Indian Country Homeownership · 2020. 11. 17. · Volume and success matter to increased lender...
Transcript of Indian Country Homeownership · 2020. 11. 17. · Volume and success matter to increased lender...
#RuralResearchSymposium
Indian Country Homeownership
Kris Rengert (Discussant), James Colombe, Miriam Jorgensen and Krystal Langholz
#RuralResearchSymposium
Indian Country Homeownership
James Robert Colombe, Project Manager, Center for Indian Country Development
3 #RuralResearchSymposium#RuralResearchSymposium
TITLE STATUS REPORTS AND INDIAN
COUNTRY HOMEOWNERSHIP
James ColombeProject Manager, Center for Indian Country Development
November 9, 2020
Minneapolis, MN
#RuralResearchSymposium
4 #RuralResearchSymposium
CENTER FOR INDIAN COUNTRY DEVELOPMENT: MISSION AND VISION
Mission: The Federal Reserve System’s Center for Indian Country Development (CICD) advances Indigenous
economic outcomes through high-quality research, coalition building and policy development.
Vision: Leveraging research and relationships to unlock the full economic potential of Indian Country
WHAT IS CICD?
5 #RuralResearchSymposium
WHY TRIBAL HOMEOWNERSHIP?
• Demand: Need for homes, desire for homeownership
• Capacity: Improved income and credit scores
TRIBAL HOUSING AND HOMEOWNERSHIP
6 #RuralResearchSymposium
THE HIGHER PRICE OF MORTGAGE FINANCING FOR NATIVE AMERICANS
• CICD working paper by Dr. Donna Feir and Laura Cattaneo
• Do Native Americans face higher-priced financing than other populations?
• Research: Examine HMDA first-lien home purchase loan data
• “High-priced loan” = interest rate 1.5 percentage points greater than
APOR (“rate spread”)
• What proportion of Native American loans are high-priced?
• What is the rate spread for those loans?
TRIBAL HOUSING AND HOMEOWNERSHIP
7 #RuralResearchSymposium
TRIBAL HOUSING AND HOMEOWNERSHIP
PROPORTION OF LOANS WITH A RATE SPREAD GREATER THAN OR EQUAL TO 1 .5
8 #RuralResearchSymposium
TRIBAL HOUSING AND HOMEOWNERSHIP
AVERAGE RATE SPREAD IF LOAN HAS SPREAD GREATER THAN OR EQUAL TO 1 .5
9 #RuralResearchSymposium
TRIBAL HOUSING AND HOMEOWNERSHIP
PROPORTION OF LOANS WITH A RATE SPREAD GREATER THAN OR EQUAL TO 1 .5
10 #RuralResearchSymposium
TRIBAL HOUSING AND HOMEOWNERSHIP
AVERAGE RATE SPREAD IF LOAN HAS SPREAD GREATER THAN OR EQUAL TO 1 .5
11 #RuralResearchSymposium
TRIBAL HOUSING AND HOMEOWNERSHIP
2018 MORTGAGE INTEREST RATE BY QUINTILE
12 #RuralResearchSymposium
TRIBAL HOUSING AND HOMEOWNERSHIP
2018 MORTGAGE INTEREST RATE BY QUINTILE –MANUFACTURED HOMES
13 #RuralResearchSymposium
SHORTENING THE TSR T IMELINE: A PROPOSAL TO END DELAYS THAT HINDER NATIVE HOMEOWNERSHIP
• TSRs, required for mortgages on tribal trust land, are often delayed
• Long TSR timelines hinder homeownership in Indian Country
• Solutions should center on accountability, electronic access, and best practices
TITLE STATUS REPORTS
14 #RuralResearchSymposium
WHAT IS A TSR?
• Over 50 million acres of tribal trust land is managed to some extent by the U.S. Department of the Interior’s
Bureau of Indian Affairs.
• TSRs cover legal descriptions, liens, transactions, and all other supporting documents for a tract of tribal
trust land. The BIA describes TSR functions as “similar to recording at a Country Recording Office.”
• Three kinds of TSRs: informational; first certified; and final certified.
TITLE STATUS REPORTS
15 #RuralResearchSymposium
TITLE STATUS REPORTS AND HOUSING
• First and final certified TSR delays delay private mortgages and federal homeownership programs for Native
Americans on trust land.
• The Federal government has acknowledged the problem in the context of home mortgage finance since the
1990s.
• Current system lacks equity in land title records and bureaucracy for Native Americans.
TITLE STATUS REPORTS
16 #RuralResearchSymposium
HOW TO SOLVE THE PROBLEM
• Preserve success within the BIA. Expand best practices where possible.
• Require regular reporting on TSR-processing timelines
• Bring all BIA offices into compliance with existing timelines and consider statutory deadlines for title
recording.
TITLE STATUS REPORTS
17 #RuralResearchSymposium
HOW TO SOLVE THE PROBLEM
• Create an electronic portal for residential mortgage packages to provide certainty and efficiency to
borrowers and lenders.
