site for development. • Developing an interest in establishing and maintaining good credit and work history during lulls in building and construction. On the horizon For future phases of this project, the pueblo will utilize a USDA self-help grant request for 10 new homes and seek a Rural Development Section 538 loan for a multifamily rental project. The pueblo also has a portfolio of loan products (including Section 184 home loans) that provides a service fee to the Housing Authority, which financially sustains the program. 27 TRIBAL LEADERS HANDBOOK ON HOMEOWNERSHIP When I saw NAHASDA had the words “Self-Determination” right in the title, I said, “I’m in.” —BOB GAUTHIER, Administrator, United Native American Housing Association 28 TRIBAL LEADERS HANDBOOK ON HOMEOWNERSHIP Historical Housing Programs in Indian Country C H A P T E R 5 C H A PT E R 21 L et’s look at historical housing programs in Indian Country to see the shifts and changes in homeownership and what they mean for these communities. Low-Rent and Mutual Help Housing Since 1962, the Office of Native American Programs (ONAP) at HUD has provided funding to Indian Housing Authorities (IHAs) in American Indian and Alaskan Native communities. Before the passage of the Native American Housing Assistance and Self-Determination Act of 1996 (NAHASDA), this funding constituted the majority of all federal resources for housing in tribal communities. These early HUD programs had many problems. • Funding assistance was restricted to low-income tribal members, with no opportunity for participation from moderate-income tribal members. The Low Rent and Mutual Help programs created a proscribed development process with limited vision for creative, culturally appropriate siting and housing design. Finally, the amount of funding available was wholly inadequate. • As a consequence, IHAs could not build enough homes to meet the housing needs of their communities, could not maintain the homes they did build, and had to disregard sustainable and traditional designs and layouts. • In too many instances, the only homes available to tribal members were small box-shaped houses often located on scattered sites or in unattractive subdivisions. It was housing that could be immediately identified as “government” housing, and its residents tended to treat it as such—compounding problems with poor maintenance. ° For tribal members who desired and could afford to buy a home, there was virtually no homeownership market, private development, or mortgage lending on trust land on reservations. ° In this environment, households wanting to purchase a home of their own faced difficult choices: They could buy a mobile home, try to build or buy their home without mortgage financing (usually with exorbitant interest), or move off the reservation. 29 TRIBAL LEADERS HANDBOOK ON HOMEOWNERSHIP Both of these problems—insufficient funds for low-income members and little or no available mortgage credit for moderate-income members—have led to severe overcrowding and a critical shortage of adequate housing on many Indian reservations across the country. In some cases, Mutual Help programs have created communities in which families “own” their homes but enjoy little if any of the benefits of homeownership. This is because they have no financial investment in the home. Nor did they have any say about its design or location. As a result, there was very little pride in homeownership. Earlier homeownership efforts in tribal communities, like the Mutual Help program, usually were federally funded, heavily burdened by bureaucracy, and involved no private sector financing. Mutual Help was subject to federal funding allocations and design guidelines, among many other regulations and restrictions. Monthly payments were calculated as a percentage of income, without regard to an ability to repay a loan. True homeownership almost always has an element of personal financial contribution. Home loan financing is available primarily to households with adequate, reasonably reliable income and takes into consideration the borrowers’ debts and other financial obligations. Whether funded by government or private sources, homeownership is commonly financed with a mortgage. On trust land, a mortgage is a pledge of the borrower’s leasehold interest against the loan used to buy or construct the home. If the borrower cannot make the payments, the lender can take title to or repossess the leasehold interest in the land—including the home—through a foreclosure process. Before any tribal community or tribal member embarks on a path toward homeownership, a full understanding of the mortgage and foreclosure process is essential. NAHASDA: Exercising Sovereignty and Leveraging Resources for Homeownership Since 1996, NAHASDA has offered tribal governments more options to expand their housing programs and create community-based homeownership opportunities. Although NAHASDA funding levels are still too low for tribes to fully address housing shortages, they allow tribal governments to: • Design housing programs better suited for their members. • Leverage federal block grants with private funding. • Set aside a portion of funding for families with higher incomes in need of housing. The ability to leverage government subsidies with a bank and other private investment is the key to building more and better homes for tribal members. While NAHASDA is still focused on low-income households, tribes can use NAHASDA funds to leverage government-guaranteed and conventional loans for homeownership, thereby providing more housing options to members of all income levels. 30 TRIBAL LEADERS HANDBOOK ON HOMEOWNERSHIP For instance, in using more bank funding for moderate-income homeownership, tribes are able to preserve block grant funds to build more rental housing for poorer households—the definition of leverage. Rather than building four homeownership units, the TDHE could use $150,000 in bank financing to build two homeownership units and the $150,000 in NAHASDA funding to assist in the construction of low-income rental housing. Moreover, by leveraging NAHASDA funding, tribes can create mortgage programs that allow households to enlarge existing homes, renovate deteriorated houses, or refinance mobile homes at reduced interest rates or for longer terms. While NAHASDA can be used to support homeownership and mortgage programs, to develop and implement these programs successfully often means a shift in a tribe’s approach to housing and property management. The Shift to a Homeownership Approach Providing homeownership opportunities for tribal members means a true shift in approach from the “old” way to a new way. While programmatic shifts may be difficult, a new approach can mean serving more tribal members more effectively in the long run. This shift includes a careful examination of collection efforts for monthly payments and market-rate rentals: Reducing TARs The new approach means an emphasis on timely, current rental payments and building a stronger balance sheet for a Housing Authority or TDHE to take on homeownership development projects. This program approach also promotes an important “culture of payment” that is critical to establishing consistent repayment practices for individual mortgage loans. Charging Market-Rate Rents The new approach also emphasizes charging market-rate rents as a true reflection of what families can afford. It can lead them to consider homeownership options. If the difference between a monthly mortgage payment and a market-rate rental payment is insignificant, potential homebuyers may look more favorably at homeownership options. Charging below market-rate rents is a disincentive for homeownership—why pay more for a mortgage if the current rental rates are so low? A more targeted approach to housing assistance can be accomplished without squeezing lower-income families out by using rental vouchers where most needed. By making these shifts and providing homeownership options, tribes can develop a strong continuum of housing options that meet the needs, payment abilities, and dreams of tribal members. Providing homeownership options for those who can afford to pay can relieve overcrowding in rental units and address long waiting lists. The ability to leverage government funds with a bank and other private investment is the key to building more and better homes for tribal members. 