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First Title VI loan bought in secondary market will finance Pojoaque housing

DALLAS - Giant mortgage agency Fannie Mae has bought its first federal Department of Housing and Urban Development Title VI loan, creating liquidity for an instrument with the potential to finance hundreds of millions of dollars of housing in Indian country.

And a second large government-sponsored enterprise, the Federal Home Loan Bank System, may be right behind Fannie Mae in buying Title VI loans.

The $435,000 loan, extended by Century Bank FSB of Santa Fe, N.M., will help finance rental housing on the Pueblo of Pojoaque in New Mexico. The 30 units being developed by the Pojoaque Housing Corp., the tribal housing entity, will go to very low-income residents on tribal lands just north of Santa Fe.

The loan is the fifth to close in HUD's Title VI program, which has nearly $200 million in lending guarantee authority. It is the first to be bought in the secondary mortgage market dominated by Fannie Mae and its cousin agency, Freddie Mac. Although the dollar amount is small, the significance is large because the willingness of Fannie Mae to buy the loans increases the willingness of lenders to make them.

Mark Vanderlinden, marketing director for housing impact for the agency's southwest region based here, said Fannie Mae looks at Title VI as a potential source of big volume of American Indian lending.

"We're viewing it as we're just beginning to scratch the surface."

And Paul Jurkowski, who heads the Title VI program for HUD, agreed that starting a secondary market for Title VI is a favorable development for the program.

The Title VI loan on the White Sands Village project is just one part of a complicated financing for the units and infrastructure, which includes money from the pueblo's federal housing block grant, HUD's Rural Housing and Economic Development program, and the Affordable Housing Program of the Federal Home Loan Bank System.

Ground has been broken and completion is expected this year, Vanderlinden said.

Total volume in the Title VI program so far has been about $10 million. HUD guarantees 95 percent of the loan, with the tribe or housing authority taking up the rest. The first loan was to the Mountain Village tribe in Alaska for $1.7 million, the second for a project associated with the Catawba of South Carolina for $5.3 million.

Others have been for $900,000 to finance 40 homes in Winter, Wis., on the Lac Courte Oreilles reservation, and for $1.525 million to finance a mobile home park in Pablo, Mont., on the Flathead Reservation.

Reports indicate that the Federal Home Loan Bank of Seattle will announce its own program to buy Title VI loans at a meeting in Alaska on Aug. 24.

Potential for the program is enormous, since under Title VI of the Native American Housing and Self-Determination Act, tribes can get a loan for five times the amount they receive for "additional housing need" each year. (Their federal block grants, $650 million a year, are divided into two components, one to maintain existing housing stock, and one for "additional need.")

Jurkowski said that with carryovers from previous years, HUD now has $192 million in Title VI guarantee authority, 19 times the volume that's been done to date. A $6 million appropriation for the program is in the fiscal year 2002 budget, meaning HUD will be able to leverage many millions more in authority next year.

He said another half dozen deals have preliminary approval letters, three more Title VI loans could close within the next month or two and total volume on those six deals would be about $5 million.