Guide to Mortgage Lending in Indian Country, Study notes of Law

Download Guide to Mortgage Lending in Indian Country and more Study notes Law in PDF only on Docsity! 1 Guide to Mortgage Lending in Indian Country Table of Contents Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Part I — Operating in Indian Country . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Who is an Indian or a Native American? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 What is an Indian tribe? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 What is Indian country? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 What is Indian land? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Can banks make mortgage loans on Indian land? . . . . . . . . . . . . . . . . . . . . . . . . . 6 Individual trust or restricted land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Tribal trust land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Fee simple land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 What is tribal sovereignty? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 What is sovereign immunity? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Which courts have civil jurisdiction in Indian country? . . . . . . . . . . . . . . . . . . . 9 What does the Native American Housing Assistance and Self-Determination Act of 1996 mean for financial institutions? . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Part II — Residential Mortgage Lending Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 The Lending Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Pre-purchase counseling. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Origination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Processing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Appraisals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Title status. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Title insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 BIA approval process. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Underwriting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Second review programs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Recording the lien. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Portfolio Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Homeowner’s counseling for delinquent or defaulting borrowers. . . . . . 17 Foreclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Part III — Types of Mortgage Loan Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Direct Mortgage Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 2 Department of Housing and Urban Development . . . . . . . . . . . . . . . . . . 19 Office of Native American Programs -- Section 184 . . . . . . . . . . . 19 Department of Veterans Affairs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 VA Direct Home Loans for Native American Veterans Living on Trust Lands . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 VA Loan Guarantee Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Department of Agriculture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Rural Housing Service — Rural Housing Native American Pilot Loan Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Federal Home Loan Bank System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 FHLB Affordable Housing Program . . . . . . . . . . . . . . . . . . . . . . . 22 AHP Homeowner Set-Aside . . . . . . . . . . . . . . . . . . . . . . . 23 FHLB Community Investment Program . . . . . . . . . . . . . . . . . . . . 24 Secondary Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Fannie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Freddie Mac . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Part IV — Compliance Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Fair Lending Statutes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Types of lending discrimination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Overt evidence of discrimination. . . . . . . . . . . . . . . . . . . . . . . . . 27 Evidence of disparate treatment. . . . . . . . . . . . . . . . . . . . . . . . . . 28 Risk- and cost-based pricing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 Community Reinvestment Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 Appendixes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 Cherokee Nation v. Georgia, 30 U.S. (5 Pet.) 1, 17 (1831).1 61 Fed. Reg. 58,211-02 (1996). This list is posted on BIA’s website at http://www.doi.gov/bureau-2 indian-affairs.html. 18 USC § 1151.3 25 CFR § 151.2(d).4 25 CFR § 151.2(e).5 5 tribes as “domestic dependent nations” with governmental authority over their members1 and their territory. Under federal law, the Secretary of the Interior maintains a list of Indian tribes that are recognized by the United States as governments. 2 What is Indian country? The definition of “Indian country” has changed over history, but the term generally is used today to describe collectively Indian territory throughout the United States. Congress has defined “Indian country” as land inside the boundaries of Indian reservations, communities made up mainly of Indians, and Indian trust and restricted land. 3 What is Indian land? “Indian land” is any restricted or trust land, even if such land stands outside of reservation boundaries. “Trust land” means land the title to which is held in trust by the United States for an individual Indian or a tribe. “Restricted land” means land4 the title to which is held by an individual Indian or a tribe and which can only be alienated or encumbered by the owner with the approval of the Secretary of the Interior because of limitations contained in the conveyance instrument pursuant to federal law or because of a federal law directly imposing such limitations.5 Land ownership on Indian reservations includes individual trust or restricted land, tribal trust land, and fee simple land, each of which presents different issues for lenders. Reservations that are a mosaic of Indian and non-Indian owned land are sometimes referred to as “checker board” reservations. C Individually owned lands are of two kinds: (1) Trust land — The federal government holds legal title but the beneficial interest remains with the individual Indian. (2) Restricted fee land — An individual Indian holds legal title but with legal restrictions against alienation or encumbrance. 