indian country homeownership · 2020. 11. 17. · volume and success matter to increased lender...

#RuralResearchSymposium

Indian Country Homeownership

Kris Rengert (Discussant), James Colombe, Miriam Jorgensen and Krystal Langholz


Indian Country Homeownership

James Robert Colombe, Project Manager, Center for Indian Country Development

3 #RuralResearchSymposium#RuralResearchSymposium

TITLE STATUS REPORTS AND INDIAN

COUNTRY HOMEOWNERSHIP

James ColombeProject Manager, Center for Indian Country Development

November 9, 2020

Minneapolis, MN


https://www.minneapolisfed.org/article/2020/shortening-the-tsr-timeline-a-proposal-to-end-delays-that-hinder-native-homeownership

4 #RuralResearchSymposium

CENTER FOR INDIAN COUNTRY DEVELOPMENT: MISSION AND VISION

Mission: The Federal Reserve System’s Center for Indian Country Development (CICD) advances Indigenous

economic outcomes through high-quality research, coalition building and policy development.

Vision: Leveraging research and relationships to unlock the full economic potential of Indian Country

WHAT IS CICD?


WHY TRIBAL HOMEOWNERSHIP?

• Demand: Need for homes, desire for homeownership

• Capacity: Improved income and credit scores

TRIBAL HOUSING AND HOMEOWNERSHIP


THE HIGHER PRICE OF MORTGAGE FINANCING FOR NATIVE AMERICANS

• CICD working paper by Dr. Donna Feir and Laura Cattaneo

• Do Native Americans face higher-priced financing than other populations?

• Research: Examine HMDA first-lien home purchase loan data

• “High-priced loan” = interest rate 1.5 percentage points greater than

APOR (“rate spread”)

• What proportion of Native American loans are high-priced?

• What is the rate spread for those loans?


https://www.minneapolisfed.org/research/cicd-working-paper-series/201906-the-higher-price-of-mortgage-financing-for-native-americans



PROPORTION OF LOANS WITH A RATE SPREAD GREATER THAN OR EQUAL TO 1 .5



AVERAGE RATE SPREAD IF LOAN HAS SPREAD GREATER THAN OR EQUAL TO 1 .5



PROPORTION OF LOANS WITH A RATE SPREAD GREATER THAN OR EQUAL TO 1 .5



AVERAGE RATE SPREAD IF LOAN HAS SPREAD GREATER THAN OR EQUAL TO 1 .5



2018 MORTGAGE INTEREST RATE BY QUINTILE



2018 MORTGAGE INTEREST RATE BY QUINTILE –MANUFACTURED HOMES


SHORTENING THE TSR T IMELINE: A PROPOSAL TO END DELAYS THAT HINDER NATIVE HOMEOWNERSHIP

• TSRs, required for mortgages on tribal trust land, are often delayed

• Long TSR timelines hinder homeownership in Indian Country

• Solutions should center on accountability, electronic access, and best practices

TITLE STATUS REPORTS

https://www.minneapolisfed.org/article/2020/shortening-the-tsr-timeline-a-proposal-to-end-delays-that-hinder-native-homeownership


WHAT IS A TSR?

• Over 50 million acres of tribal trust land is managed to some extent by the U.S. Department of the Interior’s

Bureau of Indian Affairs.

• TSRs cover legal descriptions, liens, transactions, and all other supporting documents for a tract of tribal

trust land. The BIA describes TSR functions as “similar to recording at a Country Recording Office.”

• Three kinds of TSRs: informational; first certified; and final certified.



TITLE STATUS REPORTS AND HOUSING

• First and final certified TSR delays delay private mortgages and federal homeownership programs for Native

Americans on trust land.

• The Federal government has acknowledged the problem in the context of home mortgage finance since the

1990s.

• Current system lacks equity in land title records and bureaucracy for Native Americans.



HOW TO SOLVE THE PROBLEM

• Preserve success within the BIA. Expand best practices where possible.

• Require regular reporting on TSR-processing timelines

• Bring all BIA offices into compliance with existing timelines and consider statutory deadlines for title

recording.



HOW TO SOLVE THE PROBLEM

• Create an electronic portal for residential mortgage packages to provide certainty and efficiency to

borrowers and lenders.

• Create an interagency report card, with regular updates, to spur collaboration between tribes and federal

agencies, build a foundation for accountability, and help identify solutions to trust land title issues for

residential mortgages.

