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Private lenders start to close mortgages on the Navajo Nation

WINDOW ROCK, Ariz. - Capping six long years of arduous effort, private mortgages are being made on the Navajo Nation.

A ceremony July 19 marked closing of the first "conventional" (private rather than government) loans on Navajo trust land, and their sale to the giant secondary mortgage agency, Fannie Mae.

The first loan went to the Ron Maldonado family from Suburban Mortgage of Albuquerque, N.M. It closed late last year. Fannie Mae bought it and three others.

Navajo Nation President Kelsey Begaye joined principals in the transaction and a representative of New Mexico Sen. Jeff Bingaman at the ceremony. The house was built on the homesite of Maldonado's wife, Karen, Navajo. They have two daughters.

Mark Vanderlinden, from Fannie Mae's New Mexico office, said a dozen more loans should be closed over the next year.

"As frustrating as this was to work on it for that long, it feels that good to have it done," he said.

Vanderlinden said the loans purchased so far are in the $85,000 to $110,000 range, all involving new construction.

Participating in the loan program are the Washington, D.C.-based Fannie Mae, PMI Mortgage Insurance Co. of San Francisco, and the Navajo Partnership for Housing, based in St. Michaels, Ariz. Fannie Mae and PMI are in partnership with lenders Suburban Mortgage, Credit Union Mortgage Services of Albuquerque, First American Credit Union of Window Rock, Citizens Bank of Farmington, N.M, and mortgage broker Jewell Carrol Enterprises, Durango, Colo.

Fannie Mae buys mortgages from lenders (being able to sell the loans gives lenders the confidence to originate them), and PMI insures repayment of 20 percent of the loan amount, something Fannie Mae requires before it will buy a loan.

Borrowers on Navajo trust land will be able to close a loan with as little as 1 percent to 3 percent down to finance new construction or purchase and rehab existing homes.

Jean Garrison, affordable housing specialist for PMI, said that her firm's $3 million commitment should translate into 30 or 40 mortgages on Navajo trust land and she hopes for a substantial number of closings in the next six to nine months.

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The Navajo Partnership provides home-buyer education to all prospective homeowners.

It is one of two "One-Stop Mortgage" initiatives supported by the Clinton Administration to bring private mortgage lenders onto the nation's reservations. Some 40 mortgages have been closed so far on the Navajo Nation of Arizona, New Mexico and Utah.

The pilot program was started in 1998 after President Clinton directed development of a program to overcome hurdles which kept lenders from extending credit on the nation's tribal homelands.

The initiative dates back to the mid-'90s, when high-ranking officials of the U.S. government, including the comptroller of the Currency and the federal housing commissioner, traveled to the Navajo to try to facilitate mortgage lending.

In 1994, Fannie Mae began a two-year-long negotiation with the nation on a lending agreement which was signed in 1996.

But, Fannie Mae reported many obstacles remained: difficulty in getting homesite leases, difficulty in getting appraisals; difficulty in getting multiple approvals from different agencies of the tribe, difficulty in getting contractors to build in Indian country; and credit challenges for Indian borrowers.

Richard Kontz, executive director of the Navajo Partnership, said with five loans that closed April 28, 40 mortgages have been made on Navajo trust land since Oct. 1, 1998.

Bulk of the lending has been through the Rural Development arm of the U.S. Department of Agriculture, which makes direct loans (and guarantees lender outlays) under a Native American pilot program. Loans average about $85,000, Kontz, Navajo/Creek, said. Six conventional loans also closed, through First National Bank of Farmington, First National Bank of Pueblo, Colo., and Suburban Mortgage.

NPH recently signed an agreement to originate reservation mortgages for Suburban Mortgage and hopes to do the same with Wells Fargo Home Mortgage, the former Norwest Mortgage.

NPH has seen 1,183 Navajo families graduate from its Homeownership Orientation sessions, with 215 graduating from a further "Shelter Our People" education course, and it was reported that 68 of its clients have been prequalified and referred to lenders.

Kontz told a recent Native housing summit he became a licensed Realtor in New Mexico, to try to facilitate buying and selling properties on the Navajo Reservation. But, he said, starting a real estate industry on the reservation is hard since there are no appraisers, title insurers or Realtors.

In addition to the traditional, low-income population on the reservation, Kontz said his group is targeting high-income Navajos, who often must live off the reservation to obtain financing.