25 USC § 483a.6 An “allotment” is land that was removed from tribal ownership and given to individual members of7 the tribe by the federal government during the late nineteenth and twentieth centuries. Today, this land is generally held by the descendants of the “allottee” as individual trust or restricted land. 6 C Tribally owned lands are of three kinds: (1) Trust land — The federal government holds legal title but the beneficial interest remains with the tribe. (2) Restricted fee land — The tribe holds legal title but with legal restrictions against alienation or encumbrance. (3) Fee land purchased by tribes — The tribe acquires legal title under specific statutory authority. However, by operation of law, the title becomes restricted because, without the consent of Congress, it cannot be alienated and, without the consent of the Secretary of Interior, it cannot be encumbered. C Fee simple land (1) Some reservations include fee simple land — that is, land whose title is held absolutely by the owner, without restriction, in the same way that lands are generally held throughout the United States. Can banks make mortgage loans on Indian land? Yes, under certain circumstances. Generally, banks secure mortgage loans with ownership or leasehold interests in real property. In Indian country, the United States often holds the title to land in trust for an Indian tribe or an individual Indian, and such lands are referred to as trust lands. Tribal trust lands may be leased in accordance with federal law, but may not be mortgaged or sold. Lenders may obtain mortgages with ownership or leasehold interests in real estate as security for loans involving individual Indian trust lands in accordance with federal law. Because federal law treats tribal and individual trust lands differently, a bank must know the status of the land in order to determine how it can obtain a security interest. Individual trust or restricted land Real property held in trust or restricted status by the federal government for individual tribal members may be mortgaged with the approval of the Secretary of the Interior, and may be subject to lien and foreclosure. In 1956, Congress explicitly authorized6 mortgages and foreclosures of individual allotments 7 “to encourage individual Indian landholders to utilize commercial credit to the maximum extent possible,” to encourage the extension of that credit by Northwest S.D. Prod. Credit Ass’n v. Smith, 784 F.2d 323, 326 (8 Cir. 1986), quoting S. Rep. No.8 th 1647, 84 Cong., 2d Sess., reprinted in 1956 U.S.C.C.A.N. 2304-05.th 25 USC § 177.9 25 USC § 415(a) and 25 CFR part 162.10 7 reassuring lenders that they could obtain foreclosurable first mortgages on trust lands, and to clarify that the federal government would not be a necessary party or retain any claim to the land after a foreclosure sale.8 The law clearly states that individual trust or restricted land can be mortgaged, and, with the consent of the Secretary of the Interior, can be sold to a person who is not a member of the tribe if foreclosure is inevitable or the property cannot be transferred within the tribe. The non-tribal member would receive a fee simple interest in the land. To obtain the Secretary’s consent, a bank must gain the approval of the BIA, a process described in part II of this guide. However, Native Americans with individual trust or restricted lands may be reluctant to mortgage their land because, in the event of foreclosure, the land leaves its trust or restricted status and could leave Indian ownership. In order to avoid this problem, a holder of individual or restricted trust land may prefer to use a leasehold interest as collateral instead of the land itself. Using a leasehold interest as collateral for a mortgage also requires Secretarial approval, as described below in the “Tribal trust land” section. Individual trust or restricted land is often conveyed to the descendants of allottees. The number of undivided interests in the resulting tenancy in common may sometimes make it difficult for lenders to negotiate a mortgage. For more information on how to overcome problems of “fractionalization,” banks should contact the tribe or nearest BIA area office. A list of the BIA area offices is included in appendix B of this guide. Tribal trust land Because federal law generally prohibits a lender from obtaining a mortgage on real property held in trust by the federal government for an Indian tribe, tribal trust and9 restricted lands present the greatest challenge to extending credit. But these legal barriers are not insurmountable. Loans secured by leasehold interests in tribal trust or restricted lands are permissible. Where a tribe has developed a program in which it executes a lease as a lessor, an individual can offer as collateral a leasehold interest in either tribal or individual trust or restricted land, subject to approval of the BIA. While some tribes are authorized by10 Resource Directory, 1 Indian Hous. L.Q. 44 (1996). The Tribal Housing Code is published as part21 of the “Our Home” series under the title “Providing the Legal Infrastructure Necessary for Private Financing.” To obtain copies, contact your local ONAP office, listed in appendix C of this guide. Pub. L. No. 104-330, 110 Stat. 4016 (codified at 25 U.S.C. § 4101 et seq. and in scattered sections22 of 42 U.S.C.). 