Cultural sensitivity, education key to success in Native American lending
(Top image, from left to right: Juel Burnette, Darkfeather Ancheta, and Brett Robinson of 1st Tribal Lending.)
Paper documents and a functioning fax machine may not be the tools of choice for today’s mortgage originator but that hasn’t stopped 1st Tribal Lending from closing its fair share of Section 184 loans. In fact, 1st Tribal Lending, a division of Addison, Texas-based Mid America Mortgage, is the nation’s leading provider of Section 184 loans for Native Americans.
The Section 184 Loan Guarantee program, created by the Housing and Community Development Act of 1992, is designed to provide homeownership opportunities to Native Americans living on reservations or restricted lands.
According to Brett Robinson, division manager of 1st Tribal Lending, since Mid America began its Section 184 program in 2011, it has originated nearly 6,000 of these mortgages totaling close to $1 billion. He attributes his company’s success to specialization and a devoted group of employees.
“Darkfeather Ancheta, a Tulalip tribal member who’s been with us for a long time, is one example,” says Robinson. “She travels to reservations, shows, and powwows educating people about the program.”
“Juel Burnette, of the Rosebud Sioux in the Sioux Falls, South Dakota office does the same thing,” he adds. “We’re the only lender I know of that devotes these kinds of resources to bringing awareness and education about homeownership to Native Americans.”
Understanding the Need
Native Americans are among the most “under housed” in the United States. According to the U.S. Commission on Civil Rights, in 2003 approximately 90,000 such families were homeless and 30 percent of households on reservations were crowded.
Beyond educating potential borrowers, originating, closing, and servicing these loans pose unique challenges to 1st Tribal Lending because on tribal lands, these processes have to be managed through the Bureau of Indian Affairs (BIA).
“The scope of what the BIA does is immense, and there’s no consistent way of dealing with things from office to office,” says Robinson, whose 12 loan officers cover 40 states nationwide wholly or in part.
“The BIA manages mineral rights and titles. It approves certain types of loans and records any documents that need to be recorded. There are a lot of layers, protocols, and procedures,” he says, which results in a protracted process. A title report, for instance, which might take a few days to obtain outside of tribal property, can take up to six months or as long as two years.
The underwriting process is also entirely manual and all interactions with the U.S. Department of Housing and Urban Development are paper-based. “The entity we deal with — the Office of Native American Programs — is small and doesn’t have a lot of technology. We send paper files for endorsement and fax things back and forth,” says Robinson.
He notes that while 85 to 90 percent of its Section 184 loans are off-reservation and move at the same pace as a typical FHA or conventional loan, the on-reservation loans can take up to six months or longer depending upon the BIA and tribal approvals that are required.
Terms are typically 15- or 30-year fixed rates with down-payments of 2.25 percent. Back-end ratios are 41 percent or up to 43 percent with specific compensating factors, and the average loan size is $180,000.
To be eligible at least one borrower has to be an enrolled member of a federally recognized tribe. While 1st Tribal sells all of its loans to the secondary market, it retains 100 percent of the servicing rights.
“They do a great job of performing,” says Robinson. “Our portfolio has done better than the closest comparable FHA loan.”
Making Homeownership a Tradition
Beyond performance, however, are the rewards that come with making homeownership possible.
“Many Native Americans don’t have a culture or tradition of owning a home and making a payment. It’s a brand new experience for some of these people, and it’s heartwarming to see how much they appreciate it,” says Robinson.
A recent example he cites is a family with two children that had an emergency foster placement of four more. As a result, five of the six kids residing in one small house were under the age of five — more children than were permitted under the terms of the lease. Robinson says after losing several homes in bidding wars, one of the family’s offers was accepted. First Tribal financed it, and all six children now are enjoying more living space plus a large patio and fenced-in yard.
There’s also the case of the widow with a disability living in substandard housing with mold and a leaky roof whose husband died last year on her birthday. The tribe had placed her in a home, but the house had a 12-month residency limit so she needed to find somewhere else to live. To further complicate things, during the loan process, she had emergency surgery and had to be hospitalized for more than two weeks.
But in the end, the loan closed.
“This first-time homeowner and her dog are now safe and secure in their own home, which includes another first for her — a walk-in closet,” reports Robinson.