Salish and Kootenai use sovereignty to secure mortgages

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PABLO, Mont. - The Confederated Salish and Kootenai tribes are using their sovereignty in an unusual way, guaranteeing repayment of mortgages made to tribal members by an outside lender.

In a small way, the tribal government is replicating what the U.S. government does on a much vaster scale, guaranteeing mortgages to lenders through the Federal Housing Administration and Department of Veterans Affairs.

The Salish and Kootenai already have an interior tribal credit program that makes mortgages to tribal members, as do many tribes. The unusual aspect of what is happening on this rural Montana reservation is that the tribe's housing authority is guaranteeing repayments to an outside lender.

And that lender happens to be the federal government, through its Rural Development section 502 mortgage.

The Salish and Kootenai Housing Authority (SKHA), under the leadership of retiring executive director Robert Gauthier, is making a few bold moves toward ending the mortgage drought on its Native homelands. Not only is it guaranteeing the RD 502s, it is actually making mortgages to some of its own clients that don't qualify for Tribal Credit mortgages.

The scale of these programs is infinitesimally smaller than the real FHA. The Salish and Kootenai Housing Authority, based here on the Flathead reservation, has made or insured just 40 mortgages.

SKHA has made 20 loans to clients unable to obtain finance in any other way, and it has guaranteed 20 loans extended by the federal Rural Development agency under its section 502 program.

According to Jason Adams, acting director, the Indian Housing Authority is getting the money for these unusual IHA activities by pledging unobligated money towards the guarantees (still a rhetorical question, since none of the loans has defaulted yet). And it gets money to lend from the sale of homes on the reservation constructed by the now-defunct Department of Housing and Urban Development program, Mutual Help.

On a site in Elmo, Mont. overlooking Flathead Lake, 11 houses are being built by the local Ktunaxa Community Development Corp., using the "self-help" program of Rural Development. These are large, detached single-family homes being built by all 11 families, and no one can move in until all 11 are complete. They will join nine more already completed.

The average mortgage is about $72,000, with an average mortgage payment of about $450, according to Adams, with a generous subsidy and sweat equity reducing the cost to buy to about 60 percent of appraised value. Plus, the Salish and Kootenai are timber tribes, so members can obtain several thousand dollars worth of free lumber for building a home. Still, these potential homeowners didn't all fit RD's criteria, prompting the IHA to step forward with its guarantee.

The tribe granted SKHA the leases on the land in question, and the IHA has sub-leased them to the individual tribal members. If the homeowners default, the IHA has the option of making the payments, or buying the property. Some of the people involved have fallen behind, but they have gotten caught up again, Adams said.

Its own mortgages have been made to very low income tribal members. The IHA has sold them units it has built at 40 percent of appraised value and adjusted the mortgages to their incomes. Average mortgage is in the $70,000 area, and average payment is $350 per month.

This program is on hold for the moment, but the IHA would like to do more mortgages in the future, Adams said. Defaults on these mortgages would lead to eviction and either a new homeowner, or the unit would revert to a rental.

SKHA is also working on its fourth Low Income Housing Tax Credit project, to rehab 33 rental units built in the 1970s in the Turtle Lake area outside Polson, Mont. It has also used LIHTC equity from Enterprise Social Investment Corp. and the Raymond James tax credit funds, to build 20 units of ownership-option rental housing and two 10-unit elderly living centers, one in Elmo and the other in Arlee.

Another project the IHA has underway is a trailer park with 60 rental lots in the tribal capital of Pablo.

In addition, according to Adams, about 20 tribal members have applied to local banks for government-insured Indian mortgages to refinance loans they received through the Tribal Credit office. The reason? The HUD 184 guaranteed loans now have a refinancing option, and the rates are lower.

Adams said he knew of about eight applications with Ronan State Bank, another five or six with First Interstate Bank, Polson, and four or five more requests at Valley Bank, Ronan.

Two tribal members executed HUD 184s five years ago with Ronan State Bank, but those were on private property, rather than tribal or individual trust land, where mortgages are much more complicated.

The IHA currently has 420 rental units under management, and 170 of the old Mutual Help units (down from a high of 230), which it hopes to sell to tenants who could obtain financing through Tribal Credit.