Indian housing continues gains despite grim national setting

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WASHINGTON - Comparisons between the Indian housing market and the national home mortgage loan industry can;t be pushed too far - and that turns out to be a good thing.

As exhaustively chronicled in the national media and on Capitol Hill, home mortgage loans have collapsed into foreclosure across the nation, attended by many domestic and individual shattered hopes, as well as recessionary repercussions in the U.S. economy. Among the identifiable reasons for the crisis have been loose lending standards, unethical lending practices, fluctuating interest rates on home mortgage loans, the personal irresponsibility or naivete of some borrowers, and perhaps above all the zealotry of speculators to market ''bundled'' mortgages as securities - that is, investment opportunities - backed by the increasingly at-risk revenue streams of mortgage payments.

In large part because none of those factors are at full play in the Indian housing market, the Indian housing market continues to increase the percentage of Native families who are secure in their own homes, said Rodger Boyd, the Navajo deputy assistant secretary for Native American Programs in the Department of Housing and Urban Development's Office of Public and Indian Housing. Nothing is ever perfect, and he proved well aware that at least one mortgage lender has taken the financial crisis in housing markets as an opportunity to stop making loans in Indian country and elsewhere.

But Boyd explained that most of the home loans Indians take out, under so-called ''Section 184'' and other programs, are characterized by fixed-rate mortgages over a maximum 30-year duration, the requirement that the borrower must live in the dwelling (eliminating any temptation to speculate on interest rates with the house as an ''investment''), NAP's improved capacity for underwriting its own loans, a closer look by HUD's Office of Loan Guarantee at borrower capacity, mandatory quarterly reports from lenders, close oversight of borrowers who fall in arrears with their payments, and above all federal loan guarantees that lenders have become comfortable with.

As a result, Native American Programs maintains a foreclosure rate of less than 1 percent of clients in the Section 184 Indian Housing Loan Guarantee Program. Just as importantly, it has overseen growth in the program, from 250 loans in 1998 - 99 to 6,500 by the end of fiscal year 2008. Assuming normal growth through FY 2011, Boyd hopes to see the program increase Native home ownership by 1 percent a year over a full decade. ''It'll be close,'' he said.

''It's actually increased by 42 percent over the last six months,'' he said. ''Despite the larger market, it's quite impressive what's happening here.''

The program will have helped to extend $1 billion in home loans to Native people by the end of calendar year 2008, a critical threshold for the industry as it denotes a program with staying power, one that clients, lenders and investors alike are comfortable with.

Boyd's next goals are to familiarize more tribes with other home ownership opportunities, available through Tribally Designated Housing Entities under the Native American Housing and Self-Determination Assistance Act, tax credits, and the Federal Home Loan Banks.

The key, though, is for tribes to expand their perspective on capital, to include not only the guaranteed funds of Section 184 but also loans and equity - private-sector capital alongside government funds. TDHEs in good standing can borrow five times their Indian Housing Block Grant amount for housing, with 95 percent of it guaranteed.

They can then bring equity into any housing deal, lowering overall costs and perhaps attracting other investors. Or TDHEs can convert into corporations that would then qualify for programs to address the affordable housing problems on many reservations. And some 45 Community Development Financial Institutions in Indian country are now capable of qualifying to make loans for housing - as certified Section 184 lenders.

Housing development expands a community and bolsters its economy, and Boyd encourages tribes to remember that.

''As they begin to do their strategic financial planning, don't forget the contribution housing can make. ... It's really building that capacity toward an improved economy.''