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Barriers remain for Navajo mortgages

ST. MICHAELS, Ariz. - Six major obstacles remain in the way of mortgage
lending on the Navajo Nation, a housing nonprofit trying to start real
estate and finance markets there recently told Congress.

Navajo Partnership for Housing Executive Director Richard Kontz, in written
testimony to the House housing and community opportunity subcommittee,
identified six issues on mortgage lending on the Navajo.

The subcommittee recently traveled to Navajo for the first-ever
Congressional housing hearing on American Indian land.

The first barrier Kontz identified was the length of time it takes to
accomplish all the necessary tribal and Bureau of Indian Affair approvals
and reviews - years in some cases.

The second barrier he cited was the slowness in getting BIA Title Status
Reports (TSRs). A third obstacle was the lack of public access to land
ownership documents on the Navajo Nation. A fourth is that mortgage agency
Fannie Mae "has not accepted subdivision master lease lot assignments for
title and financing purposes."

The fifth obstacle Kontz outlined for the lawmakers concerned a title
insurance issue in New Mexico. If two loans are required on a property (one
for construction and the second a mortgage), title insurance is required,
but the title insurance company involved has an issue with the completeness
of the TSRs. And finally, he testified that there is a lack of capacity in
both tribal government and the BIA to process real estate and mortgage

Kontz, Navajo and Creek, made recommendations on all these problems in his
testimony. On the length of time for approvals, for instance, he urged the
streamlining of the process so that it takes a maximum of two to three

On the TSR issue, he advocated a reduction in process time to three to five
weeks and the consideration of privatizing this function for more
efficiency. He also urged that public access to land ownership documents
should be allowed.

On the lot assignment issue, "encumbrance of lot assignments for financing
purposes within approved Navajo Nation master leases for housing
subdivisions should become a standard provision."

For the New Mexico title insurance issue, he urged Navajo Nation personnel
to resolve the matter, noting five clients were being held back from

For capacity problems, he maintained that all entities "need to be
adequately staffed and have adequate budgeted resources given to them to
get the job done."

The Navajo Partnership is nearing its landmark 200th financing on some of
the toughest lending areas in the country.

The nonprofit's mix of first and second mortgages, construction loans and
grants has provided $6.8 million in housing finance on the Navajo Nation,
which sprawls through New Mexico, Arizona and Utah. NPH is based in St.
Michaels, Ariz.; Shiprock, N.M. and Chinle, Ariz. That works out to an
average financing of around $35,000.

"Most of these loans were government direct and guaranteed loans, and half
of the loans used the Section 504 program through the USDA Rural Housing
Service to fund small rehabilitation projects," Kontz said.

Kontz in his testimony to the lawmakers said that NPH has a staff of 17 and
a budget of $900,000. "When a Navajo resident is considering 'private'
homeownership, he or she will most often seek guidance and assistance from
NPH. This assistance includes homebuyer education and counseling, [and]
technical assistance in navigating through the bureaucracy of the Navajo
Nation government and the Bureau of Indian Affairs. NPH also provides
access to various forms of down payment and closing cost assistance," he

Kontz and NPH also have started to develop a real estate market on the
Navajo, buying houses, rehabilitating them and then reselling them. The
group has been helped by a revolving loan fund set up by a grant from PMI
Mortgage Insurance in San Francisco. The money realized by selling the
property gets recycled by being loaned out again.

NPH was started in 1996 by the Navajo Nation and the nonprofit Neighborhood
Reinvestment Corp. and is part of NRC's NeighborWorks network. It was named
one of two "One Stop Mortgage Shops" in Indian country by the Clinton
administration. Kontz has headed the group for more than five years.

The director explained that NRC "acts as a critical financing vehicle to
NeighborWorks organizations in the form of equity capital grants and
expendable operating grants for organizations like NPH."

NeighborWorks attempts to integrate public and private financing to help
low income families. Kontz maintained "if it were not for the
[NeighborWorks] network, and its financial, training and technical support,
the Navajo Partnership for Housing would not exist today."

In an NRC minority home-ownership case study done on NPH last year,
Alexander von Hoffman wrote, "the number of conventional first mortgages
and other financial instruments seem small and inconsequential, but in the
context of the reservation where conventional mortgages are a rarity, it
represents an accomplishment."

Von Hoffman also noted that 600 Navajo families a year go through NPH's
homebuyer education training.