31 TRIBAL LEADERS HANDBOOK ON HOMEOWNERSHIP CASE STUDY Alaska Native Homeownership Bristol Bay Housing Authority, Dillingham, Alaska T ORGANIZATION Bristol Bay Housing Authority CASE STUDY TOPIC & FOCUS Alaska Native Homeownership SERVICE AREA Bristol Bay Region of Alaska NUMBER OF TRIBAL CITIZENS Approx. 5,200 or 70% of total region population INDIAN HOUSING BLOCK GRANT $5.1 million in 2017 NUMBER OF EMPLOYEES 17 WEBSITE www.bbha.org he Bristol Bay Housing Authority (BBHA) was founded in 1974 and is the tribally designated housing entity (TDHE) for 31 villages in the Bristol Bay region of southwest Alaska. BBHA headquarters are in Dillingham, Alaska, and its service territory includes three census areas: • Bristol Bay Borough • Lake and Peninsula Borough • Dillingham Census Area BBHA’s mission is to “promote affordable housing for the Bristol Bay region.” They administer NAHASDA and Alaska Housing Finance Corporation funds and work with USDA Rural Development and the BIA. They provide single and multifamily housing, as well as leverage mortgages to increase homeownership. Tribal members in the region served by BBHA are Aleut, Athabascan, Yupik Eskimo, and American Indian. While the economy of the Bristol Bay region is better than many other parts of rural Alaska, local Natives still live in poverty with limited infrastructure and poor housing conditions. Housing in Bristol Bay is aging, poorly designed and constructed, structurally unsafe, energy inefficient, and unhealthy due to mold and poor indoor air quality. Moreover, there is simply not enough housing – leading to tremendous overcrowding. Housing in rural Alaska differs from much of Indian Country in the lower 48 in many ways: 32 TRIBAL LEADERS HANDBOOK ON HOMEOWNERSHIP • Extreme remoteness of the regions, resulting in high construction costs. • Significant climate changes, resulting in excessively high heating costs, which in turn create housing burdens often exceeding the 30 percent threshold. As a result, BBHA and other Alaska housing organizations have responded to these extremes through design features that keep construction and energy costs down. With the new resources provided by NAHASDA, the BBHA Board embraced the opportunities to improve and increase housing in the region. Over the years BBHA added in-house expertise. Today, BBHC constructs its own housing, consults with tribes in the region on their design, and utilizes the local workforce in the region. Project description The BBHA is a recognized leader in promoting mortgages and homeownership for tribal members in Alaska. Prior to the 1996 enactment of the Native American Housing and Self-Determination Act (NAHASDA), HUD managed the housing program for the region, and the outcomes were poor and unresponsive to local conditions, needs, or the tribal economy. Houses were built in Anacortes, WA, shipped by barge to Bristol Bay, and erected in straight rows with little regard to design or cultural considerations. Jobs and economic development associated with home construction were, of course, lost to the region. With the new resources provided by NAHASDA, the BBHA Board embraced the opportunities to improve and increase housing in the region. Over the years BBHA added in-house expertise. Today, BBHC constructs its own housing, consults with tribes in the region on their design, and utilizes the local workforce in the region. The result is housing that is culturally responsive, bolsters local economies, and builds the skills of tribal members. BBHA also challenged the way HUD provided housing to Alaska Natives. Instead of providing only subsidized rental housing, BBHA began to promote homeownership as a way to relieve overcrowdedness and enhance economic development. The key tool for this program is a standard mortgage model. Mutual Help (subsidized) housing is still an option for tribal members, with a priority for families with extremely limited financial means and for homes still under contract. The reasons for promoting mortgages are much the same in Alaska as in the rest of Indian Country. There is simply not enough federal, state, and other grant dollars to provide the housing needed in Native village communities. In addition, mortgages provide another source of capital to the community, which can be leveraged or stretched with other funds, such as NAHASDA, BIA and other housing resources. In the case of BBHA, their approach was to leverage the USDA Rural Development 502 Direct 33 TRIBAL LEADERS HANDBOOK ON HOMEOWNERSHIP Program with a buy-down, or “soft second” from Indian Block Grant funds, to make the mortgages more affordable. With the additional capital from mortgage loans, BBHA was able to provide housing to many more families. Even though village poverty remains high, it does not mean that many families can’t afford a modest mortgage payment. In small villages, even one new home is good for the entire community. The board continues to provide leadership in several ways, including the allocation of funds for mortgages or mortgage buy-downs as part of their Indian Housing Plan. Promising approach BBHA’s mortgage model has worked very well for the past several years. The key ingredients to this success: • Strong Native leaders: BBHA’s willingness to pull away from the Mutual Help rent-to-own model and prioritize homeownership would not be possible without the sanction of Native leaders in the region. • Strong partnerships: BBHC collaborates with many other organizations in the region –Bristol Bay Native Association, area Native corporations and health organizations, tribal and local governments, and fishing organizations. • Multiple funding sources: BBHA utilizes the USDA 502 direct loan program, HUD Section 184 loan guarantee program, and the BIA Housing Improvement Program, Category D. Economy of the region. • Housing Design: Keeping construction costs down requires a concerted effort and intentional planning – getting land donated, promoting subdivisions as opposed to scattered-site development, employing innovative construction techniques, and by paying careful attention to the seasons and construction schedule. The homes built by BBHA crews achieve a six-star energy rating. Wind, solar, and heat pumps are also being used to lower costs. • Innovative approaches: Using community and environmentally conscious design and construction, as well as employing local work forces. • Consistency: The current administration of BBHA builds on the mortgage approach from previous BBHA management. • Understanding the financial needs of the communities: Familiarity with debt among tribal members is critical. Bristol Bay has a strong fishing economy enabling tribal members to fare somewhat better; however, tribal members who are benefitting from the local economy have high costs for fishing boats, permits, and other transaction costs. • Services to tribal members: The program is marketed to 28 villages. Homebuyer Readiness classes are mandatory. BBHA also offers post-purchase counseling, budgeting, and home maintenance advice. BBHA also provides a one-year warrantee for the homes they build. 