• Create an interagency report card, with regular updates, to spur collaboration between tribes and federal
agencies, build a foundation for accountability, and help identify solutions to trust land title issues for
residential mortgages.
• Consider a centralized mortgage-processing center
TITLE STATUS REPORTS
18 #RuralResearchSymposium
ACKNOWLEDGEMENTS
• Dr. Donna Feir and Laura Cattaneo
• External partners for conversations on TSR issues
• Fort Belknap Indian Community Councilman Nate Mount, who testified about TSR delays at a Senate
Committee on Indian Affairs hearing
CONCLUSION
#RuralResearchSymposium
Mortgage Lending on South Dakota’s Indian Trust Land:A Survey of Lenders
Miriam Jorgensen, Research Director, Native Nations Institutein collaboration with Hope Nation, Inc.
20#RuralResearchSymposium
Agenda
The study01
Perceived barriers02
Attracting borrowers03
Serving borrowers04
Federal programs05
Conclusions & Recommendations06
21#RuralResearchSymposium
• Motivated by ongoing feedback from the field about lender knowledge
• Outreach to commercial, institutional, and practitioner lenders working in South Dakota but not necessarily lending on trust land
• 18 responses
• Most questions had between 11 & 15 usable responses
• Indicative, not large enough sample for statistical confidence; we have to start somewhere
The Study
22#RuralResearchSymposium
Perceived Barriers to Lending
Our institution’s issue is a lack of qualified applicants….
Instead of complaining, we need to step in and try to understand and work towards understanding.
24#RuralResearchSymposium
Attracting Borrowers
Connecting with qualified applicants:
• Collaborate with CDFIs, TDHEs, other community partners
• Establish a presence on/near Indian lands, create real relationships
• Use social media and other location-relevant media
• Ask for referrals and recommendations
• Senior management commitment, specific lending goals
Serving Borrowers
Overcoming the challenges of
• Conducting appraisals of property
on trust lands
• Obtaining Title Status Reports for
trust land parcels
• Underwriting
• Managing risk
26#RuralResearchSymposium
Lender information / training needsServing Borrowers:Identified Lender Info Needs
27#RuralResearchSymposium
Federal Programs
Conclusions & Recommendations
Volume and success matter to
increased lender participation.
“The ability to generate a profit is
necessary. Serving the greater good for
housing in Indian Country is important as
well, so profitability doesn’t need to match
other lines of business necessarily.”
Conclusions & Recommendations
Knowledge and relationships
are necessary for improved
lender performance.
“Be available to help them through a
hard time. Give them the ability to trust
you and to come to you when an issue
first comes up.”
Conclusions & Recommendations
Creative thinking and
innovation may be needed to
address funding gaps.
“I don’t think lenders should partially
commit, if they want to do this type of
lending it takes a real commitment and
that may take a lot of time and money.”
31#RuralResearchSymposium
Ongoing progress
requires diverse
contributions—from:
• Native CDFIs
• Allies
• Tribes
• Commercial and
institutional lenders
• The federal government
Conclusions & Recommendations
32#RuralResearchSymposium
Check out the report!
Research and report produced in
partnership with Hope Nation LLC.
For more information contact:
Thank you!
#RuralResearchSymposium
Opportunities and Challenges for Native CDFI Housing LendersInnovative Mortgage Lending Solutions in Native Communities
Krystal Langholz, Chief Operating Officer, Oweesta Corporation
34#RuralResearchSymposium
What is a Native CDFI?
• Currently, there are 69 Native Community Development Financial Institutions certified by the US
Treasury and they include: 5 Banks and/or Holding Companies, 7 Credit Unions, and 57 loan
funds
• Must be representative of their community, provide development services, and lending products to
serve the needs of their community
35#RuralResearchSymposium
Driving Research Questions
1. How are Native CDFIs currently serving housing needs in their communities? Where do they want to go in the future?
2. What are their structural barriers that impede that movement and how can we remove them, specifically focusing on secondary market access?
36#RuralResearchSymposium
Methodology of Study
1. Native CDFI Housing Survey (30 Native CDFI Loan Fund Participants who either want to do housing lending (13) or currently provide housing products (17))
2. Key Informant Interviews (14 Native CDFI Participants)
3. Housing Advisory Board (10 Native CDFI Participants)
37#RuralResearchSymposium
Native Mortgage Lending Market
• Between 1994-2015, only 10% of HUD 184 lending was done on tribal trust lands
Native CDFI Loan Funds
• Last year, 79% of their reported lending for housing was done on tribal trust lands
Why Do Native CDFIs Matter to Mortgage Lending in Native Communities?
In 2018, 40% of Native CDFI surveyed wanted to add a housing product in the next year;
Annual loan volume growth for Native CDFI housing lenders from 2019 to 2020 was 89%
We can identify the needs of our clients and community. We can relate it to the culture and we work them on an individual level.”
