Homes going up for White Mountain Apache

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WHITERIVER, Ariz. - Fifty homes are under construction on the Fort Apache Reservation, with another 200 to come, under a first-of-its-kind $25 million tax-exempt bond financing by the White Mountain Apache Housing Authority.

The 52 homes in phase one of the "Apache Dawn" project will be built here and in two other White Mountain Apache communities on the reservation.

The complicated financing is believed to be the first-ever use of a tax-exempt bond to finance housing construction on trust land, WMAHA attorney John Weideman said.

When complete, the 250 new housing units will make a dent in the tribal waiting list of 1,000 families, and although the units are rentals, the occupants will have the option to buy them in 10 years.

If they do routine maintenance on their units, Weidman said the IHA will pay them for it, into an account which can be used toward a down payment.

The units under construction are stick-built on slabs, and rents will range $500 and up per month. But future units may be manufactured housing in the interest of affordability, the attorney said. There is even some talk of starting a company, Apache Rainbow Homes, to go into the manufactured housing business to facilitate the project.

"It's the way to go to get homes more affordable," the attorney said.

Partners in the deal are the IHA, bond counsel Kutak Rock, underwriter US Bancorp Piper Jaffray, lenders Bank One Mortgage and Countrywide Home Loans, and secondary mortgage agencies Freddie Mac and Fannie Mae.

Fannie and Freddie each bought more than $10 million in bonds, with a third investor, Sit Investment Group of Minneapolis, buying a small amount.

The IHA got an attractive yield of 5.98 percent on the bonds, Weideman said. The bond has been rated AAA, the highest rating, by Moody's Investors Service. The low rate on the debt will allow lower rental payments, making the units more affordable.

The Housing Authority is the borrower for the HUD 184 loans, extended by Bank One Mortgage. Bank One no longer issues Ginnie Maes, so that part of the deal is being handled by Countrywide Home Loans.

The IHA is using a small amount of its government housing block grant, $1.3 million, to pay the cost of issuing the bonds.

This has leveraged a housing investment of $25 million, the attorney pointed out. He said the tribe gets a total of $7 million a year in Native American Housing Assistance and Self Determination Act, NAHASDA money, so the bond is bringing in more than three times that amount.

The financing marries the tax-exempt bond structure to government-guaranteed loans using a two-tiered structure. It is based on an obscure clause in Title VII of the 1996 NAHASDA, which allows private lenders doing government-guaranteed Indian mortgage loans to also issue government securities (Ginnie Maes) based on those loans.

"That's the foundation on which we built this thing," Weideman said.

This allows lenders to make more money on the deal, and therefore makes it more attractive to them to extend the HUD 184 mortgage loans in the first place.

Bank One Mortgage extended seven HUD 184s on the reservation a few years back, Weideman said.