34 TRIBAL LEADERS HANDBOOK ON HOMEOWNERSHIP Impact • Leveraging Opportunities: The housing problems in the Native villages are severe. More newly constructed, energy efficient homes are necessary, and additional capital investment in the form of mortgage financing is a promising approach to build more homes. • Challenge the stereotypes: The impression that all of Native, rural Alaska is too poor to afford mortgages has been challenged by BBHA. There are in fact families in many villages who can afford a reasonable mortgage. Even one new home in overcrowded village housing helps the entire village. • Cost Control by Housing Design: The cost of heating fuel in rural Alaska is very high. The savings afforded by a new energy-efficient home can go a long way toward paying a mortgage. • Replicability: This model is replicable across Indian Country. • Pride: Homeownership is a source of pride, self-esteem, belonging, and stability for many tribal members. • Viable and healthy native communities: Good housing is the foundation of healthy, viable Native communities, and mortgages provide another way for tribal members to return to their communities and attract education, health and other professionals to live there. Lessons learned • Patient approach with tribal members: Many tribal members have never thought that homeownership was possible for them. Others are uncomfortable with banks and debt. There is a high need for basic financial literacy. BBHA strives to be responsive to the needs of tribal members and meet them where they are on the journey to homeownership. • Challenge assumptions: The BBHA model challenges assumption both internally and externally about both tribal members as homeowners and the options that are available in remote villages with extreme conditions, including the climate but also poverty, isolation, and employment. • Take the long view: The BBHA work and experience to date with a home ownership model has evolved over a 25-year period. • The “art of the possible”: BBHA leadership since 1993 has not been satisfied by the status quo and have methodically implemented their vision through innovation and creativity to meet the changing needs of the people in the region. • Tribal members want options: The BBHA made a conscious decision to provide alternative asset building options for housing for tribal members and many have responded. Ongoing challenges • Aversion to debt: Many tribal members are uncomfortable and lack familiarity with debt. • Responsive Lenders: The traditional financial industry could do a better job of promoting homeownership and providing loans in rural Alaska. 35 TRIBAL LEADERS HANDBOOK ON HOMEOWNERSHIP • Funding Threatened: Under the current administration, the USDA 502 Direct program is being challenged. • Cash flow: Cash in the local economy is very scarce. • Limited infrastructure: High need for subsidy due to high construction costs and other factors. • Land status: Alaska is different from the Lower 48 due to the absence of small amount of trust lands. The cumbersome leasing process by the BIA is not an impediment, but other land status and availability issues exist in Alaska that create real challenges to land use and development. • Financial industry responsiveness: There is a huge gap in the availability of private financing for mortgages to tribal members in the Bristol Bay region. On the horizon Stay the course: Under its current leadership, BBHA will continue to promote the promise of homeownership in the region, strengthen its collaborative relationships with all partners, and continue to innovate with funding, housing, design, and construction. 36 TRIBAL LEADERS HANDBOOK ON HOMEOWNERSHIP 37 TRIBAL LEADERS HANDBOOK ON HOMEOWNERSHIP Can mortgages work in Indian Country? At my reservation, they already do. At least 20 percent of my tribal houses have home loans. And we aren’t checkerboard. We’re almost all trust land. —CHERYL CAUSLEY, Executive Director, Bay Mills 38 TRIBAL LEADERS HANDBOOK ON HOMEOWNERSHIP Partnering on Homeownership O nce a tribe, TDHE, or tribal organization has committed to providing homeownership options for tribal members, it is difficult to know where to start. The focus often is on the housing stock: What homes will tribal members purchase? When considering all options for homeownership, however, it is important to take the broad view of both the options and the process. For a tribe to successfully provide homeownership, and to allow private home development within the reservation, it is important to address all components of homeownership, from assessing the needs of tribal members, to preparing families for homeownership, to facilitating the availability of mortgages for qualifying families. Below is a checklist for developing a homeownership program in tribal communities. The checklist provides a comprehensive framework of the various components of homeownership and the questions that should be addressed. It is important to recognize that a single organization is not expected to carry out all the different components. In fact, it is rare that just one organization has the capacity, experience, or staff to handle all the pieces of the process. More often, one organization takes the lead and then identifies partners to carry out certain pieces of the framework. The framework also can assist in identifying gaps in an existing program. Here are some important questions to ask in reviewing the framework: • Who is doing this work? • Who can be a partner on this piece? • Are new programming, policies, or relationships needed to tackle this piece? Key Features of a Homeownership Program Needs assessment, outreach, and recruiting Before undertaking homeownership efforts, it is important to assess the community’s housing needs and interests and then plan around tribal members’ input. • A housing needs assessment is a useful first step to get a sense of income levels, employment status, current commuting patterns, ages, 39 TRIBAL LEADERS HANDBOOK ON HOMEOWNERSHIP C H A P T E R 5 C H A PT E R 31 Native Homeownership: Questions Needing Answers NEEDS ASSESSMENT, OUTREACH, AND RECRUITING ☐ Has the tribe conducted a needs assessment recently? ☐ Who can conduct a survey/needs assessment? ☐ Who are the potential homebuyers? (TDHE residents, veterans, young families, tribal employees) HOMEBUYER EDUCATION AND CREDIT IMPROVEMENT ☐ Which curriculum will ☐ Is the tribe thinking be used? ☐ Who can assist families in improving credit? ☐ Who can conduct homebuyer counseling? about a subdivision or scattered sites? ☐ Are leases in place? Will families need to obtain leaseholds? ☐ What infrastructure will be necessary? (septics, lagoon, water line, wells, roads) ☐ Where will the building happen? ☐ How will reaching out ☐ Where do families to recruit potential homebuyers be done? PLANNING, LAND, AND INFRASTRUCTURE ☐ What are the infrastructure costs? want to live? financial education and homebuyer education classes? ☐ How will it be determined what families can afford? ☐ Who will work with families to complete loan applications? ☐ What sources of mortgage financing will homebuyers access? ☐ Are there existing relationships with mortgage lenders? GAP FINANCING AND SUBSIDIES ☐ How will you determine how much gap financing/ subsidies families will need? ☐ What gap financing will homebuyers access? ☐ How can families who are credit-ready and income qualified now be assisted? ☐ What will the development budget include (construction, roads, infrastructure)? ☐ What sources of development financing are available? ☐ What is repayment ability for development financing? ☐ What needs to be in place to access development financing? ☐ Who can teach AFFORDABILITY AND MORTGAGE FINANCING DEVELOPMENT FINANCING HOME DESIGN AND CONSTRUCTION CAPACITY AND PARTNERS ☐ Are you working with ☐ Where are the gaps? ☐ How can staff capacity an architect? ☐ Do you have construction plans, floor plans? ☐ Who will do your building? (force account, contractors, other crew?) ☐ Is there the capacity to carry out these different pieces? ☐ What design features do families want? Source: South Dakota Native Homeownership Coalition 40 TRIBAL LEADERS HANDBOOK ON HOMEOWNERSHIP be built? ☐ Who can be a partner on some of these pieces? and other demographic information. It may be necessary to reach out to potential homebuyers to participate in the assessment. Are there tribal members who may be unaware of trust land homeownership options despite being strong candidates for homeownership? • What are the best ways to reach them? Options may include the media, community meetings, meetings hosted by key employers, and homeownership fairs. Financial education, homebuyer education, and credit improvement Financial education and homebuyer education are critical to effectively providing homeownership opportunities for families. It is important for families to understand the homeownership process and the responsibilities of homeownership. • Money management is key to ensuring that families can pay for and maintain their new homes. Since credit history is such a critical component of qualifying for a mortgage, it is important to provide credit counseling and support for families who need to improve their credit scores in order to qualify for mortgage financing. Planning, land, and infrastructure If homeownership in the community involves constructing new homes, it will be important to look at land sites and infrastructure. This raises many questions to consider before moving ahead. • Where will new homes be built? • Where do families want to live? • What kind of housing concept is desired – subdivisions or scattered sites? • What kind of infrastructure will be necessary? • What is the status of the land? • Will families need to obtain leaseholds? • What are the steps that tribal members need to take to obtain a lease? Development financing If homeownership in the community involves constructing new homes, construction financing will be needed. The question here is: Who will provide the financing for these projects? Tribal governments might, if their budgets and borrowing capacity permit. Alternatively, banks and other private lenders may finance construction if the appropriate legal infrastructure is in place. 