Native CDFI Executive Director
39#RuralResearchSymposium
Current Native CDFI Housing Activities
• Approximately $13MM in housing lending last year reported by the 17 housing lenders who
participated in the survey
• 67% of Native CDFIs that provide housing products do mortgage lending; and,
• In survey, capital is by far the largest challenge to homeownership lending and yet only 20% of
Native CDFIs say that they “feel confident” in their knowledge about the secondary market
40#RuralResearchSymposium
Current Housing Loan Products Mortgage Products and Services
Current Products
67%
60%
40%
33%
20% 20% 20%
13%
7%
89%
56% 56% 56% 56%
11%
CDFI Loan Package HUD184 Package USDA502 Package VA-NADL Package forConventional
Lender
LIHTC
41#RuralResearchSymposium
Housing Goals of Native CDFI Housing Lenders
71%
57%
30%
29%
43%
40% 10% 10% 10%
Current
Next Year
Ultimate Goal
Current Structure and Goals
Portfolio Lender Mortgage Broker Correspondent Lender Direct Seller (without servicing) Direct Seller (with servicing)
42#RuralResearchSymposium
Barriers
62%
46%
46%
46%
46%
23%
8%
Qualified Homeowners
Housing Stock
Infrastructure Needs
Lack of Qualified Staff
NMLS Licensing
Down Payment and Closing Costs
Lack of Data and Research for Home Lending
Barriers Will Need to Address to Achieve One-Year Goal(s)
43#RuralResearchSymposium
• Those who are “no”, plan to stay portfolio
lenders
• Described barriers consisted of:
– Gaps in underwriting criteria in portfolio loans
to conforming products
– Insurance and licensing requirements
– MOUs with tribe
The Secondary Market
Yes, 67%
No, 33%
Are you interested in participating in the secondary market?
44#RuralResearchSymposium
How Large Is the
Underwriting Gap, then?
CDFI NAME: HUD Section 184 USDA 502 Guarantee USDA 502 DirectVA Native American
Direct Loan Fannie Mae HomeReadyFreddie Mac
HomePossibleFirst Mortgage
(6 CDFIs)
Loan Features
Income Limits None < 115% AMI < 80% of AMI No < 80% of AMI < 80% AMI
None, 125% NAHASDA AMI
Maximum Loan Amount Based on county limits None Based on county limits Based on county limits $510,400 $510,400 150K-225K
Downpayment Assistance Requirement
1.25% (<$50k) 2.25% (>$50k) None None None 3% 3%
none-1%, $5K
Maximum Loan to Value (LTV)
98.75% (<$50k) 97.75% (>$50k) 100% 100% 100% 97% 97%
90%-100%
Maximum LTV for Refinance97.75% (or 85% for
cash out) 100% 100%, no cash back99.5%, can only refinance
NADL97% (or 80% for cash
out) 97%
95%-100%,1 does not offer
Cash Out with Refinance? Y Y Y Y Y Y 4 Yes, 2 No
Manufactured Housing Terms?
New/Existingon permanent
foundation
New w/permanentfoundation
New w/ permanentfoundation; Approved
Dealer- Contractor
New w/ permanentfoundation; Approved
Dealer- Contractor
Guidelines tighter, 95% max CLTV
Yes 5 Yes, 1 No
Debt-to-Income Ratios (front/back end)
41 29/41Very Low Income 29/41;
Low Income 33/4141 Up to 50 DTI in DU 45
28-29 / 38-43, use HUD, case by
case
Origination Fee
1.5%, .25% annual premium
1%, .35% annual premium None 1.25%Cancellable mortgage
insuranceCancellable mortgage
insurance1-2% of Loan
Credit Score Requirements
Good Credit(alternative creditsources allowable)
Good Credit >640 (alternative credit sources allowable)
Good Credit(alternative creditsources allowable)
Good Credit 620 660600, HUD, none (no
collections / no delinq)
Able to Finance Closing Costs?
Yes Yes Yes Yes Yes Yes Yes
Title Insurance Required? No No No No No ? 4 Yes, 2 No
#RuralResearchSymposium
How then can we support this emerging market?
46#RuralResearchSymposium
Training Needs
(Ranked by Order of Importance)
1. Capitalization for Housing
2. Housing Loan Product Underwriting
3. Mortgage Licensing Training
4. Navigating the Loan Construction Process
5. Becoming a HUD 184 Approved Lender
Technical Assistance Needs (Ranked by Order of Importance)
1. Share and Produce Best Practices in Home Lending with Case Studies
2. Create Cohort for those Seeking Mortgage Certifications
3. Business Planning Support Housing Products
Capacity Building Support Needs for Secondary Market Access
If you want to engage the secondary market, you have to dedicate all your energy and focus and resources into this. It’s not easy; it’s not cheap.”
Native CDFI Executive Director
Thank You