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Homebuilding success contributes to an infrastructure crisis

PABLO, Mont. - The explosion in homebuilding among American Indian housing entities is causing an unexpected crisis as it swamps capacity to construct the necessary infrastructure.

Robert Gauthier, executive director of the Salish and Kootenai Housing Authority here, noted that this year, Indian housing authorities are planning to build four times as many housing units as they did in 1997.

Gauthier called on Congress and the Indian Health Service, which has traditionally supplied money for water and septic systems, to free up more funds to combat what he called "an extreme crisis" in infrastructure.

A former director of the Federal Home Loan Bank of Seattle, Gauthier said his IHA is building about 50 units a year. "The IHS can't keep up."

He said the Rural Development arm of the US Department of Agriculture has been helpful in the crisis. "It has bent over backwards" to try to help Indian housing through its Water 2000 program. He called on Congress to increase appropriations for this program.

Another possibility for infrastructure money is the Title VI program of the U.S. Department of Housing and Urban Development, he said.

Gauthier noted that his IHA is better off than most since it is able to assess its clients' $28 a month to help pay for infrastructure costs. The authority has implemented a radio telemetry system to monitor water problems before they become emergencies.

The tribal authority built more than 800 housing units on the Flathead Reservation in northern Montana. It has been a leader in teaming with private sources to stretch its housing dollars, and Gauthier said another such effort is now under way.

The authority is guaranteeing a couple of lenders that mortgages they extend on the reservation will be repaid - even though some homeowners have less-than-perfect credit. Mortgages have already started to close in the program.

The authority nearly went into the mortgage-lending business itself, but in the end decided just to guarantee the loans extended by its partners, the Montana Board of Housing (through a local lender, Ronan State Bank) and the federal Rural Development agency.

The loans come through the Rural Housing Service section 502 American Indian pilot, with the state agency helping to buy down interest rates to make the loans more affordable.

Prospective homeowners rent the units for a year from the housing authority, at the same level as future mortgage payments, while they are trained on homeownership and credit issues and tracked on their rent payment history. The authority then rebates half of the payments for the year as downpayment assistance.

About three quarters of the units in the program are in existence, with the balance being new home construction. Units are both on and off reservation trust land, and owners looking to build have access to a 500-lot inventory maintained by the authority.

Borrowers are individuals at 60 percent or less of area median income, or who have been turned down by a private lender or tribal credit for a loan because of bad credit or other factors.

The director said one elder who qualified for the program has an income of just $512 a month, but her monthly payment is less than $150.

Gauthier said putting these borrowers on the homeowner track increases their incentive to pay monthly rents, and added that all of those in the program are current. One unit has had to be taken back, but for a rules infraction rather than delinquency.

And he says the mortgages the prospective owners will pay are comparable to the rents they pay now.

The director readily admitted these homeowners are likely to have higher foreclosure rates than normal. But he said the housing authority can take the unit back and sell it, or add it back into its rental rolls. It can also garnish a foreclosed owner's tribal per capita payment.

It will also have access to money to maintain a 5 percent reserve against losses.

Although the homeowners are higher risks, Gauthier feels it is actually cheaper for the authority to have individuals in their own houses rather than rentals, where the authority would be required to provide maintenance.