41 TRIBAL LEADERS HANDBOOK ON HOMEOWNERSHIP Native Homeownership Partners Native • Department of the Interior • Department of Housing & Urban Development • Department of Agriculture • Department of Veterans Affairs • Congress • Housing Authorities & TFHES Federal and • Tribal Schools & Colleges • Workforce Organizations • Contractors and Construction Businesses Tribal Leaders y Tribal Citizens Bureau of Indian Affairs Co m it un m Na Partners l a n tio Lenders • State Housing Finance Agencies • Homeownership Coalitions • Lenders & CDFIs • Foundations & Non-profits Re gio s nal Partner Affordability and mortgage financing Providing homeownership opportunities for tribal members often involves supporting families’ efforts to qualify for a mortgage. A number of mortgage products are designed for rural and Native homebuyers, including Rural Development’s 502 loan (the RD or RHS 502), the HUD-guaranteed 184 loan (which is originated by a private lender), and the VA’s Native American Direct Loan (NADL) for Native veterans. • For tribal members to access some of these programs, such as the widely used HUD 184 mortgages, tribal government may need to enter into specific agreements with the relevant federal agency. 42 TRIBAL LEADERS HANDBOOK ON HOMEOWNERSHIP Legal infrastructure In addition to the physical infrastructure needed to be in place, providing homeownership opportunities also means having the necessary legal infrastructure in place. Are the tribe’s lease documents current with lending standards? What other legal and judicial infrastructure is needed to support the full homeownership process, including judicial recourse? Gap financing and subsidies Affording a mortgage is absolutely essential to successful homeownership, so securing gap financing and other subsidies can help ensure that families can pay for their home and make monthly payments. • Families can access different funding sources for down payment and closing cost assistance. Some of these resources are designed for Native American borrowers, while others are general funds that Native homebuyers can tap into. Home design and construction If providing homeownership means new construction, it is also important to look at home design and construction. Here the questions concern who will design the homes and how will families have input in the home design. Many forms of housing are available to meet the consumer’s need and the community’s standards, from manufactured to stick-built housing. Selecting a builder is as important as securing the right lender and designer. In the chapters that follow, these components of homeownership are discussed in further detail. Different funding sources help families access down payment and closing cost assistance. 43 TRIBAL LEADERS HANDBOOK ON HOMEOWNERSHIP With the increases in tribal populations in our communities, our housing needs, already great, are only going to become greater. Homeownership needs to be part of the mix. —SUSAN HAMMOND, Executive Director, Four Directions Development Corporation Assessing Tribal Members’ Needs W hen planning tribal homeownership projects, assessing what is actually needed in the community is an important first step. A needs assessment may identify different issues and can help steer the overall direction of projects and developments, as well as help fine-tune the details of potential projects. An assessment may show, for example, a need to develop three-bedroom units rather than two-bedroom units, or that tribal members would prefer a certain location for a new subdivision, rather than another location. While time or resources may be a limiting consideration, conducting a needs assessment actually can save valuable time and money in the long run. Who does the needs assessment? A needs assessment can be carried out internally by tribal council or housing staff, externally by an outside partner or firm, or by a combination of the two. Options include a consulting firm with experience in conducting needs assessments or a university with the capacity to connect to the community. Here the most important factors are that they have experience working with tribal communities, respect the tribal organization’s role and experience, and incorporate tribal input into the process. The survey The central conduit for gathering information about the community’s needs is a survey. Using a survey to conduct a needs assessment includes these steps: 1. Design the survey: The focus is on who will use the information collected and for what purpose, and what information they need to accomplish their goals. What should inform home design and programming? Depending on the questions that need to be answered, this information might include: • What are families’ incomes? • What purchase price can homeowners afford? • Where do potential homeowners work? • What kind of credit do potential homeowners have? 45 TRIBAL LEADERS HANDBOOK ON HOMEOWNERSHIP C H A P T E R 5 C H A PT E R 4 • Where do respondents want to live? • What design features are important to potential homeowners? • What are the demographics of potential homeowners: veterans, single heads of households, multigenerational households? 2. Determine who to survey: It is important to know who has the information needed and who should be heard. Potential homeowner respondents include: • Housing Authority tenants. • Tribal government employees. • Teachers and school employees. • Indian Health Services and other healthcare employees. • Head Start families. • Elders. • Veterans. 3. How will the survey be conducted? • At community events. • By mail. • Online. • At central locations in the community (such as a grocery store). • Through one-on-one meetings with potential homeowners. • Through group meetings at different worksites, such as schools and tribal offices. 4. Determine the goal at the outset. Set a goal for the number of completed surveys: To ensure solid information moving forward, use a community outreach plan to reach a large swath of community members with the survey. The outreach plan identifies key events and gatherings, popular distribution sites, and news outlets. Sometimes the grocery store is the best place to connect with people. The overall objective here is to reach as many people and encourage completion of as many surveys as possible. 