25 USC § 4131(a)(5).23 10 jurisdiction over civil claims. Despite tribal courts’ exclusive jurisdiction over civil claims, some tribal governments have not yet adopted laws governing mortgage lending and foreclosure. In dealing with these governments, a bank may wish to help the tribe, the tribal court, and the tribe’s counsel to enact laws facilitating private mortgage lending on the reservation. The National Indian Justice Center and the Department of Housing and Urban Development’s (HUD) Office of Native American Programs (ONAP) have published a comprehensive Tribal Housing Code, including foreclosure procedures, required by the21 Section 184 Loan Guarantee Program. (See part III of this guide for further discussion of this program.) The code serves as a model to address issues that commonly arise in lending to Native Americans and to help tribal leaders make the choices needed to create the legal infrastructure necessary for private financing in Indian country. What does the Native American Housing Assistance and Self-Determination Act of 1996 mean for financial institutions? The Native American Housing Assistance and Self- Determination Act of 1996 (NAHASDA) will likely change the landscape of affordable22 housing in Indian country. Rather than receiving public housing assistance in a piecemeal fashion under a number of programs, Indian tribes will receive a single, needs-based block grant. The NAHASDA, which becomes effective October 1, 1997, separates Indian housing assistance from public housing assistance. One of its major objectives is to promote the development of private capital markets in Indian country and to allow such markets to operate and grow.23 The Secretary of HUD, through ONAP, will implement NAHASDA. Each fiscal year, the HUD Secretary will make block grants to Indian tribes that have submitted Indian housing plans that comply with the requirements of the program. With the block grant funds, recipient tribes will have the flexibility to design new programs, continue existing programs, and leverage additional housing resources through public-private partnerships with private lenders. 25 USC § 4132.24 See 62 Fed. Reg. 35,718 (July 2, 1997) (proposing rules to be codified at 24 CFR parts 950, 953,25 955, 1000, 1003, and 1005). 25 USC § 4116(b)(1).26 11 The block grants may be used for eligible affordable housing activities, which include: C Indian housing assistance (modernization or operating assistance for housing previously developed or operated pursuant to a contract between HUD and an Indian housing authority); C Acquisition, new construction, reconstruction, or moderate or substantial rehabilitation of affordable housing; C Housing-related services for affordable housing, such as housing counseling, establishment of resident organizations, or energy auditing; C Management services for affordable housing, including loan processing, inspections, and management of affordable housing projects; C Safety, security, and law enforcement measures and activities appropriate to protect residents of affordable housing from crime; and C Housing activities under model programs designed to carry out the purposes of the act and specifically approved by HUD.24 HUD recently issued proposed rules to implement NAHASDA. The act provides that25 final regulations must be issued by HUD not later than September 1, 1997, to become effective October 1, 1997.26 12 Part II — Residential Mortgage Lending Process Making mortgage loans in Indian country is like making mortgage loans anywhere else, with a few exceptions. This section provides a guide to those exceptions. (Because banks often use government-guaranteed programs to lend in Indian country, they will need to understand the specific requirements of the loan program. General information about some of these programs is included in part III of this guide.) The Lending Process Mortgage production usually proceeds in four phases: origination, processing, underwriting, and closing. Before the application process begins, a bank should consider whether a consumer needs pre-purchase counseling. Pre-purchase counseling. Many Native American mortgage loan applicants living on a reservation are first-time home buyers who may not be familiar with the mortgage lending process in general, the requirements of a specific lender, or the various types of loans or loan guarantee programs available. According to many financial institutions, customer education is a key to lending successfully in Indian country. To facilitate the homebuying process, a bank may sometimes recommend that the applicant obtain homeownership counseling. A bank that does not counsel applicants in- house may arrange with qualified third parties to supply such training. Some of the topics that may be addressed in a pre-purchase homeownership counseling program include: C What information a lender considers when an applicant applies for a mortgage loan; C How an applicant can determine whether he or she is likely to qualify for financing; C What financing options are available and which option(s) would be most suitable for the applicant; C What barriers might exist that could prevent the applicant from qualifying, how to overcome the barriers, and whether there may be nontraditional financing programs for which the applicant may qualify; C How to select a home that is suitable for the applicant’s needs and financial means; 25 CFR §§ 152.34 and 162.12.31 25 USC § 483a and 25 CFR § 152.34.32 15 interest