Mortgage Lenders Sought for Indians
.c The Associated Press
By PHILIP BRASHER
WASHINGTON (AP) -- Melvin Lee wants a house so badly he would help build it himself, but no bank will lend the money. The problem is not his income, but where he lives: an American Indian reservation.
Banks will not make mortgages on Indian land. The government paperwork can take months, appraisals are hard to get and the land's special legal status makes it difficult to foreclose on delinquent loans. Thus, thousands of American Indian families cannot buy a house even if they can afford to pay for one.
That could change under a Clinton administration plan to lure lenders to reservations by offering to guarantee and buy home loans. The idea will be tested first at two South Dakota reservations, Pine Ridge and Lower Brule, that are among the poorest areas in the country.
''I like what I see. I think this will work,'' said Lee, a resident of Pine Ridge, where an estimated 4,000 families need homes.
Lee, who makes $19,000 year working for the Oglala Sioux tribal government, lives in a mobile home he is buying. Mobile homes depreciate quickly, and Lee's is so drafty that it costs $200 a month to heat in the winter. But for reservation residents who are lucky enough to own a home at all, a mobile home often is the only option.
The problem is this: Most Indian land is held in trust by the federal government and cannot be pledged as collateral. A mobile home is easy to finance. The lender can haul it away if the buyer defaults. A house is another matter.
Under the administration's plan, the government, not the banks, will assume the risk for bad loans. The Department of Housing and Urban Development will guarantee the loans and, through its Ginnie Mae subsidiary, buy the mortgages from private lenders. HUD also has provided money to put in electricity and other infrastructure, so buyers do not have to pay for them.
Tribes and their members, meanwhile, will get first crack at buying foreclosed property, so there is little risk of reservation land winding up in the hands of non-Indians, a critical issue for tribes.
''We'll make it work here,'' HUD Secretary Andrew Cuomo, who visited both South Dakota reservations in August, said in an interview. ''If it works here it will work on the other reservations.''
The need is virtually limitless. Forty percent of Indian housing nationwide is considered substandard, compared with less than 6 percent elsewhere, and 21 percent is overcrowded, according to the National American Indian Housing Council. The council says 200,000 housing units are needed nationwide for Indians.
The Oglala Sioux have 1,000 people on a waiting list for tribal housing, and many others have given up. In many cases, three or four families share a single house. ''If I had 3,500 homes I could fill them in two days,'' said Paul Iron Cloud, who runs the tribal housing authority.
There still is the problem of making the mortgage payment. Unemployment on the Pine Ridge reservation reaches 85 percent during parts of the year, according to the tribe.
''Private financing is not going to be a solution to all of that tribe's problems,'' said Chris Boesen, executive director of the Indian housing council.
HUD's project aims to make the housing as cheap as possible. Payments could be as low as $100 a month, according to lenders, and buyers may be asked to help with the construction, as is done with Habitat for Humanity projects.
Two major mortgage companies, Norwest Mortgage and Countrywide Home Loans, will help the Oglala Sioux set up a tribally run lending agency to work directly with borrowers. Norwest and Countrywide Home Loans will service the loans initially, then sell them to Ginnie Mae. A Countrywide official said standards for borrowers will be eased to help more people qualify for mortgages.
Lee, who is trained as a cabinet maker, is eager to attend a homebuyers' fair later this month at which tribal members will get a chance to talk directly to lenders. But he said the project can only help so much.
''It would be good if we're all able to have affordable housing, but it isn't reality because we don't have jobs here,'' he said.
AP-NY-09-21-98 0138EDT
Copyright 1998 The Associated Press. The information contained in the AP news report may not be published, broadcast, rewritten or otherwise distributed without prior written authority of The Associated Press.
|