46 TRIBAL LEADERS HANDBOOK ON HOMEOWNERSHIP Example: Cheyenne River Housing Authority Homeownership Needs Assessment Survey (a full version is included in the Appendix materials). Section G: Homeownership G1. G6. Which of the following best describes why you chose to move into your current home? Select one If you were to buy a new home, how many people in your family would live in this new home together? Location of unit Adults Quality of unit Children 17 years or younger G2. Affordable rent Have you tried to purchase a home? Size of unit Yes Only choice I had No G3. If yes, which option best describes the result? G7. Why are you interested in homeownership? Select one Select one Good investment I bought a home. Stability I did not buy a house because I could not find one I wanted to buy. I did not buy a house because I could not get a loan/financing. I did not buy a house because I did not have enough down payment money. I did not buy a house because I could not get the land to build it on. Freedom to build/change/improve home without landlord approval Better location Better house Other I did not buy a house because the infrastructure costs (roads, water, sewer, electricity) were too expensive. Other I did not buy a house because the lot did not have access to infrastructure (roads, water, sewer, electricity). Other G4. How easy do you think it is to find affordable, quality housing to buy on the Cheyenne River Reservation? G8. Select one Very Easy Somewhat Easy Somewhat Challenging Very Challenging G5. If you needed to rent a home today, how many choices do you think would be available to you? In general, what do you think about buying a house in the next year? Select one I think it is a great time for me to buy a house I think it is a good time for me to buy a house I think it is a somewhat bad time for me to buy a house I think it is a very bad time for me to buy a house Don’t know None 1-5 6-10 More than 10 Analysis and final report Once the survey is complete, analyzing the data will be key to understanding current trends and common themes in the community. Most important, these findings need to be shared and discussed with tribal leaders, community members, and staff. In working with an outside consultant, it is important that they have experience working in tribal communities and understand the nuances of Native projects. 47 TRIBAL LEADERS HANDBOOK ON HOMEOWNERSHIP CASE STUDY Housing Needs Study Cheyenne River Housing Authority, Eagle Butte, South Dakota T ORGANIZATION Cheyenne River Housing Authority CASE STUDY TOPIC & FOCUS Housing Needs Study SERVICE AREA Cheyenne River Indian Reservation WEBSITE www.crhanetwork.org/ index.html he Cheyenne River Housing Authority (CRHA) is a tribally designated housing entity (TDHE) created by an ordinance enacted by the Tribal Council of the Cheyenne River Sioux Tribe. Its mission is to provide affordable, safe, and sanitary housing throughout its service area, which encompasses the boundaries of the Cheyenne River Reservation, based in north-central South Dakota. CRHA has a long history of providing homeownership opportunities, having started down the path of mortgage lending with the inception of the NAHASDA. Since then, its homeownership services have evolved and diversified to meet the needs of its families. CRHA recognizes that families come to homeownership through different paths, including contract for deed, new construction, local bank financing, and mortgage loan products. It has gained experience in loan packaging for USDA’s 502 loan, the HUD-guaranteed 184, the VA’s NADL, as well as conventional bank loans with local lenders. Project description In 2016, with the support of the South Dakota Native Homeownership Coalition and the South Dakota Housing Development Authority, the CRHA completed a comprehensive Housing Needs Study to inform and support its homeownership efforts. According to Executive Director Sharon Vogel, “In order for us to understand the interest and preferences of tribal members interested in homeownership, we needed to gather information and data.” The Study was conducted by an external consulting company with extensive experience in Indian Country. 48 TRIBAL LEADERS HANDBOOK ON HOMEOWNERSHIP The importance and value of the CRHA Housing Needs Study were immediately recognized when developing their new subdivision, Badger Park: CRHA recognizes that families come to • Interest in homeownership homeownership through • Awareness of different loan products different paths, including • Understanding of the mortgage loan process and affordability contract for deed, new • Need for homeownership education • Potential homeowners for the Badger Park subdivision • Potential sites for future subdivisions (where tribal members wanted to live) construction, local bank financing, and mortgage loan products. • Desired neighborhood amenities The CRHA matched its funds with resources earmarked by the South Dakota Housing Development Authority for the assessment. Overall, the completed study provided valuable information for both short-term planning in designing homebuyer readiness services to prospective homeowners, and long-term planning in identifying potential sites for future subdivisions. Promising approach The CRHA Housing Needs Study succeeded for a number reasons. The key ingredients for success include: • Use a professional contractor who understands your community and, preferably, has experience working in Indian Country. • Secure internal buy-in from the staff (all departments) that the Housing Needs Study is an integral part of the development and planning process. • Design the survey to collect the kind of information needed by the community, and engage the staff in the development of the survey instrument. • Think outside of the box about what information to gather, like questions around affordability (what is affordable, compared to an actual mortgage). • Coordinate the survey with different employers in the community, who could provide access to their employees (such as the Tribe, the schools, and larger businesses). • Lead with a vision about the value and importance of the Housing Needs Study and educate staff, tribal leaders, and the community. 49 TRIBAL LEADERS HANDBOOK ON HOMEOWNERSHIP Impact The CRHA points to a number of beneficial impacts of their Housing Needs Study: • Enabled the organization to design and deliver homebuyer readiness classes designed for an identified list of potential homebuyers. • Informed modifications to the homebuyer readiness curriculum, now an expanded to a 12-week course taught by financial education experts. • Reaffirmed that Badger Park is a desired location for families and that prior planning is on target. • Validated the need to find subsidies for hard-working families to ensure these families could achieve homeownership and manage a mortgage. • Highlighted the need for targeted outreach for veterans, because many were not aware of the VA loan product available to them. • Reaffirmed the Housing Authority’s capacity to execute the project using an integrated, comprehensive housing development approach. Lessons learned The CRHA learned many lessons through the process: • Be flexible in conducting the study and administering the survey – if one outreach strategy isn’t producing results, it’s important to have the flexibility to modify the approach. • Consider target groups for special outreach efforts, such as Housing Authority tenants, elders, veterans, and employees. • Identify a goal for the number of completed surveys. • Use the Needs Study as a living tool that is reviewed and updated regularly. Ongoing challenges A number of challenges cropped up in conducting the CRHA Housing Needs Study, as well as in providing homeownership opportunities for tribal members: • The study creates expectations for services and support, so it is important to have the capacity to manage these expectations. • There may be a disconnect between what families want and what they can afford after looking at affordable design and construction. • It is important to keep families motivated and engaged in the homebuying process – there are many steps in the process and it’s easy to give up. 50 TRIBAL LEADERS HANDBOOK ON HOMEOWNERSHIP On the horizon In the future, the CRHA plans to use the information it has collected to design and develop more affordable homeownership opportunities for tribal members. The study and its planning process are now an ongoing process, rather than a “one-time deal.” In the near future, the CRHA plans to build on the Housing Needs Assessment to conduct a targeted needs assessment focused on veterans. The CRHA also plans to continue developing partnership opportunities for subsidy funding to ensure maximum affordability. 