Ginnie Mae hopes to expand Indian lending

4/26/99

CHICAGO - The Government National Mortgage Association is adding guaranteed American Indian mortgages to its Targeted Lending Initiative, hoping to jump-start the fledgling program by giving lenders extra fees to service the mortgages.

Housing and Urban Development Secretary Andrew Cuomo told the HUD Native Homeownership Summit here that lenders will be able to earn up to three basis points over the usual 44 bp Ginnie Mae fee by originating HUD 184 and Federal Housing Administration 248 loans for securitization by Ginnie Mae.

A basis point is one-hundredth of one percentage point. Therefore, 47 basis points is nearly half of one percent.

Those loans, which guarantee lender outlays to American Indians, are currently eligible to be pooled into Ginnie Maes, but few have been. Cuomo gave no estimates on how many loans Ginnie might buy.

Jacqueline Johnson, HUD director of the Office of Native American Programs, also had no volume estimate but said that other programs have doubled their volumes when added to the Ginnie Mae initiative, which aids affordable housing and is part of President Clinton's program to increase the national homeownership rate.

Johnson is Tlingit and the first Native head of the office.

Cuomo also said that HUD is considering combining the 184 and the FHA 248 Indian mortgage programs. Other officials at the summit said the idea would require Congressional approval and is being considered for an upcoming legislative package.

The combined instrument probably will be insured by the FHA, since Ginnie Mae normally secures only FHA and Department of Veterans Affairs home loans.

The HUD 184 was made eligible for Ginnie Mae pools by the 1996 Native American Housing and Self Determination Act, but few have been secured, according to Karen Garner-Wing, who directs the program.

The 184 is much more widely used than the 248, which narrowly escaped being terminated last year. An official at the conference said only six 248s have closed this fiscal year, all in New Mexico.

Volume for the 184, on the other hand, is approximately 90 to 100 loans so far this fiscal year. The program is just about to go over 500 closed loans since its1995 inception, Wing said.

The two loans differ in certain features. The FHA 248, for instance, can only be used for tribal trust land, while the 184 can be used for Indians living on fee simple (private property) land. The majority of 184s to date have been on fee simple land, as the trust status of tribal land has proved a potent barrier to mortgage lending.

The 184 loan is assumable, a feature which appeals to tribes that don't want to lose land through foreclosure (they can arrange another Indian borrower if the first one defaults). The 248 loan can be refinanced, while the 184 cannot. The HUD 184 has been most popular in Alaska and Oklahoma, two states with big Indian populations but no reservations. The FHA 248 has been used in the Pacific Northwest, where Washington Mutual Bank of Seattle has closed about 20 loans.

Cuomo also detailed for the summit progress on the President's "One Stop Shopping" initiative to encourage mortgage lending on tribal homelands. The task force (consisting of HUD and the Department of Agriculture) is recommending allowing tribes to retain land in trust through assumption, creating a financial intermediary to provide homebuyer education and counseling, and streamlining federal bureaucracy between agencies.

Intermediaries will be nonprofits like the current Navajo Partnership for Housing and a similar one that is forming on the Pine Ridge reservation of the Oglala Lakota in South Dakota.

A second homeownership summit will be held on Pine Ridge this summer, with plans for a "blitz build" of 50 homes.

Cuomo gave tribes a strong incentive to start forming nonprofit intermediaries by announcing that tribal nonprofits will be able to apply for a share of more than $1 billion in HUD programs for which tribes currently are ineligible.

The programs, currently only open to local governments and nonprofits, include Rural Economic Development grants. Tribal nonprofits will get a preference for the $27 million in funding this year. Other grants eligible include those for low-income senior citizens and those with disabilities, homeless people, the Youthbuild program for home building training, low-income people with AIDS, and the Self-Help Homeownership Opportunity Program.

HUD angered many tribal leaders by not including an increase in the amount for Indian housing in next year's budget. The current budget is $620 million, which is distributed to tribes or their designated housing entities in block grants set up by the self-determination act. It was intended to encourage tribes to partner with lenders to leverage housing funds, and several have done that in the 18 months since the first block grants were awarded.

Tribes recognized at the meeting for doing so included the Chickasaw Nation of Oklahoma, which has partnered with Freddie Mac, PMI Mortgage Insurance and others on a mortgage effort, the Comanche Nation of Oklahoma, the Choctaw Nation of Oklahoma, partnering with Freddie Mac, PMI, and Washington Mutual, the Coeur d'Alene tribe of Idaho, which has partnered with Norwest Mortgage, and the Grand Ronde tribe of Oregon

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