in Indian land. However, several title insurance companies are developing title insurance policies and underwriting standards for such loans. Fannie Mae has worked with title insurance companies to help them develop local programs. To obtain information about these companies, banks may contact Fannie Mae at (202) 752-7407. BIA approval process. If a mortgage loan to an Indian is secured by interests in trust or restricted Indian land, it must be approved by the BIA. BIA approval is not necessary for31 mortgages secured by fee simple land, even if it is located on a reservation, unless the fee simple land is owned by a tribe. The BIA is streamlining and standardizing this approval process, which currently varies by region. The BIA area offices can answer questions about how the approval process works in their areas, specifically whether a bank should initiate the approval process with the area or agency office and whether the tribe maintains its own realty files. Generally, the bank must submit the mortgage loan documents to the BIA area director or agency superintendent with jurisdiction over the property. Items the area director or agency superintendent may require include the following: mortgage or deed of trust; promissory note and security agreement; appraisal; evidence of title (TSR or abstract of title); and the borrower’s loan application, credit report, and income verification. If the applicant is a self-employed businessperson, the area director or agency superintendent may also request the company’s financial statements and business plan. To approve the mortgage, the area director or agency superintendent must be reasonably certain that the applicant has the repayment capacity to avoid default and foreclosure. The BIA may also appraise the subject property to ensure that the borrower is not over- collateralizing the loan. BIA approval benefits the bank by removing restrictions against encumbrances that otherwise apply to property held in trust or restricted status for an individual. As a result,32 the bank will have authority to foreclose and take possession of the property interest upon the default of the borrower. The property interest in individual trust or restricted land could be the land itself or a leasehold. If it is tribal land, the property interest will be a leasehold, not the land itself. Failure by the bank to obtain BIA approval of the loan contract renders it void. Underwriting. Underwriting involves evaluating whether the prospective borrower qualifies for the requested mortgage. Underwriters employ the bank’s guidelines or those 16 of the mortgage program in which the bank participates, e.g., one extending a federal government guarantee. Underwriters generally analyze loan applications by reviewing what are traditionally called the “four C’s of credit.” They are: the borrower’s credit history, character (job stability and reliability), capacity to repay a loan, and collateral (condition and value of property). Collateral is the area that presents the most complexities for lenders extending mortgage loans in Indian country. The ability to use Indian trust land as collateral depends on whether the land is held in trust for the tribe or the individual, as described in part I of this guide. Although holders of individual trust land or individual restricted fee land can mortgage their land directly or use a leasehold interest as collateral, neither tribal trust land nor tribal restricted fee land can be mortgaged directly. The tribe must issue a leasehold interest to the borrower, who uses that interest as collateral. Fee simple land held by an individual on an Indian reservation can be mortgaged in the same manner as privately owned land outside of the reservation. In addition to taking interests in land to secure mortgage loans, national banks may secure a loan with other property interests, such as proceeds from land leases or natural resources, or interest income from trust funds held in tribal accounts by the BIA. Whether the collateral interest is in land or other property, underwriting standards should emphasize the borrower's ability to repay the loan from cash flow or net income rather than the sale of collateral. When the bank offers a low introductory interest rate, prudent underwriting analyzes repayment capacity at the end of the introductory rate term. To increase efficiency, reduce costs, and expedite application decisions, many banks are using credit scoring tools for electronic evaluation of loan applicants. Such banks should recognize these tools’ limitations, i.e., they may be unable to assess the creditworthiness of applicants who do not fit typical profiles — such as first-time homebuyers on Indian reservations. Second review programs. Many banks are implementing second review procedures to assure themselves and the mortgage loan applicants that every effort has been made to qualify each applicant. Such programs, which may be very useful in Indian country, examine for a second time the characteristics and circumstances of applicants recommended for denial after an initial review. Internal or external panels can help the bank seek ways of approving these loans. Banks usually establish strict criteria for applicants afforded a second review. Closing. After a loan is approved, the final phase is to close the loan, i.e., to disburse loan proceeds and to receive executed loan documents evidencing the borrower’s debt and the bank’s security interest in collateral. See also OCC Advisory Letter 97-3, issued March 7, 1997, on effective credit underwriting33 standards and portfolio credit risk management; and OCC Advisory Letter 97-7, issued July 23, 1997, on affordable mortgage portfolios. 