PIERRE, S.D. - Changes in banking over the past decade have given way to new opportunities for homeownership for American Indians on reservations along with new options for tribal members living in urban settings.
Two tribal members, who have worked in the banking industry since early adulthood, helped paved the way for tribal homeowners with a specialized approach that changed the way banks and mortgage companies think about the American Indian marketplace.
Juel C. Burnette, a member of the Rosebud Sioux Tribe, and Robert Skjonsberg, a Sisseton Wahpeton Sioux tribal descendent, helped mold banking to fit the needs of American Indians. The men, who work for Wells Fargo, spent years working with tribal members and tribal governments to create a greater understanding of the needs of an underserved market.
Burnette, who grew up in Mission, began his career while still in high school, working for what was then Farmer's State Bank. In 1994, he was selected for a management trainee program with Norwest Bank in Sioux Falls where he worked in the real estate and personal banking departments. He later managed a bank branch on the Lower Brule reservation.
Now 30, Burnette travels the nation working on a variety of lending projects with an assortment of loan programs he helped develop into a successful lending formula for American Indians tackling the sometimes daunting task of getting a home loan.
Burnette drives thousands of miles and logs plenty of airtime as a part of his consulting efforts and counseling individual tribal members on how to qualify for home loans.
During a recent three-day trip, he said he drove 1,100 miles to Flandreau, Rosebud and Pine Ridge. Catching a plane to service clients in Nevada and California isn't unusual for the Fort Pierre family man.
Skjonsberg, 28, grew up on the Lake Traverse Reservation. He was a junior in college when he began his career in banking with Norwest. He majored in economics and received his bachelor's degree from South Dakota State University in Brookings.
The young banker followed Burnette as manager at the Lower Brule bank for two years and later moved to Pierre where he became a community development specialist working with loans targeted to minority and low- to moderate-income borrowers.
He is an assistant vice president for community development and specialized lending and works with projects in Montana, South Dakota and North Dakota.
Both men work a dizzying schedule in bringing potential loan candidates to the table and educating tribal members, representatives from tribal governments and nonprofits to access a variety of programs designed to bring affordable housing to tribal members.
Skjonsberg said it took more than a decade of work with tribal governments, federal agencies and lending partners to create initiatives for specialized programs catering to needs of tribal borrowers.
Building a friendly working relationship with BIA offices in the nation's capital and the Great Plains Area Office in Aberdeen, along with mortgage companies in the secondary market, led to new lending tools that fit Indian country.
"I think we're seeing good things because we have a good working relationship with the bureau. We know these people and we have known them for a long time. The Great Plains Area Office in Aberdeen has a really good understanding of what we are doing. They are behind us in our efforts to provide housing," Burnette said.
But not all bureau offices are as user-friendly, Burnette said. Differences in the various area offices made it difficult to streamline the mortgage process, the lack of uniformity results in a "bottle-neck" of loan applications.
Often tribes and tribal members have to be more aggressive about BIA services. In areas such as California, where there may be as few as 45 members in a tribe, tribes need to combine efforts to demand the services from area offices, he said.
Getting those offices to be more responsive is a challenge, but Skjonsberg said they are constantly working to streamline the process in other parts of the nation.
"We hear about trust responsibilities and all the buzz words. Not only are you supposed to act as a safeguard, but when credit-worthy people who happen to live on trust land want to build a home or start a business, the trust responsibility can't be a barrier," Skjonsberg said.
But, he added, the cooperative effort with the bureau can't be ignored.
"When you look at any large entity, whether it is Wells Fargo in the private sector or the bureau, ideally what we're going to do with this is use the same template in other parts of the country where we have a high concentration of tribes."
Skjonsberg praised Burnette's efforts, saying he is one of the best educated mortgage representatives for the lending niche.
Burnette said the market for home loans in Indian country is on the verge of exploding as the population continues to increase and younger borrowers enter the marketplace.