51 TRIBAL LEADERS HANDBOOK ON HOMEOWNERSHIP There are thousands of households in Indian Country that are ready for homeownership right now. And there are many thousands more that could be. —JOE GARCIA, Councilman, Ohkay Owingeh Pueblo 52 TRIBAL LEADERS HANDBOOK ON HOMEOWNERSHIP Preparing Families for Homeownership C H A PT E R 5 A critical part of providing homeownership opportunities for tribal members must focus on preparing families for homeownership. While some Native American families may live in a home built on land passed down for generations, many of these homes were probably built and improved as time, money, or materials were available. Other Native American families live in rental housing, often the only housing available for tribal families. In very many cases, no banks, mortgage lenders, mortgage brokers, or mortgage guarantors were involved in either scenario. Financing a home is often a new concept. As a result, many Native American prospective homebuyers have little understanding of the homebuying or mortgage process. What is homebuyer education? Homebuyer education and credit repair are tremendously important. These courses and programs focus on teaching families the home purchase process—through individual counseling and coaching, and group classes. It also includes supporting homebuyers in the different aspects of purchasing a house, such as finding or constructing the right home, applying for a mortgage, accessing subsidies to reduce costs, navigating the leasehold mortgage process, and repairing credit. Financial education classes Build Build Building Nativ Communities e FINANCIAL in an cia l Sk Native Com ing nities mu nities mu Native Com ing SKILLS FOR Building Nativ Communities e FAMILIES F FINANCIAL es ills for Famili in an cia l Sk SKILLS FOR FAMILIES F Financial education classes often are the first step to homeownership. They cover basic budgeting and money management, as well as understanding credit. Many Native organizations use the Building Native Communities: Financial Skills for Families curriculum, developed by First Nations Development Institute and Fannie Mae, and managed by First Nations Oweesta Corp. Oweesta provides instructor training around the country to prepare local practitioners to use the curriculum. PA R T I C I PA F O U R N T ’ S T H E D I T I W O R K O N B O O K Fifth Edition PARTICIPAN T es ills for Famili WORKBOO K PA R T 53 TRIBAL LEADERS HANDBOOK ON HOMEOWNERSHIP I C I PA F O U R N T ’ S T H E D I T I W O R K O N B O O K Fifth Edition PARTICIPAN T WORKBOO K Homebuyer education classes Building on financial education, homebuyer education classes focus on the buying process, to prepare families to purchase, build, rehab, maintain, and keep their own homes. Many Native organizations and TDHEs providing homeownership education use the Pathways Home: A Native Homeownership Guide, developed by the National Congress of American Indians (NCAI), and managed by the National American Indian Housing Council (NAIHC). NAIHC conducts train-thetrainer sessions to prepare instructors to teach this curriculum in their communities. This curriculum covers: • Understanding the mortgage loan process. • How to prepare a family budget. • How to improve credit profiles. • How to avoid the pitfalls of predatory lending. • Preventing foreclosure. • How to maintain a home. Homeownership counseling While financial education classes and homebuyer education classes are typically taught in a group setting, buyer readiness often includes one-on-one homeownership counseling. This counseling provides support tailored to the borrower’s specific needs, such as their budget, what they can afford to pay for a new home, and what it will take to make this happen. Homeownership counseling may also include: ° Loan packaging assistance Homeownership counseling may involve working with families to determine the loan product best suited to their needs, and then supporting them to apply for the loan. Depending on income, families may qualify for Rural Development’s 502 loan, for example, with a sliding scale interest rate. Veterans may qualify for the VA Native American Direct 40% ...of reservation households have incomes near or above US Median Household Income 54 TRIBAL LEADERS HANDBOOK ON HOMEOWNERSHIP Most Reservation Residents Have Prime or Near-Prime Equifax Risk Scores Percentage of Residents of Federally Recognized American Indian Reservations (2017 Q4) 50.1% 36.6% Equifax Risk Score Prime (>720) Near-Prime Subprime (<660) 13.3% Source: CICD staff calculations based on data from the Federal Reserve Bank of New York/Equifax Consumer Credit Panel Loan product. Another option for Native families is the HUD 184 loan, where HUD guarantees the loan made by a private lender. ° Accessing subsidies Homeownership counseling can also assist families in accessing subsidies to reduce the amount of the mortgage loan and monthly payments. These subsidies play an important role in ensuring homeownership is affordable for families, and they are taking on a home loan that they can afford to repay. ° Navigating the leasehold mortgage process Purchasing a home on a reservation often means securing a lease, which can be a daunting process for tribal members. Homeownership counseling can help families’ efforts to work with their tribe and the BIA to secure the lease and Title Status Report. 55 TRIBAL LEADERS HANDBOOK ON HOMEOWNERSHIP ° Finding the right home/constructing a home Homeownership counseling also can focus on assisting families in finding the right home if there is available housing stock or constructing a new home, if stock is limited. Constructing a home may include choosing a site, securing bids, selecting a contractor, and choosing a floorplan. ° Coaching to improve credit rating Having no or bad credit (a history of late payments, too many loans, or collections) is often a barrier to qualifying for a mortgage loan. For this reason, preparing homebuyers often means addressing credit issues and working with borrowers to repair credit. That begins with pulling a “credit report” that outlines all the potential issues. It can include developing detailed plans to address credit issues, supporting families’ efforts to pay off loans, and working with families to contact creditors to consolidate debts. ° Coaching to achieve financial goals Financial coaching focuses on creating financial goals, moving through obstacles, and providing accountability. A trained coach works one-on-one with a family to help them articulate and move toward a goal, over time. Ideally, the coaching process leads to learning new financial habits while accomplishing the family’s self-determined goal. Coaching is designed to support clients who want to improve their financial situation and turn knowledge and intentions into action. Throughout the coaching relationship, the goal serves as motivation and a tool to focus residents’ attention on financial tasks. Homebuyer education is money well spent. 56 TRIBAL LEADERS HANDBOOK ON HOMEOWNERSHIP CASE STUDY Homebuyer Readiness Program Salish and Kootenai Housing Authority, Pablo, Montana T ORGANIZATION Salish and Kootenai Housing Authority CASE STUDY TOPIC & FOCUS The Flathead Finance Program Homebuyer Readiness and Education SERVICE AREA Flathead Indian Reservation NUMBER OF TRIBAL CITIZENS 7,900 NUMBER OF EMPLOYEES Three staff in the Homebuyer Readiness Program INDIAN HOUSING BLOCK GRANT $4.2 million ANNUAL BUDGET $10 million WEBSITE www.skha.org he Salish and Kootenai Housing Authority (SKHA) serves all residents residing within the boundaries of the Flathead Reservation. The Flathead Reservation is home to the Confederated Salish and Kootenai Tribes (CSKT) in northwestern Montana. SKHA currently manages nearly 700 housing units including rental, 50 units of Tenant-Based Assistance, an 80-lot trailer park, and the homeownership program. Established in 1963 by Tribal Council action, the SKHA operates as an independent tribal entity. SKHA now is overseen by a seven-member Board of Commissioners appointed by the Tribal Council. The SKHA executive director has oversight over six different departments: Finance, Administration, Housing Resource, Occupancy, Maintenance and Water, and the Sewer Department. In addition, all housing programs and services have been consolidated into the Housing Authority’s portfolio, including the BIA’s Housing Improvement Program (HIP), Weatherization Program, Indian Community Development Block Grant (ICDBG) Program, and the Tribe’s water/sewer systems. With the transfer of the Indian Health Service Construction (IHS 121) Program, including the project engineer and inspector staff, all housing services are unified into one program, making it easier to serve the community and for the membership to access tribal programs. Collectively these programs chart the course for the future of homeownership on the Flathead Reservation. 