Tearing the Curtain
"Navajo Partnership for Housing’s Superb Accomplishment"

By Mark Fogarty, columnist, National Mortgage News

May 12, 2003 -- One hundred mortgages may not seem like a lot, especially if they are made over five years. But the almost incalculable difficulty in making loans on the Navajo Nation and this country's other American Indian reservations makes this recently-passed milestone by the Navajo Partnership for Housing a superb accomplishment.

And with NPH's efforts and a bold, separate mortgage effort about to be launched through the Navajo Housing Authority, the shameful and enduring injustice of home finance redlining of Indian homelands, an area with an aggregate size of the state of Utah and a population of one million people, may finally be on the run.

NPH, a non-profit started by the Neighborhood Reinvestment Corp. and the Navajo economic development and community development offices, through March 31 of this year has made or arranged $4.6 million in finance through 102 first mortgages and another 30 construction loans, grants and second mortgages, according to information released at a lenders conference it held recently in Farmington, NM.

Although most of these are government loans, and half are small rehab loans or grants through the Rural Housing Service section 504 program (102 financings is therefore more accurate), NPH has also arranged 21 conventional mortgages for tribal members through local lenders like Suburban Mortgage of Albuquerque and American Financial Resources of Arizona.

None of the mortgages made over the last five years has gone into foreclosure, indicating the presence of a cadre of borrowers able to finance a loan but prevented in doing so by a pervasive lack of opportunity.

The start of a rudimentary mortgage industry in a place which until very recently had few financial institutions and no Realtors, title insurers, mortgage insurers, mortgage brokers or closing attorneys is extraordinary. In addition to these impediments, excruciating land issues, poverty, lender ignorance and the lack of tribal foreclosure ordinances have added tremendous obstacles to mortgage finance.

Besides mortgages, the non-profit has sought to jump start a real estate industry on the remote, West Virginia-sized reservation, using a grant by PMI Mortgage Insurance and Wells Fargo Home Mortgage to acquire seven properties on the Navajo, which sprawls through Arizona, New Mexico and Utah. It has rehabbed and sold six of them to date.

The conventional mortgage market on the Navajo, which has gained a toehold through the admirable perseverance of NPH, is about to get a big boost when the Navajo Housing Authority starts a mortgage program with First Mortgage of Oklahoma, PMI, and Fannie Mae as the secondary partner.

NHA, as shown in a presentation it made at the Farmington NPH conference, plans a bold program in which it will now offer mortgages to its clients who previously were eligible for a government funded lease-to-own program, Mutual Help.

The Indian housing authority (IHA) will take the government funds, develop and construct new housing units, and sell them to tribal members. The new owners will obtain mortgages (guaranteed by NPH, which will maintain investment and reserve accounts) through the First Mortgage/PMI/Fannie Mae program, which has closed more than 300 mortgages on other Indian homelands nationwide.

Importantly, NHA, even though it will heavily subsidize the borrowers, will receive significant amounts of money through the home sales- money it will then use to build more housing units than it would have been able to otherwise.

In an example given at the conference, a $100,000 home sale underwritten at a 22% front end ratio for a family earning $24,000 will generate $32,000 in cash for NHA after subsidy. Under the old Mutual Help and rental programs, the IHA got paid $150 per month per unit for administrative costs-less than the actual admin costs.

NHA will pre-qualify candidates and process their applications using Fannie Mae's Desktop Originator product on the Internet (it has six operators already trained on DO). First Mortgage will underwrite the loans and sell them to Fannie Mae, with PMI providing the mortgage insurance.

Having two mortgage efforts available on the huge reservation nicely echoes the variety of mortgage venues most people in this country have access to, and we wish success to both of them. We extend congratulations to executive director Richard Kontz and his team at NPH (Joe Hibbard is the loan officer) for their determined shirtsleeve effort to get mortgage and real estate industries started where none had ever existed before. Mr. Kontz has gone so far as to get his own Realtor's license along the way.

We also extend congratulations to executive director Chester Carl and his team at NHA (Roberta Drake heads the mortgage effort). Mr. Carl, the longtime national spokesman for Indian housing when he chaired the National American Indian Housing Council, has developed an elegant concept that honors both Navajo Nation sovereignty and the express intent of Congress, which directed tribes and IHAs to undertake just this sort of private sector leveraging in the landmark 1996 Native American Housing Assistance and Self Determination Act.

Just to give an idea of how hard this kind of lending is to do, consider the land issues. Reservation land is actually owned by the federal government, which holds it in trust for tribes or individual Indians. (Some of it by now has passed out of trust and into private hands.) The tribe can, however, issue a lease on a piece of tribal trust land to an individual Indian, and a mortgage can be made on the leasehold (meaning the improvements).

Individual Indian allotments can be even more complicated, since the allotments generally were made generations ago and now may have dozens or even hundreds of heirs. More than half of the heirs have to agree on anything having to do with the parcel-generally a practical impossibility.

Six or seven years back, I wrote an editorial called "The Red Curtain," decrying the lending barriers around all this country's reservations and Indian areas, calling it a national disgrace and a violation of the civil rights of a million American citizens.

And while I'm not ready to declare victory yet, I believe that if you listen carefully in Navajo border towns like Farmington, or towns on the reservation like Shiprock and Crownpoint, NM, and Window Rock, Tuba City and Chinle, Ariz., you may be able to hear the sound of that curtain beginning to tear.

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