"The potential not for just this area office, but for Indian country, is huge. Nobody can put a dollar to it."
"It's hard to gauge the market, Skjonsberg said.
He pointed to statistics from the Native American Housing Council that suggested a need for at least 200,000 new homes now.
"If we look at what the census numbers tell us. We're the youngest, fastest growing non-immigrant group in the nation. Our numbers are just exploding. If we really want to make something happen, we have to do it now," Skjonsberg said.
As the young people on the reservations become young adults and other tribal members move back to the area, the market will expand.
"We think we have a demand now. Wait, because in five years we're going to see a demand like you won't believe, Skjonsberg said.
"We need to do things now. The tribes need to be aggressive now and the bureau needs to be an active player."
Thinking outside the box
Banking for the American Indian market is slightly different than in mainstream America. It presents different challenges and required the two bankers to educate secondary market investors to overcome perceptions of risk.
"The concept is the same, but we are taking a lot of side streets. You have to go out of the box. You can't be baffled by the fact on the mortgage side there are no realtors, no market-based appraisals, environmental issues, infrastructure concerns, and appreciation concerns," Skjonsberg said.
"All of the things they taught you - you have to throw them out the window. You have to go through all these different channels. This why it has been such an enigma to the private sector."
"Fannie Mae, Freddie Mac and Ginnie Mae, all secondary market investors that buy these loans, have had to adjust, too. They are used to buying a property that has a market-based appraisal, appreciates 4 percent every year and that is a regular 30-year conventional deal," he said.
Getting the secondary market investors to make investments on trust land where there are no taxes, without market-based appraisals, while taking leasehold mortgages managed by the federal government took some time, he said.
Working with lenders in the secondary market along with PMI Mortgage Insurance Co. bridged the gap for many tribal members who may have been on long waiting lists for housing. The company has made a commitment of more than $100 million to tribes nationally.
Banking in Native America requires lenders to work with potential homeowners to establish good credit and set them on a stable financial course.
"We don't want to put somebody in a home who doesn't qualify and set them up to fail. If they want a home, they have to take some initiative," Skjonsberg said.
While tribal residents might be denied a loan the first time they apply, Skjonsberg said they shouldn't give up. They may need to work to build a credit history or repair their credit to lay the foundation for applying again. Often tribal residents who work through credit problems can later qualify.
The Wells Fargo HomeBuyers Club is a free counseling service that helps tribal members resolve credit issues that might derail home loan applications.
"If they would simply follow through with the counseling, they would all end up in a home," he said.
The credit challenges faced by tribal members more often are the result of unfavorable marks on their credit from failed car loans or unpaid contract health care bills.
Skjonsberg said he often sees tribal members in debt because of vehicle loan defaults. Health care costs stack up against them if the Indian Health Service fails to pay contract health care costs in a timely manner.
Because of delays by IHS in paying the bills, tribal members often are hounded by medical facilities that later turn bills over to collection agencies, Burnette said.
Burnette, who deals with credit issues daily and watches his own credit rating carefully, said he fell victim to a collection agency after the IHS, failed to pay a contract health care bill. It took months for him to clear up his credit report.
"I was furious. I got treated the way I shouldn't have been treated."
The bankers said tribal people need to be educated consumers when it comes to shopping for loans and goods. They also need to understand that in most mainstream lending outlets that depend on the automated reports, they will be offered higher interest rates. Bankers who better understand their challenges and needs can look beyond such credit issues when assisting them.
Tribal members may face a credit report run through an automated system that doesn't take into account the reason for charge-offs resulting from such circumstances.
"That is one of the unique things not everybody is taking under consideration when they should be," Skjonsberg said.
Unlike the trend of many young adults across the nation already piling up debt on credit cards, few young Native American consumers have such blemishes on their credit. Only about one in 20 applications show such problems, Burnette said.
Making the tribes and tribal people aware of what is available is a major part of Burnette's job. While the situation is changing, as recently as four years ago only two lenders went to a HUD conference that drew more than 700 people.