57 TRIBAL LEADERS HANDBOOK ON HOMEOWNERSHIP Project description This case study focuses on the Flathead Finance Program for homebuyer readiness and education. SKHA clients interested in buying a home are required to complete the Flathead Finance Program, comprised of four major components: • Application and Intake • Action Planning • Homebuyer Counseling and Readiness Education • Foreclosure Counseling and Prevention Application and Intake. Here, clients use worksheets to compile their income, outstanding credit card and other debt, and current credit scores. They then compute their total household income and complete an initial household budget. All the information about the Flathead Finance Program, the intake form, and other client worksheets are available online or can be requested from SKHA staff. Action Planning. Once the application and intake process is completed, the client enters into the Action Planning phase with SKHA staff. Information from the completed intake forms and worksheets are reviewed and an in-person interview is scheduled. During this initial meeting, SKHA staff work with the client to develop an Action Plan that includes, at minimum: • A detailed household budget • An analysis of the client’s credit history • A credit repair plan, if necessary • A strategy for savings for down payment, closing costs, and post-purchase expenses The intake forms and worksheets provide SKHA staff with information to determine the client’s eligibility for down payment and closing cost assistance. • Clients with no or poor credit histories who are not likely to qualify for a mortgage in the near term are counseled toward a long-term action plan. • Clients who are “mortgage ready” but lack the required credit history for a bank loan are referred to CSKT Tribal Credit Department for further assistance. • Clients who are mortgage-ready at intake are provided information about local banks from whom they can apply for mortgages. Several banks offer loan products on the Flathead Reservation. Three reservation-based banks are certified HUD 184 lenders: • Eagle Bank, owned by CSKT 58 TRIBAL LEADERS HANDBOOK ON HOMEOWNERSHIP • Valley Bank • Glacier Bank SKHA does not advocate for a specific loan product or refer the client to a particular bank. Homebuyer Education Class The Flathead Finance Program for homebuyer readiness and education is based on the Pathways Home curriculum, a comprehensive homebuyer education program sponsored by the National American Indian Housing Council designed to help educate prospective native homebuyers on how to become successful homeowners. The curriculum is specifically tailored for Native American communities. The training begins with a pre-test to assess each participant’s baseline knowledge, and then moves into eight modules: 1. Exploring Homeownership 2. Considering Mortgage-based Homeownership 3. Budgeting for Homeownership 4. Evaluating Credit for Homeownership 5. Finding a Home 6. Applying for a Home Loan 7. Meeting Your Financial Obligations 8. Protecting Your Investment The curriculum is culturally adapted to the community, incorporating an opening prayer and a viewing of Sovereign Lending: A Bright Chance for Survival, the nationally recognized video on homeownership on the Flathead Reservation produced by the Federal Reserve Bank of San Francisco. The class is offered one day per month, which means that participants must complete all the modules, take the review test, and get their certificate of completion the same day. They cannot attend part of the class one month and another part the next month, primarily because of the cohesive curriculum. At the end of the class, participants take a final test, answers are reviewed, and certificates are distributed to those who successfully completed the course. Post-purchase classes also are available to support ongoing financial responsibilities of homeownership. 59 TRIBAL LEADERS HANDBOOK ON HOMEOWNERSHIP Promising approach • The Flathead Finance Program for homebuyer readiness is designed to be as friendly and flexible for the client as possible, while still maintaining the integrity of the program. • Representatives from local area banks are engaged as instructors for some of the modules. Using community bankers as instructors has several benefits: ° Local bankers have the opportunity to share their expertise and learn from class participants about the financial, credit, and other concerns their customers are facing. ° Participants get to know and develop a relationship with the local banking representatives. ° Familiarity with local people and developing relationships are essential components of building trust. • The program is promoted through many modes of communication throughout the community – the tribal and local county newspapers, the CSKT’s website, the tribal employee newsletter, local banks, and realtors. • Local area banks require participation in the Flathead Finance Program for certain loan products such as the HUD 184 program. • SKHA has a positive relationship with NeighborWorks Montana, which supports the costs of the program and also allows SKHA to benefits from the ongoing training, consulting, and other assistance. • The program offers options and choices in lenders in the area including three HUD-certified lenders. • SKHA staff get instant feedback on the program and can assess modules that are most helpful and those that are challenging. • SKHA staff are committed advocates who believe that homeownership is possible. They are dedicated to their clients and are available to them every step of the way, including accompany them to meetings with the lenders if requested. Impact • The Flathead Finance Program for homebuyer readiness sees approximately 155 clients annually. • In 2017, SKHA qualified nine people for down payment assistance and closing costs: seven qualified for both benefits; one for down payment assistance; and one for closing costs. • More and more people are successfully closing on homes and becoming successful homeowners. • Even if clients are not closing on a home, SKHA sees more people on the reservation who are working hard to repair their credit and prepare for homeownership. 60 TRIBAL LEADERS HANDBOOK ON HOMEOWNERSHIP Lessons learned • Structured hands-on learning – Clients need a structured, hands-on, and patient approach, and that is what SKHA offers. • Credit and credit repair – Many clients are working diligently on credit and credit repair even though they may not purchase a home in the future. • Possibility of homeownership – Tribal members are realizing that homeownership is possible. • Tribal leadership and support is an essential component because they lead by example: they are homeowners themselves and they support SKHA policies that promote homeownership. Ongoing challenges • Affordability and Limited Housing Stock. New home construction costs are increasing and outpace affordability. ° Although SKHA clients qualify for a mid-range mortgage, recent construction of eight modest two-bedroom rental homes cost well-above that threshold. ° Consequently, people who qualify for a mortgage may not be able to afford new construction. ° There is a limited housing market of existing homes on tribal trust lands. • Funding uncertainty. The ICBG financial assistance program for down payment, mortgage subsidy, and foreclosure prevention has been eliminated in the proposed 2019 budget, which disrupts planning new projects. • State collaboration. SKHA does not receive support from the State of Montana and would benefit from mutual collaboration around affordable housing. • More choices. SKHA needs more options to serve its clients. There is a constant need to identify or develop additional mortgage products with the flexibility for Indian Country lending. On the horizon • The Flathead Finance Program for homebuyer readiness will continuing to be a mainstay of the SKHA housing program. • SKHA staff has the capacity and desire to serve many more clients. 