Indian Home Loan Guarantee Fund

PROGRAM HIGHLIGHTS

SUMMARY OF BUDGET REQUEST

1. SUMMARY OF BUDGET REQUEST

   The Budget proposes an appropriation of $6 million in budget authority to support loan guarantees of $72 million. Funds are expected to guarantee approximately 325 home mortgages. The request includes $150,000 for administrative expenses, an amount that will be transferred and merged with the Department's appropriation for Salaries and Expenses.

2. CHANGES FROM 1998 ESTIMATES INCLUDED IN THE 1999 BUDGET

   In fiscal year 1998, program activity was only $1.8 million in budget authority and $22.2 million in actual loan guarantees, compared with the fiscal year 1999 budget estimate of $5 million in budget authority and a loan guarantee limitation of $61.5 million.

3. CHANGES FROM 1999 BUDGET ESTIMATES

   The 1999 current estimate of $11.8 million includes $6 million in new budget authority and $5.8 million in carryover budget authority. The carry over budget authority provides an additional $71 million in loan guarantee limitation. The increase in outlays of $1 million reflects spend out from the additional budget authority.

   The increase of $2 million in fiscal year 2000 outlays over the 1999 estimate reflects the spendout of the additional $2 million of budget authority provided by Congress in 1998, the spendout of the $11 million available for 1999, and the spendout of pre-1998 obligated balances.

EXPLANATION OF INCREASES AND DECREASES

For fiscal year 2000, only $150,000 is requested for administrative expenses, a decrease of $250,000 from the fiscal year 1999 request. The administrative expenses will continue to fund travel for monitoring reviews, marketing, training, contracting to support housing counseling, and data systems maintenance. Major system enhancements are expected to be completed in fiscal year 1999.

FUNDING ACTIVITY

The limited program activity for this 5-year old program is attributable to the loss of the largest program participant which created a void which has been difficult to fill in the short-term. In addition, implementation of statutory amendments in 1998 temporarily slowed program production.

To further promote this program and the broad scope of private sector mortgage lending in Indian Country, the Department is working to streamline Federal lending programs to support the President's One-Stop Mortgage Initiative. The Navajo Nation and Pine Ridge initiatives will result in models to expedite the homebuying process and will be replicable nationally. A "one- stop mortgage center" at the Navajo Nation will provide information, guidance and action to tribe members to become homeowners. A successful mortgage center at the Navajo Nation will be used as a model for other centers in Indian country. The Pine Ridge reservation initiative will create a financial institution on the reservation to facilitate mortgage lending and disseminate information regarding the availability of government loan products, self-help opportunities, and training. One goal of this initiative is to create a "building blitz" at Pine Ridge in the summer of 1999.

In fiscal year 1998, there were two defaults for this program with a total loan amount of approximately $117,000. These were the first two foreclosures in the history of the program.

PROGRAM DESCRIPTION

This program is authorized by Section 184 of the Housing and Community Development Act of 1992, Public Law 102-550, enacted October 28, 1992, as amended by Section 701 of the Native American Housing Assistance and Self-Determination Act (NAHASDA) of 1996, Public Law 104-330, enacted October 26, 1996. Funding for this program provides loan guarantees for Native American families, Indian tribes, and tribally designated housing entities to purchase, construct and/or rehabilitate single-family homes on trust or restricted land and in designated Indian areas. It has served as a catalyst for private financing of home mortgages which would otherwise not have been possible because of the unique legal status of Indian lands.

Private financing for the purchase of homes in Indian country was almost non-existent prior to the implementation of this program in September 1994. Since its inception, the Section 184 Indian Home Loan Guarantee Fund has provided first-time, home ownership opportunities for more than 528 Native American families.

This program has made homeownership available to Native Americans living on Indian lands, and enabled lending institutions to serve a new client group. Due to the unique legal status of Indian trust or restricted lands, lenders had previously been hesitant to assume the risk of providing home mortgage financing where legal title to the real property could not be used as collateral. In addition, most lenders were unwilling to take the risk of going into tribal courts in the event of default. In fact, most tribal courts had not enacted the requisite foreclosure laws or ordinances to adjudicate such matters. As a direct result of this program, numerous banks are now lending in Indian Country, and many tribes have established legal procedures for processing foreclosures and evictions.

This program has served as the vehicle to leverage private funds with Federal dollars in Indian country in order to create housing opportunities where Federal subsidy programs historically provided 100 percent of the costs of new unit construction. Through this program, private financing is now used to cover construction costs while Federal dollars are used only to guarantee payment in the event of a default.

In contrast to the traditional subsidy programs, this program is not restricted to low-income families. However, it provides opportunities for income-eligible families currently living in subsidized units to afford a market-rate home mortgage, thus freeing up subsidized units for use by other lower-income families. This is the housing cycle that has been operative in non-Indian country for decades. If these funds were provided through the conventional Indian housing development program, $6 million of budget authority would have provided funding for fewer than 60 units, compared to the 325 guaranteed loans anticipated to be supported with the same funds in fiscal year 2000.

This program differs from the Title VI Indian Federal Guarantees Program (funded as a demo within the Indian Housing Block Grant program in fiscal years 1998 and 1999) since any Indian family, tribe, or tribally designated housing entity, can apply regardless of income. In contrast, the Title VI program provides loan guarantees for Indian Housing Block Grant recipients who are unable to borrow from other sources. Future Block Grant funds are used by the borrower to collateralize the loan.

FISCAL YEAR 2000 PERFORMANCE MEASURES

Indicator: Increase the number of homeownership units to be guaranteed for Native Americans.

Goals:

This program conforms with the Department's strategic objective of increasing homeownership opportunities through a variety of tools such as expanding access to mortgage credit. The increased numbers of homeownership units will allow Native Americans to be included in the national goal of creating 8 million new homeowners by 2001.