17 Recording the lien. When a bank makes a loan secured by an interest in Indian land, the bank will require the borrower to execute a deed of trust, a mortgage, or other similar lien document. According to the BIA, once it approves these documents in the process described above, the bank has a valid lien. To further protect its interest, a bank should record the lien document along with the note with the county records office, tribal realty office, the BIA Land Title and Records Office, and the BIA agency office having jurisdiction over the land. Portfolio Management When the production phase is over, the bank should monitor and service its Indian mortgage portfolio in the same manner it manages its other real estate portfolios. Monitoring minimizes the effect that underperforming or defaulted loans could have on the bank’s profitability. Programs that review the borrower's financial condition annually (or at other regular intervals) will help to spot potential repayment problems before a crisis occurs. Effective loan monitoring to minimize delinquencies is particularly important when lending in Indian country. Government guarantee programs, which are often used in this market, may have more liberal lending standards than conventional programs. For example, some permit higher loan-to-value ratios, higher debt-to-income ratios, or lower requirements for savings on hand. To minimize delinquencies and foreclosures, some banks have adopted “enhanced” or “accelerated” servicing programs in which they closely monitor loans meeting relaxed credit criteria. If such loans become delinquent, the bank can immediately start working with the borrower.33 Homeowner’s counseling for delinquent or defaulting borrowers. If a borrower is slow in making payments or has missed a payment, the bank may consider providing credit counseling to the borrower. The counseling program should describe the options, programs, and actions available to the borrower for resolving the delinquency or default. The bank may provide this counseling itself or direct the borrower to a third party. Typically, the same agencies that counsel first-time homebuyers provide credit counseling. Foreclosure Because Indian tribes are sovereign nations and typically have jurisdiction over mortgage transactions, lenders must resolve most foreclosures in tribal courts. 20 C An Indian family or individual who will occupy the property as a principal residence and who has met the credit and underwriting standards specified by the program. C An Indian Housing Authority (IHA) or Tribally Designated Housing Entity (TDHE) that may borrow funds to create IHA- or TDHE-owned rental housing or to develop single-family homes for sale to eligible borrowers. C An Indian tribe that, like the IHAs or TDHEs, may borrow funds to create tribe- owned rental housing or to develop single-family homes for sale to eligible borrowers. How is the program administered? ONAP administers the Section 184 program. Individuals, IHAs, TDHEs, and Indian tribes are responsible for submitting to private lenders an application containing information on the borrower’s qualifications for mortgage financing. Before a borrower can submit an application to a private lender, a tribe must enact policies and procedures for foreclosure and eviction actions in its tribal court system. In the alternative, the tribe could name a state or county court to assume jurisdiction and enforce state or county foreclosure procedures. Tribes may coordinate the program by assisting borrowers with loan applications, leasing trust land for home sites, and providing financial assistance to borrowers. How does one apply? Native American borrowers work directly with private lenders and their tribes to apply for a housing loan. Lenders then conduct the necessary loan underwriting analysis and coordinate with HUD regarding loan approval and commitment. For more information about the HUD Section 184 program, banks or tribes may contact their local ONAP office, listed in appendix C. Department of Veterans Affairs C VA Direct Home Loans for Native American Veterans Living on Trust Lands What does the program cover? A Department of Veterans Affairs (VA) direct loan can be used to purchase, construct, or improve a home on Native American trust land. VA direct loans are generally limited to the cost of the home or $80,000, whichever is less. How are banks involved? Because the VA makes these loans directly, banks’ involvement is limited. However, in some parts of the country, VA has contracted with banks to 21 package and process VA direct home loans. For this service, the banks are paid a fee. Who can use the program? VA direct loans are available to all eligible Native American veterans who meet credit and income qualifications. Veterans who have been honorably discharged from active duty are eligible. How is the program administered? The VA administers its direct home loan program. The initial appropriation for this pilot program will support a total of $58 million worth of loans. The authority to make direct loans under this pilot program expires October 1, 1997, unless the program is extended. How does one apply? A Native American veteran must have a certificate of eligibility before he or she can apply for a VA direct home loan. A veteran who does not have a certificate can obtain one by applying to the local VA office on VA form 26-1880. To apply for a loan, the veteran should contact either the local housing authority or the local VA regional office, listed in appendix D. The VA nationwide toll-free number is 1- 800-827-1000. C VA Loan Guarantee Program Eligible veterans, including Native American veterans, may apply for loans guaranteed by the VA. The guarantee program is intended to encourage lenders to offer all veterans