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First National Bank makes benchmark mortgage loan

WASHINGTON – The Department of Housing and Urban Development’s Section 184 mortgage program has guaranteed its 1,000th American Indian loan in the state of Oklahoma, and the lender was an Indian-owned bank.

First National Bank of Oklahoma, Shawnee, was the lender that recently made the benchmark HUD 184 loan. First National now has made 58 loans for $5.2 million in mortgages under the program. It is owned by the Citizen Potawatomie Band.

The loan was made to a Citizen Potawatomie member living in Edmond, Okla., according to Pam Hunt, mortgage officer of the community bank. The tribal member also qualified for a $2,125 closing cost assistance grant from the tribe on the 30-year, fixed-rate mortgage.

The tribe has owned First National, which has three branches in Shawnee and Holdenville, since 1989. The bank opened in 1984 and is the only locally-owned bank in Shawnee.

Besides the HUD 184, First National also will make “conventional,” or private, mortgages to both Indians and non-Indians, Hunt said. She characterized the HUD 184 as a “wonderful” program and said she has been making the loans for the past eight years to Indians, Citizen Potawatomie and other tribal members, all over the state.

The HUD 184 has a good rate and no costly private mortgage insurance, and the one-time guarantee fee can be covered by gifts from family members or tribal assistance, she said. Of the 150 or so mortgages made by the bank each year, a “significant” number go to Indians, she said.

The HUD 184 loan, extended to American Indians both on and now off their reservations, has made over 3,300 loans to date for a total of $376 million in credit. By the end of June, it expects to have 3,400 loans for more than $390 million on its books.

Its use has been on the rise in recent years, even before an expansion of the program allowed some Indians living off their reservations to qualify.

Tribes or their housing entities must ask HUD for expanded lending areas, but if they can demonstrate that the area is associated with the tribe historically or that members live there presently, HUD has been active in granting the requests. For instance, the Seminole Tribe of Florida asked for and received the entire state of Florida as its expanded area.

Urban Indians will benefit from the expansion as well, as it will be easy for many tribes to demonstrate their members are living in cities like Albuquerque, Phoenix, Denver, Minneapolis, New York or Los Angeles.

Year to date, almost 750 loans have been made for about $110 million, increases of 86 percent in numbers and 132 percent in dollars over last year.

Oklahoma is the bellwether state of the program because with the abolition of reservations there, Indian-area land is more like private property than the “trust land” status of most reservations. Alaska is similarly reservation-free, but less populous.

HUD 184s in Oklahoma have been averaging $103,000 apiece. The nationwide average is brought up to $146,000 apiece by more expensive areas like southern California, Florida and Alaska.

Most HUD 184s come through retail (branch) lending, although some lenders, like GreenPoint Mortgage, use third parties like mortgage brokers.

In addition, HUD is looking into getting Native intermediaries, like community development financial institutions, to help it find borrowers. In New Mexico, it is known to be looking at Native American Lending Group for this purpose.

The HUD 184’s lesser-used cousin, Title VI, has seen seven loans close to date this year. It now has guaranteed about $95 million in big-project loans. More than half that volume comes from one loan, for $50 million, to construct nearly 500 homes for the Cherokee Nation of Oklahoma.

Title VI, named after the authorizing section of the Native American Housing Assistance and Self Determination Act, also allows bonds to be underwritten to support housing, and HUD is looking into this possibility now. Tribes or their housing entities would issue the bonds, supported by housing block grant money pledged by the tribe.

The HUD 184 carries with it a 100 percent guarantee of lender outlays, while the Title VI instrument guarantees 95 percent of the loan amount. Bonds would not be guaranteed, but would be backed as long as the government continues to appropriate housing support money for tribes. Currently, it is funding tribes and their housing entities with more than $600 million per year.