61 TRIBAL LEADERS HANDBOOK ON HOMEOWNERSHIP Mortgage lenders love standardization. When we first started back in the day, the homeownership process on our reservation was anything but standard. But we improved our efforts by getting better educated, which has impacted our homeownership program today. — JAMES "JC" CRAWFORD, Executive Director, Sisseton Wahpeton Housing Authority 62 TRIBAL LEADERS HANDBOOK ON HOMEOWNERSHIP Lending Processes to Optimize Opportunities for Homeownership C H A P T E R 5 C H A PT E R 6 A t the heart of homeownership is the lending process. Most homeowners need a mortgage to purchase a house, their biggest lifetime investment. To reduce costs and make the process more efficient, lenders look to standardize their lending practices. Creating a clear lending process for mortgage loans on trust land is a critical piece of Native homeownership programs. The lending process for most reservations differs in a few significant ways, however, making standardization a challenge to attain. The two primary differences are the status of the land and the laws applicable to lending and recourse in tribal jurisdictions. Lenders typically use the land on which a home is located as collateral for a mortgage loan. Most reservation lands—trust lands—cannot be encumbered and may be subject to other federal conditions. To secure a home loan on trust land, the lender provides a mortgage on the borrower’s interest in the leasehold (the lease of the land), not the land itself. A similar process is used for mortgages on condominiums and townhouses where the mortgage relates to the dwelling, not the land. Thus, while not an impediment to lending, the trust status requires additional steps and considerations in the process. Before 1992, it was virtually impossible to obtain mortgage financing to buy or build a home on trust or restricted land, and tribal members had few choices for housing. The HUD Low Rent or Mutual Help housing programs were prevalent at the time. Another option was a mobile home, usually at a high interest rate. Some were able to self-finance construction. In 1992, Congress created two new federal programs to address the lack of mortgage lending in Indian Country: the HUD Section 184 Loan Guarantee and the VA Native American Direct Loan Programs. The Section 184 program offers a loan guarantee to private sector lenders to encourage them to make mortgage loans to eligible borrowers for homes located in Indian Country, while the Native American Direct Loan program allows the VA to make direct housing loans to Native American veterans on trust land. The U.S. Department of Agriculture (USDA) Rural Development Section 502 Direct Loan Program offers another mortgage 63 TRIBAL LEADERS HANDBOOK ON HOMEOWNERSHIP program to assist low- and very-low-income applicants to obtain housing in eligible rural areas by providing payment assistance to increase an applicant’s repayment ability. Each of these loan products allows borrowers to use their leasehold interest and improvements as security for their loan. Importantly, tribes support these beneficial programs by: • Enacting a mortgage code and establishing a system of recourse in tribal court, • Endorsing a lease instrument that meets securitization requirements, and • Executing a memorandum of understanding (MOU) between the tribe and the federal agency, or with the lender and government-sponsored enterprise (GSE) for conventional products. All of these products and programs have made it possible for Native borrowers to obtain home loans on trust lands, but the process remains more complicated than mortgage financing on fee simple land. As a consequence, these programs were underutilized for trust land mortgages and qualified tribal households often opted to purchase or build homes on fee simple land where mortgage financing was easier to obtain. With lending in Indian Country still lagging, HUD and the U.S. Department of the Treasury issued the One-Stop Mortgage Center Initiative in Indian Country: A Report to the President (2000), summarizing their efforts to streamline the mortgage process and make capital more available for trust land loans for both federal and conventional loan products. The initiative brought together tribes, lenders, federal regulatory agencies, and other housing professionals with a goal of streamlining the lending processes within each agency. The outcome was an interagency collaboration to recognize and use model documents preapproved by HUD, USDA, Rural Development, and the VA. This became the “One-Stop Mortgage” project, and hundreds of tribes adopted the model lease and other documents. Over time, however, the effectiveness of the project waned due to disjointed agency cooperation and new programs, as well as shifting policy directions as new Administrations came in. One of these changes permitted the HUD 184 loan guarantee to be used in tribally designated areas, which often included areas well beyond the reservation (such as designating an entire state as an eligible area). The result has been a soaring increase in lending to American Indians on fee lands, as illustrated in Chart 1. Even with these challenges, Native homeownership has flourished on many reservations. At the Bay Mills Indian Community in Michigan, for instance, more than 20 percent of homes on trust land have mortgages. See Chart 2 and Chart 3 on pages 66 and 67. Many hands are required to achieve scale development, standardize transactions, and streamline processes in American Indian communities, Alaska Native villages, and Hawaiian homelands. These include tribal leaders, federal agencies, and private lenders—all of whom play critical roles in serving the trust land mortgage market. 64 TRIBAL LEADERS HANDBOOK ON HOMEOWNERSHIP Number of HUD 184 Loans by Type of Land (1995-2015) 1 Fee Land Loans Dominate Since 2005 5000 Fee simple land Tribal trust land Allotted/individual trust land 4000 3000 2000 1000 0 1994 1997 2000 2003 2006 2009 2012 2015 Source: CICD staff calculations based on data provided by the U.S. Department of Housing and Urban Development Role of Tribal Leaders As discussed in Chapter 1, tribal leaders are in the best position to support mortgage lending in their communities and create more opportunities to live on the reservation. They can: • Promote partnerships. Develop financial partnerships with lending institutions to bring mortgage capital to their communities. • Enact legal infrastructure. Establish a legal process, based in tribal law with avenues for judicial recourse, for the tribe, lenders, federal agencies, and secondary market investors, as well as individual borrowers. The elements of this legal infrastructure include: ° A tribal mortgage lending code enforceable in tribal court or other process that ensures an opportunity for recourse and due process. ° A residential lease instrument and approval process. ° A process for the lender to access mortgaged properties for the purpose of evaluating and servicing the loan. ° Priority of lien procedures. ° Foreclosure and eviction procedures. 65 TRIBAL LEADERS HANDBOOK ON HOMEOWNERSHIP States Where Tribes Are Making HUD 184 Loans Work on Trust Land 60 2 WY Percentage on Trust Land 50 ME 30 ID MN MS NY 20 ND 10 FL WA MI SD OR NE 0 WI MT 40 NV UT CA NC CO NM AZ KS 0 500 1000 1500 2000 2500 Number of Total HUD 184 Loans to Native Americans * Omits OK (15,491 loans, 1.3% trust land) and AK (3,791 loans, 0.1% trust land) Source: CICD staff calculations based on data provided by the U.S. Department of Housing and Urban Development • Promote homebuyer readin [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/tribal%3Aho-chunk%3Aac4c5d802c26191a. Public record. Not legal advice.