• Consider a centralized mortgage-processing center



ACKNOWLEDGEMENTS

• Dr. Donna Feir and Laura Cattaneo

• External partners for conversations on TSR issues

• Fort Belknap Indian Community Councilman Nate Mount, who testified about TSR delays at a Senate

Committee on Indian Affairs hearing

CONCLUSION


Mortgage Lending on South Dakota’s Indian Trust Land:A Survey of Lenders

Miriam Jorgensen, Research Director, Native Nations Institutein collaboration with Hope Nation, Inc.

20#RuralResearchSymposium

Agenda

The study01

Perceived barriers02

Attracting borrowers03

Serving borrowers04

Federal programs05

Conclusions & Recommendations06


• Motivated by ongoing feedback from the field about lender knowledge

• Outreach to commercial, institutional, and practitioner lenders working in South Dakota but not necessarily lending on trust land

• 18 responses

• Most questions had between 11 & 15 usable responses

• Indicative, not large enough sample for statistical confidence; we have to start somewhere

The Study


Perceived Barriers to Lending

Our institution’s issue is a lack of qualified applicants….

Instead of complaining, we need to step in and try to understand and work towards understanding.


Attracting Borrowers

Connecting with qualified applicants:

• Collaborate with CDFIs, TDHEs, other community partners

• Establish a presence on/near Indian lands, create real relationships

• Use social media and other location-relevant media

• Ask for referrals and recommendations

• Senior management commitment, specific lending goals

Serving Borrowers

Overcoming the challenges of

• Conducting appraisals of property

on trust lands

• Obtaining Title Status Reports for

trust land parcels

• Underwriting

• Managing risk


Lender information / training needsServing Borrowers:Identified Lender Info Needs


Federal Programs

Conclusions & Recommendations

Volume and success matter to

increased lender participation.

“The ability to generate a profit is

necessary. Serving the greater good for

housing in Indian Country is important as

well, so profitability doesn’t need to match

other lines of business necessarily.”


Knowledge and relationships

are necessary for improved

lender performance.

“Be available to help them through a

hard time. Give them the ability to trust

you and to come to you when an issue

first comes up.”


Creative thinking and

innovation may be needed to

address funding gaps.

“I don’t think lenders should partially

commit, if they want to do this type of

lending it takes a real commitment and

that may take a lot of time and money.”


Ongoing progress

requires diverse

contributions—from:

• Native CDFIs

• Allies

• Tribes

• Commercial and

institutional lenders

• The federal government



Check out the report!

Research and report produced in

partnership with Hope Nation LLC.

For more information contact:

[email protected]

[email protected]

Thank you!

mailto:[email protected]

mailto:[email protected]


Opportunities and Challenges for Native CDFI Housing LendersInnovative Mortgage Lending Solutions in Native Communities

Krystal Langholz, Chief Operating Officer, Oweesta Corporation


What is a Native CDFI?

• Currently, there are 69 Native Community Development Financial Institutions certified by the US

Treasury and they include: 5 Banks and/or Holding Companies, 7 Credit Unions, and 57 loan

funds

• Must be representative of their community, provide development services, and lending products to

serve the needs of their community


Driving Research Questions

1. How are Native CDFIs currently serving housing needs in their communities? Where do they want to go in the future?

2. What are their structural barriers that impede that movement and how can we remove them, specifically focusing on secondary market access?


Methodology of Study

1. Native CDFI Housing Survey (30 Native CDFI Loan Fund Participants who either want to do housing lending (13) or currently provide housing products (17))

2. Key Informant Interviews (14 Native CDFI Participants)

3. Housing Advisory Board (10 Native CDFI Participants)


Native Mortgage Lending Market

• Between 1994-2015, only 10% of HUD 184 lending was done on tribal trust lands

Native CDFI Loan Funds

• Last year, 79% of their reported lending for housing was done on tribal trust lands

Why Do Native CDFIs Matter to Mortgage Lending in Native Communities?

In 2018, 40% of Native CDFI surveyed wanted to add a housing product in the next year;

Annual loan volume growth for Native CDFI housing lenders from 2019 to 2020 was 89%

We can identify the needs of our clients and community. We can relate it to the culture and we work them on an individual level.”

