HUD program expands to serve tribal members living off-reservation
The second question is: How competitive is the loan?
"From a tribal member perspective, it's a fantastic program," Robinson said. "There's no monthly mortgage insurance, a low down payment of 2.25 percent, a 1 percent guarantee fee that is paid at closing, and a loan-to-value that goes as high as 98.75 percent."
These loans can be securitized as normal Ginnie Mae loans, so it has a market-based-type interest rate. The loans can be used for single-home construction or rehabilitation. Individuals or tribes can get the loans. In the latter case, the tribe could do an entire housing development and then rent or sell the homes to tribe members.
Finally, the third question is: How secure are these loans?
Delinquencies have not been a problem. Last year, for example, there were 80 claims for $21 million, which, according to the HUD spokesperson, comes out to a 1.25 percent default rate based on the insurance in place.
"Delinquency and foreclosures have not been a problem because the loan requires active servicing," the HUD spokesperson explained.
"If a person misses a payment, there's a requirement for reaching out and notifying the client. The traditional mortgage doesn't have an interactive role for the servicer. When you get to 45 days on a delinquency, you have to send a letter and make an attempt to reach the borrower by telephone. For that reason, the claim rate has been much lower."
As noted, the Section 184 loan business had been expanding rapidly and this was mostly due to Native Americans being one of the most underserved demographic groups in the country as far as housing was concerned. In addition, with the development of reservation gaming, a lot more capital is available to Native Americans.
"What I find is, the loan officers who get involved in these projects have a real passion for Native American issues," Robinson said. "A lot of times we will sign up a company with 100 loan officers, but it is really just one or two that get involved in this niche and are out there marketing and promoting."
Steve Bergsman is a freelance writer in Arizona and author of several books. His latest book, "Growing Up Levittown: In a Time of Conformity, Controversy and Cultural Crisis," is now available for sale on Amazon.com.
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