loans with more favorable terms. VA-guaranteed loans are made by private lenders such as banks, savings and loan associations, or mortgage companies. For more information about VA-guaranteed loans, banks can call 1-800-827-1000. Department of Agriculture C Rural Housing Service — Rural Housing Native American Pilot Loan Program What does the program cover? The Rural Housing Native American Pilot (RHNAP) Loan Program was jointly developed by the Rural Housing Service (RHS) and Fannie Mae. In this program, the RHS guarantees loans made on tribal land. The pilot is modeled after the Section 502 Guaranteed Rural Housing (GRH) loan program, which was modified to work on trust lands. The loans are 30-year fixed rate loans and can be for the purchase of existing homes or for new construction. The loan can be for 100 percent of the value of the property. Borrowers qualifying for RHNAP loans may use the funds to purchase single-family, owner-occupied, principal residences that qualify as “modest rural housing” (including units in condominiums, planned unit developments, and manufactured housing that is permanently affixed to the property). Homes must be located on tribal trust or restricted 22 fee simple lands owned by tribes. Individual allotments and unrestricted fee simple lands are not eligible. How are banks involved? Lenders who have been approved by both RHS and Fannie Mae can originate RHSAP loans. Who can use the program? Eligible borrowers include individual members of federally recognized tribes that have been approved by RHS to participate in the pilot program. There are currently 16 tribal governments that have been selected for the pilot. They are: Gila River and Navajo Nation in Arizona; San Juan Pueblo and Poaque Pueblo in New Mexico; Salish-Kootenai and Chippewa-Cree in Montana; Lac Courte Oreilles and Oneida in Wisconsin; Grand Traverse Band of Chippewa Indians and Sault Ste. Marie Tribe of Chippewa Indians in Michigan; Seminole in Florida; Cheyenne River Sioux in South Dakota; Omaha in Nebraska; Oneida in New York; Fort Mojave in Nevada; and Pala Band of Mission Indians in California. How does one apply? An eligible borrower applies directly to an RHS/Fannie Mae- approved lender. For more information about the RHNAP loan program, banks can contact the Rural Housing Services state offices, listed in appendix E. Federal Home Loan Bank System The Federal Home Loan Bank (FHLB) System is a privately capitalized, cooperative, government-sponsored enterprise created by Congress in 1932. Consisting of twelve regional FHLBs, the system’s mission is to support the residential mortgage lending and community development lending of its member-stockholders. Eligible members include commercial banks, savings institutions, credit unions, and insurance companies. The FHLB System provides economical wholesale credit and technical assistance to its members. Its member-stockholders receive an attractive and safe investment. An institution may apply for membership by contacting the FHLB in its area. A list of the FHLBs is included in appendix F. The FHLB System’s homebuyer assistance programs are available through FHLB members to all eligible borrowers, including Native Americans. The FHLB of Des Moines’ Model American Indian Partnership Project increased a tribal entity’s funding options by making it an FHLB nonmember borrower. For more information about this pilot program, contact the FHLB of Des Moines. C FHLB Affordable Housing Program 25 Fannie Mae is a federally chartered private corporation with the public mission of promoting housing for all Americans by attracting investment capital into mortgage lending. Fannie Mae has been actively working with a variety of partners, the BIA, and a number of Indian tribes to increase mortgage financing opportunities for Native Americans. What loans will Fannie Mae buy? Fannie Mae will buy the following loans: C Permanent loans guaranteed by HUD under the Native American Housing Loan Guarantee Program (Section 184). C Section 184 construction/permanent loans. (There is a single closing for the construction/permanent mortgage loan, with a single interest rate.) C Loans made under the Native American FHA Mortgage Insurance Program (HUD 248), including both permanent and construction/permanent loans. These loans are insured by the FHA under section 248 of the National Housing Act. C Section 502 Guaranteed RHS loans under the Rural Housing Native American Pilot. These loans will be available for selected tribes working in partnership with Fannie Mae and RHS. C Conventional loans for Native Americans living on trust or restricted lands under a Fannie Mae Native American Conventional Lending Initiative. A tribe’s separate approval is required for participation. What lenders may sell loans to Fannie Mae? A lender must be approved as a Fannie Mae seller/servicer in order to sell loans to Fannie Mae. To obtain approval or more information about Fannie Mae’s Native American loan purchase programs, lenders should contact their Fannie Mae lead regional office. Fannie Mae regional offices are listed in appendix G. Freddie Mac Freddie Mac is a federally chartered private corporation established by Congress in 1970 to create a continuous flow of funds to mortgage lenders in support of homeownership and rental housing. Freddie Mac is also working to increase lending to Native Americans in Indian country. What loans will Freddie Mac buy? On a negotiated basis, Freddie Mac will purchase the following eligible mortgage loans: C Fifteen-, twenty-, and thirty-year mortgage loans made under the HUD Section 184 26 Indian Housing Loan Guarantee Program for one- to four-unit dwellings located on both fee simple and restricted lands. C Fifteen-, twenty-, and thirty-year mortgage loans originated for Native American, Indian tribe, Alaskan Native, and New Mexican Pueblo homebuyers under the FHA Section 248 Native American Mortgages Program. These mortgage loans may only be made on properties located on Indian reservations and other restricted lands, not on lands owned in fee simple. What lenders may sell loans to Freddie Mac? Any lender approved by Freddie Mac. Banks wishing to request an eligibility package may call 1-800-FREDDIE (373-3343) or contact the main office at 8200 Jones Branch Drive, McLean, Virginia 22102. 15 USC § 1691 et seq.34 42 USC § 3601 et seq.35 See also Policy Statement on Discrimination in Lending, 59 Fed. Reg. 18,266 (1994).36 27 Part IV — Compliance Issues Banks must comply with all consumer protection statutes applicable to residential lending when they make home loans secured by interests in Indian land. The OCC’s Comptroller’s Handbook booklets on consumer compliance examination provide more detailed information about consumer protection laws. The fair lending statutes, the Equal Credit Opportunity Act (ECOA) and the Fair Housing34 Act (FH Act), apply to banks that make home loans in Indian country just as they apply to35 banks that make home loans elsewhere. Because banks frequently ask questions regarding potential lending discrimination in Indian country, a discussion of lending discrimination follows. Interested parties may also refer to the section in the Comptroller’s Handbook on fair lending for more detailed information about compliance with fair lending laws.36 Fair Lending Statutes The ECOA prohibits discrimination in any part of a credit transaction and applies to any extension of credit, including extensions of credit to small businesses, corporations, partnerships, and trusts. It prohibits discrimination based on race, color, or national origin, among other factors. The FH Act prohibits discrimination in all parts of residential real-estate related transactions. The FH Act also prohibits discrimination based on race, color, or national origin, among other factors. Discriminating in a credit transaction against persons because they are Native Americans violates the ECOA and, if the transaction is related to residential real estate, it violates the FH Act. Types of lending discrimination. The courts have recognized three methods of proof of lending discrimination under the ECOA and the FH Act: overt evidence of discrimination, evidence of disparate treatment, and evidence of disparate impact. Overt evidence of discrimination. Overt evidence of discrimination occurs when a lender openly discriminates in a prohibited manner, even if a lender expresses — but does not act on — a discriminatory preference. For example, a lending officer says to a customer, “We 30 31 32 Appendixes Appendix A OCC’s Community Reinvestment Development Specialists Appendix B Bureau of Indian Affairs Area Offices Appendix C HUD Office of Native American Programs Offices Appendix D Department of Veteran Affairs Regional Offices Appendix E Rural Housing Services State Offices Appendix F Federal Home Loan Banks Appendix G Fannie Mae Regional Offices 35 36 Appendix B Bureau of Indian Affairs Area Offices Aberdeen Area Office Nebraska, North Dakota, and South Dakota Bureau of Indian Affairs 115 4th Avenue, SE Aberdeen, SD 37401 (605) 226-7343 Fax (605)228-7448 Albuquerque Area Office Colorado and New Mexico Bureau of Indian Affairs 615 First Street, NW P.O. Box 26567 Albuquerque, NM 87125 (505)766-3754 Fax (505)766-1964 Anadarko Area Office Kansas and West Oklahoma Bureau of Indian Affairs WCD Office Complex P.O. Box 368 Anadarko, OK 73005 (405) 247-6673 Fax (405)247-2242 Billings Area Office Montana and Wyoming Bureau of Indian Affairs 316 North 26th Street Billings, MT 59101 (406) 247-7943 Fax (406) 247-7976 Eastern Area Office New York, Maine, Louisiana, Florida, North Carolina, Bureau of Indian Affairs and Mississippi 3701 N. Fairfax Drive Mail Stop 260-VASQ. Arlington, VA 22203 (703) 235-2571 Fax (703) 235-8610 Juneau Area Office Alaska Bureau of Indian Affairs P.O. Box 255200 Juneau, AK 99802-5520 (907) 586-7177 Fax (907) 586-7169 Minneapolis Area Office Minnesota, Iowa, Mich, and Wisconsin Bureau of Indian Affairs 331 South Second Avenue Minneapolis, MN 55401 (612) 373-1000 Fax (612) 373-1186 Muskogee Area Office East Oklahoma Bureau of Indian Affairs Old Federal Building 101 North 5th Street Muskogee, OK 74401 (918) 687-2296 Fax (918) 687-2571 Appendix B — Bureau of Indian Affairs Area Offices (continued) 37 Navajo Area Office Navajo Reservation Only – Arizona, Utah, and Bureau of Indian Affairs New Mexico P.O. Box 1060 Gallup, NM 87305 (505) 863-8314 Fax (505) 863-8245 Phoenix Area Office Arizona, Nevada, Utah, California, and Idaho Bureau of Indian Affairs One North First Street P.O. Box 10 Phoenix, AZ 85001 (602) 379-6600 Fax (602) 379-4413 Portland Area Office Oregon, Washington, and Idaho Bureau of Indian Affairs 911 NE 11th Avenue Portland, OR 97232 (503)231-6702 Fax (503) 231-2201 Sacramento Area Office California Bureau of Indian Affairs 2800 Cottage Way Sacramento, CA 95825 (916) 979-2600 Fax(916) 979-2569 Central Office 1849 C Street, NW Washington, DC 20240 (202)208-3671 40 Appendix D Department of Veteran Affairs Regional Offices Alabama Alaska 474 South Court Street 2925 DeBarr Road Montgomery, AL 36104 Anchorage, AK 99508 (205)223-7187 (907) 257-4736 Arizona Arkansas 3225 North Central Avenue P.O. Box 1280 Phoenix, AZ 85012 Building 65, Fort Roots (602) 640-4758 North Little Rock, AR 72115 (501) 370-3760 California California Federal Building Oakland Federal Building 11000 Wilshire Blvd 1301 Clay Street Los Angeles, CA 90024 Oakland, CA 94612-5209 (310) 575-7192 (510) 637-1126 Colorado Connecticut