Community Dividend

Mortgage agreements expand homeownership opportunities on tribal lands

Thanks to several dedicated housing partners, American Indians on trust land are entering a new era in which they can obtain traditional mortgages to build or purchase their own homes.

Mary Lou Affleck

Published September 1, 2005  | September 2005 issue

Recently, Crow tribal members Kathy Arnoux and her husband Doug Paulson became the first American Indians in Montana to receive a conventional mortgage on tribal trust land, which they used to construct a new home on the Crow Reservation. Developments like this are historic, considering the many challenges that have prevented American Indians from buying homes on trust land.

Many American Indians live on restricted land that is owned by the federal government and held in trust for their tribe. They experience chronic housing problems such as overcrowding, substandard conditions, inadequate infrastructure and a lack of availability of affordable financing. According to the National American Indian Housing Council, nearly 33 percent of homes on tribal lands—more than six times the national average—are overcrowded, less than half of the homes in Indian Country are connected to public sewer systems, and 16 percent of these homes lack complete indoor plumbing. Almost half of Indian households pay more than 30 percent of their income for housing expenses, compared to 23 percent of all households in the U.S.

The homeownership rate on reservations is 41 percent, well below the national average of 68 percent. An absence of conventional mortgage lending is a major factor behind the gap. Historically, tribes did not have adequate foreclosure laws in place. Consequently, primary lenders did not offer conventional mortgages on trust land because they could not sell the loans on the secondary market.

As a result, American Indians interested in purchasing homes on tribal land had few options. They could borrow through federal mortgage programs that made only a limited number of loans per year, or they could turn to high-cost or predatory lenders. Thanks to several dedicated housing partners, American Indians on trust land are now entering a new era in which they can obtain traditional mortgages to build or purchase their own homes.

Making the conventional possible

Fannie Mae's Native American Conventional Lending Initiative (NACLI) was created to make conventional lending possible for American Indians on tribal trust lands. Under the initiative, the company has reached agreements with 21 tribes to provide the necessary liquidity that will encourage traditional financial institutions to make conventional loans to tribal members. Five of those agreements are with tribes in the Ninth Federal Reserve District: the Bay Mills Indian Community in Upper Michigan, a tribe affiliated with the Chippewa Nation; the Blackfeet and Crow tribes in Montana; the Oglala Sioux of the Pine Ridge Reservation in South Dakota; and the Three Affiliated Tribes (Mandan, Hidatsa and Arikara) of North Dakota.

For a lender to deliver home loans to Fannie Mae under NACLI, Fannie Mae must first enter into a Memorandum of Understanding (MOU) with the tribe on whose land the home is located. Under the MOU, the tribe agrees to maintain certain legal standards supporting mortgage lending—primarily laws permitting land leasing, pledging of leaseholds, mortgage foreclosures and evictions. Without a legal framework of this type, Fannie Mae cannot engage in prudent business activities on Native lands. The MOU also sets forth Fannie Mae's offer to purchase loans secured by Native lands and to respect tribal sovereignty through the acknowledgment of tribal court jurisdiction.

NACLI is available to any qualified American Indian, Indian housing authority, or tribally designated housing entity. Mortgages with terms of 10, 15, 20, or 30 years are available for one- to four-family principal residences. Through NACLI and other initiatives, lending is available on federally restricted trust land and allotted lands, just as it has been on fee-simple lands. The initiative covers conventional, or non-government-backed, loans as well as government-backed loan products of the U.S. Department of Housing and Urban Development and the U.S. Department of Agriculture (USDA) Rural Housing Service.

Ninth District agreements

Fannie Mae's MOUs and related agreements with Ninth District tribes were achieved one by one, over several years. The Oglala Sioux was the first tribe to reach an agreement, originally signing an MOU in 1999 with Fannie Mae and Northwest Mortgage, Inc. The tribe signed another MOU, with Fannie Mae and First Mortgage Company, in August 2003. Bay Mills also signed its MOU in 1999, and the Three Affiliated Tribes signed their agreement in May 2004. Other partners in these MOUs include First Mortgage Company, PMI Mortgage Insurance Co. and Stewart Title Company.

To arrive at their agreements, the Crow and Blackfeet tribes in Montana each worked with Fannie Mae and local financial institutions—particularly First Interstate Bank—for two years to develop rules governing mortgage foreclosures on tribal trust land. The Crow Tribe signed its agreement in August of 2004, and the first mortgage loan for new home construction on the Crow Reservation was made in January 2005, to Arnoux and Paulson. The Blackfeet Tribe signed its own agreement with Fannie Mae later that month.

Partnerships build opportunities

Tribes throughout the country are addressing housing needs through partnerships of their own. For example, many tribes participate on task forces with housing, government and nonprofit partners. These task forces work with individual tribes to determine pressing housing needs. In Montana, many successes in increasing the homeownership rate on reservations are attributed to the Montana American Indian Homeownership Task Force, which includes housing and lending professionals who combine resources to help Montana's American Indians achieve homeownership. Several other states, including Wyoming, have similar task forces. These entities have enabled tribes to establish homeownership centers, provide scholarships to certify tribal members as homebuyer education instructors, streamline mortgage processes and create legal frameworks for traditional lending on tribal trust land.

Creating homeownership opportunities for American Indians is only part of the solution. Housing leaders and tribes must also work together to expand housing options for tribal members. For example, the Salish and Kootenai tribes on the Flathead Reservation in Montana have utilized Low Income Housing Tax Credits (LIHTCs), in partnership with several investors, to finance five housing projects. These include new construction and the rehabilitation of existing properties, which provide both rental and rent-to-own options for tribal members. The Blackfeet Tribe, in partnership with Enterprise Social Investment Corporation, has used LIHTCs to build 31 rental homes. In November 2004, an initiative was announced on the Standing Rock Reservation in North Dakota that combines single-family and multifamily housing with community development.

When it comes to tackling their toughest housing problems, limited resources create a tremendous challenge for American Indians. This underserved population has long worked to improve living conditions on tribal lands, and several housing, lending and government entities throughout the Ninth District and across the country have worked with tribes toward this goal. By working together, and side by side with tribes, we can make significant improvements in housing conditions for American Indians.

Mary Lou Affleck serves as Senior Deputy Director of Fannie Mae's Montana Partnership Office. She can be reached at or (406) 259-7049.