Native American Loans(Section 184 Loans)

What is the Section 184 Loan Guarantee Program?

The Section 184 Indian Home Loan Guarantee Program is a mortgage product specifically for American Indian and Alaska Native families, tribes, Alaska Villages or tribally designated housing entities. Congress established this program in 1992 to facilitate homeownership in Native American communities. List of Participating Tribes.

With a Section 184 mortgage borrowers can purchase a home with a low down payment, no monthly mortgage insurance and flexible underwriting.

• 2.25% down payment requirement for loans over $50,000;
• 1.25% downpayment requirement for loan under $50,000;
• No monthly mortgage insurance
• A one-time, 1% loan guarantee fee that can be added to your financed loan
• HUD underwriters and Loan Guarantee Specialists are familiar with the unique issues and circumstances that Native Americans face when trying to obtain a mortgage in Indian Country.

The Section 184 Loan Provides You With Numerous Options to Suit Your Needs

• Purchase of an existing home
• Construction of a home (stick-built or a manufactured home on a permanent foundation)
• Rehab loans
• Purchase and rehab
• Refinancing (Rate and Term, Streamline, Cash Out)
  

Program Overview

Homeownership for Native Americans
In 1992, Congress established the Section 184 Indian Home Loan Program. The program was designed to offer homeownership and housing rehabilitation opportunities for eligible Native American individuals, families, tribes and tribally designated housing entities (including Indian Housing Authorities) on their native lands and within an approved Indian area. Loans across the nation

Why a Loan Program Specific to Native Americans?
Because of the unique status of Indian lands, Native American homeownership is an underserved market. The Section 184 Program was designed to improve access to capital for Native Americans and provide private funding opportunities for tribal housing agencies.

How Does Section 184 Work?
HUD guarantees the mortgage loan made to eligible borrowers. The loan guarantee assures the lender that its investment will be repaid in the event of a foreclosure. The borrower pays a 1% loan guarantee fee at closing which may be financed in the mortgage or paid in cash. The borrower applies for the loan with a participating lender. If leasing tribal land they work with the tribe and the Bureau of Indian Affairs to obtain an approved 50 year lease. The lender then evaluates the necessary loan documentation and submits the loan for approval to the HUD Office of Loan Guarantee. Frequently Asked Questions?

Who is Eligible for a Section 184 Loan?

• American Indians or Alaska Natives who are enrolled members of a federally recognized tribe
• A member of an Alaska Village and Regional Corporation established pursuant to the Alaska Native Claims Settlement Act
• An Indian tribe
• A Tribally Designated Housing Entity (TDHE)
• An Indian Housing Authority (IHA)

How Can You Use the Section 184 Loan Guarantee?

Individuals, tribes, TDHEs and IHAs can use the Section 184 Loan for:

• Acquisition and/or rehabilitation of existing housing
• Construction of new housing, including manufactured housing affixed to a permanent foundation
• Refinancing
  
  Eligibility is limited to single-family housing (1-4 units), and fixed-rate loans for 30 years or less. Section 184 cannot be used for commercial structures or with Adjustable Rate Mortgages (ARMs). Tribes, TDHEs or IHAs can borrow funds to develop rental housing or to build single-family homes that are subsequently sold (or assumed) by eligible borrowers.

What is the Section 184 Loan Guarantee Program?

The Section 184 Loan Guarantee Program was created by the Housing and Community Development Act of 1992 to address the lack of mortgage lending in Indian Country. The 184 program offers a loan guarantee to private sector lenders who make mortgage loans to eligible borrowers for homes located in Indian Country.

Why is there a lack of mortgage lending in Indian country?

Much of the land in Indian Country is held in trust by the United States government for the benefit of a particular tribe or individual Native American. Land held in trust for a tribe cannot be mortgaged, and land held in trust for an individual must receive approval from the Bureau of Indian Affairs (BIA), before a lien is placed on the property. Without the ability to mortgage and foreclose on a home or place a lien on individual trust property, lenders were not willing to make home loans to individual Native Americans.

How does the Section 184 program correct the problem?

For a home loan on tribal trust land, the eligible individual borrower leases the land property from the tribe on a lease approved by the Bureau of Indian Affairs (BIA) and by HUD to create a leasehold estate. It is the home and the leasehold interest in the homesite that are mortgaged so that in the event of a foreclosure the home and leasehold interest are what are foreclosed. The ownership of the land itself remains in trust for the tribe.

For a home loan on individual or "allotted" trust land, both HUD and the BIA must approve the loan applicant. In the event of a default by a borrower on a 184 guaranteed loan on either tribal or individual trust land, the lender or HUD can only pursue liquidation of the loan after offering to transfer the loan to an eligible tribal member, the tribe or the Indian Housing Authority serving the tribe. In the event of a foreclosure, the lender or HUD can not sell the property to anyone but an eligible tribal member, the tribe or the housing authority serving the tribe. Thus the unique status of the trust land is protected.

Is trust land the only land eligible for a Section 184 loan?

No. Land located in an Indian area or Alaska Native area are eligible locations for a 184 guaranteed home loan. Fee simple lands within an approved Indian area (see PIH Notice 2004-19) are allowed under Section 184.

What must a tribe do to participate in the HUD 184 Loan Guarantee Program?

A tribe with tribal court jurisdiction over the property needs to have the following in place: