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| Dilapidated housing on the Choctaw Indian Reservation. (The Washington Post) |
Washington Post Staff Writer
Wednesday, November 25, 1998; Page A03
Chester Carl seemed the ideal candidate for a conventional home mortgage. He owned three thriving small businesses -- a silk-screen printing operation, a television satellite dish company and a shop that manufactured camper shells for pickup trucks -- and he had an excellent credit rating along with a reputation as a solid family man.
But when he decided to build his dream house in 1982 -- and again 10 years later when he started work on another house -- he did not even bother applying to a bank for a home loan. Instead, he worked on the houses piecemeal, building room by room from check to check as he became able to buy the materials and pay for the labor.
The reason: Carl is an American Indian and his houses are on the sprawling Navajo reservation that straddles eastern Arizona and western New Mexico. There, as is the case on most of the nation's approximately 550 Indian reservations, obtaining a conventional home loan -- or even a federally backed mortgage -- is easier said than done.
"In the real world, you figure you can get a mortgage in a few months," said Carl, who since his experiences has become chairman of the National American Indian Housing Council. "But I didn't even bother asking for one because of the frustrations I knew would be involved."
According to federal statistics, during the five years from 1992 through 1996, the 1.2 million Native Americans living on federal trust lands obtained a grand total of 91 conventional home mortgages. And 80 of those loans were made to members of two tribes -- the Tulalips of Washington state and the Oneidas of Wisconsin -- as a result of special lending programs run by three banks in those states.
The conventional home loans to Indians during the five-year period had a total value of about $5 million, a minuscule portion of the $785 billion that was loaned for home-buying in all of the United States in 1996 alone.
Moreover, the latest data released under the Home Mortgage Disclosure Act for 1997 show a 52 percent denial rate for the few reservation Indians who applied for conventional loans -- double the denial rate for whites and triple that for Asian Americans. Only black applicants had a tougher time getting loans, with a 53 percent denial rate.
"Basically, what it means is that if you want a nice home, you have to move off the reservation," said Christopher D. Boesen, executive director of the National American Indian Housing Council.
Boesen said that choice perpetuates substandard housing on reservations and causes a drain of "economically viable people" who move off reservations to get home loans. It also leads to an absence of equity accumulation on reservations and, consequently, fewer start-ups of small businesses.
As it is, according to the Bureau of Indian Affairs and other federal agencies that track reservation housing, 40 percent of the housing in tribal areas is considered substandard, more than six times the rate for the general population. Twenty-one percent of homes in tribal lands are overcrowded -- nearly 10 times the proportion elsewhere -- and more than 16 percent of Indian households do not have adequate plumbing. The National American Indian Housing Council estimates that 200,000 housing units are needed immediately in Indian areas.
Native American advocacy groups contend the disparity between conventional home loans granted on reservations and those given elsewhere is a result of "redlining" by banks -- putting reservations off limits to mortgages because of poverty, bad credit, high unemployment and alcohol and drug abuse.
But banks say, and Native American housing experts acknowledge, that other factors are involved.
The biggest is the ambiguity of the title to reservation property that normally has to be put up as as collateral for home mortgages, combined with the uncertainty among lenders about whether they can foreclose on such tribal trust lands in the event of default. Because of the complex legal status of Native American trust lands, and limitations on their use as collateral, banks often follow the path of least resistance and turn down mortgage applications or drag out processing so long that Indians do not even bother asking for a loan, advocates for fair lending practices contend.
Federal officials say banks are also unfamiliar with the tribal courts in which litigation is conducted when foreclosures occur and are concerned about the absence of housing ordinances governing foreclosures on reservations.
Generally, reservation land is owned by the federal government and held in trust on behalf of a tribe, while the tribal government, in turn, parcels out home sites to tribal members under long-term leases, usually for 50 years and, for some tribes, up to 99 years.
"The trust status has been the biggest historical impediment to lending on tribal lands," said Joseph Pigg, a senior counsel at the American Bankers Association. "Obviously there is a tremendous market there, and we'd like to develop it if we can, but there are major obstacles in developing procedures."
Pigg said a few large financial institutions, including Bank of America and Norwest Corp., have made major commitments to increase lending to Indians and that several government programs help fill the gap with federally backed home loans on reservations.
However, Boesen said the banks' declared concerns over establishing clear title are, in many cases, a "cop-out" that masks a lack of commitment to nondiscriminatory lending. "Ultimately, I don't think they think it's worth the trouble. They don't think this is a big enough market to bother with, and it's easy to claim there are a lot of legal problems," he said.
A General Accounting Office report this year said that between 1983 and September of last year, lenders made only 128 loans on trust lands under two Native American mortgage guarantee programs operated by the U.S. Department of Housing and Urban Development. The GAO report said that a Federal Housing Administration mortgage insurance program backed 18 loans to Indians worth $1.4 million in fiscal 1997, and that the Department of Veterans Affairs made 32 loans totaling $2.6 million.
However, the GAO said that because of poverty and joblessness on reservations, "even if the barriers to conventional home purchase lending are eliminated, the economic status of many Native Americans on trust lands may preclude them from qualifying for these loans."
Carl praised Fannie Mae, a government-chartered organization that provides money for mortgages, for financing $54 million in Indian home purchases over the past three years. But he said more is needed to end mortgage redlining and improve "third world housing conditions" on reservations.
In Carl's case, it took eight years and most of his earnings to finish the first house. He also had to come up with cash to make his second dream home come true, a $12,000 bungalow that he bought from a utility company and expanded into what he now reckons is a $65,000 dwelling.
After overcoming the financing obstacles with the sweat of his brow, he became the head of the Navajo Housing Authority and later took over as leader of the national council, the only country-wide association representing Indian housing concerns. His decision to become an advocate for Native American homeownership, Carl said, stemmed from the realization that "Indian Country still remains, basically, unserved by the majority of the lending community."
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