P.O. Box 25126 VA Medical and Regional Office Center 44 Union Blvd 450 Main Street Denver, CO 80225 Hartford, CT 06103 (303) 980-2860 (603) 666-7527 Delaware District of Columbia VA Medical and Regional Office Center 941 N.Capitol Street, NE 1601 Kirkwood Highway Washington, DC 20421 Wilmington, DE 19805 (202) 208-1318 (215) 951-7847 Florida Georgia P.O. Box 1437, 144 First Avenue, South 730 Peachtree Street, NE St. Petersburg, FL 33731 Atlanta, GA 30365 (813) 893-3812 (404) 347-3488 Hawaii Idaho PJKK Federal Building Federal Buidling and U.S. Courthouse 300 Ala Moana Blvd 550 West Fort Street, Box 044 Honolulu, HI 96813 Boise, ID 83724 (808) 541-1480 (208) 334-1397 Ilinois Indiana 536 S. Clark Street, P.O. Box 8136 575 N. Pennsylvania Street Chicago, IL 60680 Indianapolis, IN 46204 (312) 353-4065 (317) 226-7810 Iowa Kansas 210 Walnut Street VA Medical and Regional Office Center Des Moines, IA 50309 5500 E. Kellogg (515) 284-4829 Wichita, KS 67218 (316) 688-6720 Appendix D — Department of Veterans Affairs Regional Offices (continued) 41 Kentucky Louisiana 545 South 3rd Street 701 Loyola Avenue Louisville, KY 40202 New Orleans, LA 70113 (502) 582-6025 (504) 589-6412 Maine Maryland 1 VA Medical and Regional Office Center Federal Building Route 17 East 31 Hopkins Plaza Togus, ME 04330 Baltimore, MD 21201 (603) 666-7527 (410) 962-4250 Massachusetts Michigan J.F.K. Federal Building 477 Michigan Avenue Boston, MA 02203 Detroit, MI 48226 (603) 666-7527 (313) 226-4224 Minnesota Mississippi VA Regional Office and Insurance Center 100 W. Capitol Street One Federal Drive, Fort Snelling Jackson, MS 39269 St. Paul, MN 55111 (601) 965-4825 (612) 725-3064 Missouri Montana 1520 Market Street VA Medical and Regional Office Center St. Louis, MO 63103 Fort Harrison, MT 59636 (314) 539-3147 (406) 447-7901 Nebraska Nevada 2 5631 South 48th Street 1201 Terminal Way Lincoln, NE 68516 Reno, NV 89520 (402) 437-5032 (415) 744-7495 New Hampshire New Jersey 275 Chestnut Street 20 Washington Place Manchester, NH 03101 Newark, NJ 07102 (603) 666-7527 (201) 645-3470 New Mexico New York 500 Gold Avenue, SW Federal Building Albuquerque, NM 87102 111 West Huron Street (505) 766-2209 Buffalo, NY 14202 (716) 846-5291 New York 252 Seventh Avenue at North Carolina 24th Street 251 North Main Street New York, NY 10001 Winston-Salem, NC 27155 (212) 620-6421 (919) 631-5447 North Dakota Ohio VA Medical and Regional Office Center 1240 East Ninth Street 2101 Elm Street Cleveland, OH 44199 Fargo, ND 58102-2498 (216) 522-3614 (612) 725-3064 Appendix D — Department of Veterans Affairs Regional Offices (continued) 42 Oklahoma Oregon 125 South Main Street Federal Building Muskogee, OK 74401 1220 Southwest Third Avenue (918) 687-2158 Portland, OR 97204 (503) 326-2475 Pennsylvania Pennsylvania P.O. Box 8079 1000 Liberty Avenue 5000 Wissahickon Avenue Pittsburgh, PA 15222 Philadelphia, PA 19101 (412) 644-6660 (215) 951-7847 Puerto Rico Rhode Island GPO Box 4867 380 Westminster Mall San Juan, PR 00936 Providence, RI 02903 (809) 766-5120 (603) 666-7527 South Carolina South Dakota 1801 Assembly Street VA Medical and Regional Office Center Columbia, SC 29201 P.O. Box 5046, 2501 West 22nd Street (803) 765-5616 Sioux Falls, SD 57117 (612) 725-3064 Tennessee Texas 110 9th Avenue, South 8900 Lakes at 610 Drive Nashville, TN 37203 Houston, TX 77054 (615) 736-5243 (713) 660-4134 Texas Utah 1400 North Valley Mills Drive P.O. Box 11500 Waco, TX 76799 125 South State Street (817) 757-6822 Salt Lake City, UT 84147 (801) 524-3411 Vermont Virginia 3 VA Medical and Regional Office Center 210 Franklin Road, SW White River Junction, VT 05001 Roanoke, VA 24011 (603) 666-7527 (703) 982-4736 Washington West Virginia 4 5 Federal Building 640 4th Avenue 915 Second Avenue Huntington, WV 25701 Seattle, WA 98174 (304) 529-5414 (206) 220-6126 Wisconsin Wyoming Building 6 VA Medical and Regional Office Center 5000 West National Avenue 2360 Eash Pershing Blvd Milwaukee, WI 53295 Cheyenne, WY 82001 (414) 382-5050 (303) 980-2860 Appendix D — Department of Veterans Affairs Regional Offices (continued) 45 Appendix E — Rural Housing Services State Offices (continued) Vermont, New Hampshire, Mike Keller (802) 828-6020 Virgin Islands Virginia Michelle C. Corridon (804) 287-1595 Washington Clint Kaasa (509) 664-0220 West Virginia Scott Mullins (304) 263-6495 Wisconsin Paul Bartlett (715) 345-7670 Wyoming John Johnson (307) 261-6315 46 Appendix F Federal Home Loan Banks Federal Home Loan Bank of Boston Federal Home Loan Bank of Indianapolis One Financial Center 20th floor 8250 Woodfield Blvd. Boston, MA 02110 Indianapolis, IN 46240 (617) 542-0150 (317) 465-0428 Federal Home Loan of New York Federal Home Loan Bank of Des Moines 7 World Trade Center, Floor 22 907 Walnut Street New York, NY 10048-1185 Des Moines, IA 50309 (212) 441-6600 (515) 281-1109 Federal Home Loan Bank of Pittsburgh Federal Home Loan Bank of Dallas 601 Grant Street 5605 N. MacArthur Blvd, 9th floor Pittsburgh, PA 15219-4455 Irving, TX 75038 (412) 288-7316 (214) 714-8647 Federal Home Loan Bank of Atlanta Federal Home Loan Bank of Topeka 1475 Peachtree Street NE 120 East 6th Street, 2 Townsite Plaza Atlanta, GA 30309 Topeka, KS 66603 (404) 888-8435 (913) 233-0507 x565 Federal Home Loan Bank of Cincinnati Federal Home Loan Bank of San Francisco 221 E. Fourth St., Atrium Two 307 East Chapman Avenue Cincinnati, OH 45202 Orange, CA 92666-1507 (513) 852-7615 (714) 633-1271 Federal Home Loan Bank Federal Home Loan Bank of Seattle of San Francisco, P.O.Box 7948 1501 4th Avenue, 19th Floor San Francisco, CA 94120 Seattle, WA 98101-1693 (415) 616-2749 (206)340-2300 Federal Home Loan Bank of Chicago 111 East Wacker Drive, Suite 800 One Financial Center, 20th floor Chicago, IL 60601 (312) 565-5700 47