Establishing a blueprint for successful home loans to tribal members, testing it and proving to the private sector that it works was perhaps the largest challenge the bankers faced.
"It's not only the right thing that the private sector should be doing, Juel has also proven to the company and people from North Dakota to California who are also realizing that when you do it right and use this template, it can also be profitable," Skjonsberg said.
" I think there has been a stigma out there."
Over the course of the past few years a list of successful ventures has diminished that stigma and an active marketplace has emerged.
Earlier this year, the Lower Brule Sioux Tribe became the first tribe to sign a partnership agreement with the bank to expand lending opportunities on the reservation.
"This agreement we're trying to market to the tribes themselves. It's basically their choice to adopt it or not. If they want to, they want to give their constituents the access to our mortgage lending products or our conventional products. It's something they need to take a hard look at," said Skjonsberg.
"I don't care where you go, if you ask the administration of the tribes what are their top three issues, nine times out of 10 housing is going to be in the top three."
"Now we're really starting to see people come out of the woodwork and they want to build on their native grounds because of the tax benefit. They don't have real estate taxes and it is their land or their family's land," he said.
Burnette recently worked with a tribal family whose siblings wanted to build on land their father had held in trust all of his life. Two sisters and a brother said they wanted to build on it.
"She said, 'We're never going to go anywhere,'
"We get a person in that house and the house will stay in that family for years on end. That has been the norm in Indian country," Burnette said.
Last year, 180 HUD loans were guaranteed and about 70 of them originated with Wells Fargo. The average home loan for tribal members last year was $59,000, usually for new construction because few quality homes are for sale on the reservations, he said.
Opportunities for homeownership for urban American Indians are broadening as well. Although tribal members had access to funds on the reservation in recent years, those living away found limited prospects.
As the market evolves, Wells Fargo has been able to extend a buy-down program for urban American Indians. The program, a cooperative effort with PMI, allows the bank to offer a $1,000 buy-down to tribal members buying homes off the reservation.
Skjonsberg's role in community development places him a unique position to work with tribes, non-profit organizations and entrepreneurs in economic development.
The bank assisted Lower Brule with its revolving loan program offering options for potential business owners to tap into capital for business ventures.
"It is working with people who may not qualify right out of the gates for a small business loan. This board helps get things started.
"Our goal isn't to just carry it. Our goal is to say, "If you can make this work here, we want you to make it work in Pierre or Mission or Sioux Falls. We want you to be a strong business person.' Local support is paramount to helping businessmen achieve lending success and successes in building their ventures, " Skjonsberg said.
A variety of factors continue to slow economic development including short term limits faced by many tribal leaders. Tribal leaders are looking for economic development without compromising the environment and politics that affect some tribal business ventures.
"It seems we spend most of our time arguing about personal politics rather than seeing down the road and developing a place like Dakota Western Corp."
A business venture such as Dakota Western Corp. in Sisseton, which carved a niche in a national plastics market, must be allowed to move forward without interference. Any business venture including gaming concerns must operate the same way Skjonsberg said.
He said Dakota Western's success is because tribal leaders placed their trust in its chief executive officer to guide the company to profitability and expansion.
"They trust the management. They don't try to micromanage it. If you look at any gaming establishment that is successful, it is because they have a strong management team," he said.
"I think if you talk to a guy like Tim Azure, he is going to say, 'Without some type of risk ... without leveraging something, it is hard to get ahead,'" Skjonsberg said.
"They let him do his job and they understand without risk there is no reward," he said.
Skjonsberg's emphasis working with tribes in Montana, South Dakota and North Dakota placed him the position to help with tax credits, rural development, affordable housing grants and community facility projects.
"Hopefully what I will be able to do is compliment what Juel is already doing on the mortgage side, and hopefully help the bank to be better in line with what the tribes are doing," Skjonsberg said.