Milestone housing financing for Navajo Nation

Mark Fogarty
5/29/03

FARMINGTON, N.M. - Working hard to end the continuing mortgage redlining of the Navajo Nation, the Navajo Partnership for Housing (NPH) has just passed a milestone 100th financing.

As of March 31, the non-profit had made or arranged 102 first mortgage financings, with another 30 construction loans, second mortgages or grants, for a total of $4.6 million since it began its program in 1998.

Some of the firsts were grants through the Rural Housing Services (RHS) section 504 rehab program and so would qualify as financings rather than true mortgages, which involve debt.

Most have been made through U.S. government mortgage programs, but more than 20 loans have been extended by private lenders.

Executive Director Richard Kontz, Navajo and Creek, detailed NPH's production to Indian Country Today at an NPH Lenders' Conference in this border town just adjacent to the giant reservation.

NPH, an affiliate of the Neighborhood Reinvestment Corp. and a federally-designated "One Stop Mortgage Center," has also started to develop a real estate market on the Navajo, purchasing seven homes for renovation and resale. To date, it has sold six of them, as well as one vacant lot.

And it has passed 5,000 attendees at its periodic homebuyer education orientations. Of the 5,162 people that have attended these sessions, NPH has "graduated" 1,882 and given individual counseling sessions to 1,198. Of these, 136 have been referred to lenders.

Breaking down the 102 financings, three have come through the tribal Navajo Credit Services, 16 through the RHS 502 direct mortgage program (made by the federal government), one through the RHS 502 guaranteed program (made by a private lender but guaranteed by the government), 50 through the RHS 504 rehab program (some are loans, and some are grants), four through lenders guaranteed by the HUD 184 program, 21 via "conventional" lending by private lenders, and seven through other sources.

Private lenders involved in the program include Suburban Mortgage of New Mexico, American Financial Resources of Arizona, Gallup Federal Savings of New Mexico, and Citizens Bank. PMI Mortgage Insurance, San Francisco, and Wells Fargo Home Mortgage, Des Moines, have given NPH a grant to do the real estate resales.

Fannie Mae, the giant Washington-based mortgage agency, started the movement toward mortgages on the reservation in the 1990s. It signed an agreement with the Nation in 1996 and bought its first private mortgage on the reservation in 2000.

NHP has also provided interim construction financing four times, three through its own revolving loan fund and once through Navajo tribal housing money authorized by the Native American Housing Assistance and Self Determination Act (NAHASDA).

It has made or arranged down payment and closing costs assistance in 30 cases. Nine came through HUD's Self-Help Opportunity Grants, 11 through Affordable Housing Program funds from the Federal Home Loan Bank System, twice through its own revolving loan fund, and four times with NAHASDA funds.

This year marks the second time (the first was 2000) that NPH has made or arranged more than $1 million in housing finance, and the year is less than half over.

According to NPH loan officer Joe Hibbard, NPH is set to do a considerable volume of "construction contingency" lending in the next few months, where 10 percent of the construction amount is loaned to cover any contingencies that may arise.

According to Hibbard, there may be a further flurry of HUD 184 mortgages made on the reservation in upcoming months on the Carrigan Estates, the big housing development being built in St. Michaels. NPH is not involved in that project.

Hibbard said many NPH borrowers are in higher income brackets but have been unable to get mortgages on the Navajo. Lower-income tribal members may soon get a chance to join in, if a second program, designed by the Navajo Housing Authority, gets underway.

That program, expected to be announced shortly, will involve Fannie Mae, PMI, and First Mortgage of Oklahoma City.

The pervasive lack of home finance on the Navajo, the nation's largest reservation, stems from a number of factors. Home to more than 200,000 tribal members and sprawling across Arizona, New Mexico and Utah (it is the size of West Virginia), the Navajo is subject to tangled land issues that have made mortgage making problematic.

The reservation, like most, is a checkerboard of tribal trust land, trust land allotted to individual Indians, and "fee simple" or private property. Trust land belongs to the federal government, which holds it in trust for tribes or individual Indians, and it may not be mortgaged.

Mortgages are possible, though, when the tribe assigns a member a homesite lease. A lender can perfect a security agreement on the lease (generally meaning it puts a lien on the improvements that are made), and it is referred to as a leasehold mortgage.

The sovereign status of the Navajo Nation, and its reluctance to grant waivers of sovereign immunity, have also bothered lenders, who worry about being able to foreclose in case of a default. Jurisdiction is in tribal courts, rather than the county courts they are familiar with.

Fannie Mae got around this problem by accepting a statement from the Navajo solicitor's office saying that the agency had standing to sue in tribal court.

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