Native CDFI Executive Director


Current Native CDFI Housing Activities

• Approximately $13MM in housing lending last year reported by the 17 housing lenders who

participated in the survey

• 67% of Native CDFIs that provide housing products do mortgage lending; and,

• In survey, capital is by far the largest challenge to homeownership lending and yet only 20% of

Native CDFIs say that they “feel confident” in their knowledge about the secondary market


Current Housing Loan Products Mortgage Products and Services

Current Products

67%

60%

40%

33%

20% 20% 20%

13%

7%

89%

56% 56% 56% 56%

11%

CDFI Loan Package HUD184 Package USDA502 Package VA-NADL Package forConventional

Lender

LIHTC


Housing Goals of Native CDFI Housing Lenders

71%

57%

30%

29%

43%

40% 10% 10% 10%

Current

Next Year

Ultimate Goal

Current Structure and Goals

Portfolio Lender Mortgage Broker Correspondent Lender Direct Seller (without servicing) Direct Seller (with servicing)


Barriers

62%

46%

46%

46%

46%

23%

8%

Qualified Homeowners

Housing Stock

Infrastructure Needs

Lack of Qualified Staff

NMLS Licensing

Down Payment and Closing Costs

Lack of Data and Research for Home Lending

Barriers Will Need to Address to Achieve One-Year Goal(s)


• Those who are “no”, plan to stay portfolio

lenders

• Described barriers consisted of:

– Gaps in underwriting criteria in portfolio loans

to conforming products

– Insurance and licensing requirements

– MOUs with tribe

The Secondary Market

Yes, 67%

No, 33%

Are you interested in participating in the secondary market?


How Large Is the

Underwriting Gap, then?

CDFI NAME: HUD Section 184 USDA 502 Guarantee USDA 502 DirectVA Native American

Direct Loan Fannie Mae HomeReadyFreddie Mac

HomePossibleFirst Mortgage

(6 CDFIs)

Loan Features

Income Limits None < 115% AMI < 80% of AMI No < 80% of AMI < 80% AMI

None, 125% NAHASDA AMI

Maximum Loan Amount Based on county limits None Based on county limits Based on county limits $510,400 $510,400 150K-225K

Downpayment Assistance Requirement

1.25% (<$50k) 2.25% (>$50k) None None None 3% 3%

none-1%, $5K

Maximum Loan to Value (LTV)

98.75% (<$50k) 97.75% (>$50k) 100% 100% 100% 97% 97%

90%-100%

Maximum LTV for Refinance97.75% (or 85% for

cash out) 100% 100%, no cash back99.5%, can only refinance

NADL97% (or 80% for cash

out) 97%

95%-100%,1 does not offer

Cash Out with Refinance? Y Y Y Y Y Y 4 Yes, 2 No

Manufactured Housing Terms?

New/Existingon permanent

foundation

New w/permanentfoundation

New w/ permanentfoundation; Approved

Dealer- Contractor

New w/ permanentfoundation; Approved

Dealer- Contractor

Guidelines tighter, 95% max CLTV

Yes 5 Yes, 1 No

Debt-to-Income Ratios (front/back end)

41 29/41Very Low Income 29/41;

Low Income 33/4141 Up to 50 DTI in DU 45

28-29 / 38-43, use HUD, case by

case

Origination Fee

1.5%, .25% annual premium

1%, .35% annual premium None 1.25%Cancellable mortgage

insuranceCancellable mortgage

insurance1-2% of Loan

Credit Score Requirements

Good Credit(alternative creditsources allowable)

Good Credit >640 (alternative credit sources allowable)

Good Credit(alternative creditsources allowable)

Good Credit 620 660600, HUD, none (no

collections / no delinq)

Able to Finance Closing Costs?

Yes Yes Yes Yes Yes Yes Yes

Title Insurance Required? No No No No No ? 4 Yes, 2 No


How then can we support this emerging market?


Training Needs

(Ranked by Order of Importance)

1. Capitalization for Housing

2. Housing Loan Product Underwriting

3. Mortgage Licensing Training

4. Navigating the Loan Construction Process

5. Becoming a HUD 184 Approved Lender

Technical Assistance Needs (Ranked by Order of Importance)

1. Share and Produce Best Practices in Home Lending with Case Studies

2. Create Cohort for those Seeking Mortgage Certifications

3. Business Planning Support Housing Products

Capacity Building Support Needs for Secondary Market Access

If you want to engage the secondary market, you have to dedicate all your energy and focus and resources into this. It’s not easy; it’s not cheap.”

Native CDFI Executive Director

Thank You

indian country homeownership · 2020. 11. 17. · volume and success matter to increased lender...

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