SECTION 184 INDIAN HOUSING LOAN GUARANTEE PROGRAM Fargo, North Dakota September 2010 U.S. Department of Housing and Urba

1. SECTION 184 INDIAN HOUSING LOAN GUARANTEE PROGRAM Fargo, North Dakota September 2010 U.S. Department of Housing and Urban Development

2. PROGRAM OVERVIEW Section 184 Training, Sponsored by HUD

3. PROGRAM OVERVIEW • 1992 Housing and Community Development Act • Annual funding by Congress • Nationwide Program Section 184 Training, Sponsored by HUD

4. LENDING IN INDIAN COUNTRY IS UNIQUE • Unique land status • Tribal Trust Land • Allotted Trust Land • Unrestricted Land • Underserved markets • Non-traditional credit • Limited access/exposure to financing • Manual underwriting Section 184 Training, Sponsored by HUD

5. 184 PARTNERS • HUD 184 Program Staff • Lenders • Tribes • TDHEs (Tribally Designated Housing Entities) • BIA (Bureau of Indian Affairs) Section 184 Training, Sponsored by HUD

6. LENDER INCENTIVES/OPPORTUNITIES • 100% guaranteed loan • Assign or foreclose • Up to 2.5% loan origination fee on construction/rehab loans • Community Reinvestment Act (CRA) Section 184 Training, Sponsored by HUD

7. PARTNER ROLES AND RESPONSIBILITES Section 184 Training, Sponsored by HUD

8. WHAT DOES HUD DO? • Develops and implements policies • Conducts training and marketing • Underwrites the loan • Issues the Loan Guarantee Certificate Section 184 Training, Sponsored by HUD

9. WHAT DOES THE LENDER DO? • Lends the money! • Explains the 184 mortgage loan process • Processes and prepares the loan package • Serves as liaison between borrower and HUD • Underwrites the loan (Direct Guarantee approved) Section 184 Training, Sponsored by HUD

10. ELIGIBLE LENDERS • Bank, Savings & Loan, Credit Union • Mortgage Companies approved through FHA, VA or RD • FHA approved Brokers with 184 Program Sponsorship • Lenders/Tribe obtain approval through NAHASDA (Chapter 3 of Guidebook) Section 184 Training, Sponsored by HUD

11. 3 STEP LENDER APPROVAL PROCESS • Submission of a Lender Package HUD OLG in Washington Dc Electronically or mailed • Completion of mandatory training for staff. (Lender approval letter issued after completion of steps 1. and 2.) • Submission of executed Code of Conduct form. Section 184 Training, Sponsored by HUD

12. Lender Package HUD Form 11701, Application for Lender Approval Sponsor Agreement Funding Evidence of federal approval Financial Statements Fidelity Bond Errors and Omissions Insurance Licenses Credit Reports Resumes Quality Control Plan State Approval of dba Evidence of Acceptable Facilities Sanctions Letters Section 184 Training, Sponsored by HUD

13. RETAINING AN ACTIVE STATUS • Submit annual, updated certification package to designated OLG staff. (In the planning stages) • Request training for all new/inactive staff. • Process at least 2 applications within a 6 months period . Section 184 Training, Sponsored by HUD

14. CONTENTS OF LENDER PACKAGE Statement requesting approval to include: • Name and address of applicant, geographic service area • EIN number for applicant and date on Incorporation, Companies that are already approved lenders need not resubmit a new Lender package, but training is mandatory for all new staff. Section 184 Training, Sponsored by HUD

15. CONTENTS OF LENDER PACKAGE (CONT.) • List of Officers/Directors who supervise staff and persons holding more than 10 percent of stock in the entity including phone numbers , home addresses and social security numbers. • List of employees who will participate in the program to include social security numbers , positions and residential credit reports. Section 184 Training, Sponsored by HUD

16. WHAT DOES THE TRIBE DO? • Implements foreclosure, eviction, lien & leasing procedures • Model One-Stop Docs • Conducts environmental reviews • Completes land status form Section 184 Training, Sponsored by HUD

17. WHAT DOES THE TRIBE PROVIDE? • Land • Homeownership counseling • Financial Assistance • Infrastructure Section 184 Training, Sponsored by HUD

18. WHAT DOES BIA DO? • Serves as a trustee for tribal trust land • Approves lease/mortgage • Provides/updates title status reports • Records mortgage/lease • Underwrites/reviews loan package (if allotted/restricted) Section 184 Training, Sponsored by HUD

19. PROGRAM FEATURES AND REQUIREMENTS Section 184 Training, Sponsored by HUD

20. Who can get a 184 Loan?ELIGIBLE BORROWERS • Indian or Alaska Native individual enrolled in a Federally recognized tribe. Copy of enrollment card/enrollment letter required. • TDHE/IHA (Indian Housing Authority) • Tribe. Tribal federal designation available on Federal Register accessed on Dept. of Agriculture/BIA website Section 184 Training, Sponsored by HUD

21. Who can get a 184 Loan?ELIGIBLE BORROWERS (Cont.) • Citizenship/Immigration • Not required for eligibility • Lawful permanent resident aliens – document evidence of permanent residency • Non permanent resident aliens • Principal residence • SSN • Eligible to work in the US Section 184 Training, Sponsored by HUD

22. LOAN FEATURES • Term: 30 years or less • Fixed interest rate determined by lender • 1% guarantee fee • Minimal down payment requirement • No Adjustable Rate Mortgages • No commercial structures Section 184 Training, Sponsored by HUD

23. HOMEOWNERSHIP OPPORTUNITIES • Purchase existing house • Rehabilitation of existing house • Purchase and rehabilitation • New construction • Manufactured • Modular/stick built • Refinancing Section 184 Training, Sponsored by HUD

24. PROPERTY REQUIREMENTS • Trust land or land within an Indian area • Meet construction and safety codes • Single family (1-4 units) • Examples include: house, duplex, tri-plex, four-plex, town home, manufactured/modular home • Manufactured Housing • Affixed to a permanent foundation • Manufactured after 6/15/76 Section 184 Training, Sponsored by HUD

25. LAND OWNERSHIP • Tribal trust land • Allotted individual trust land • Fee simple land in a defined Indian operating area Section 184 Training, Sponsored by HUD

26. LAND OWNERSHIP • Program requirements and processing procedures vary depending upon how land is held • Land in an Indian Area = area in which a Tribe/TDHE is authorized to provide housing Section 184 Training, Sponsored by HUD

27. LAND CHARACTERISTICS • Land or interest in land held in trust by BIA for a Tribe • Land may not be encumbered or alienated (leasehold) Tribal Trust Land Section 184 Training, Sponsored by HUD

28. LAND CHARACTERISTICS • Land or interest in land held in trust by the BIA for an individual Indian • Tribe has no interest in land • Subject to restrictions against alienation or encumbrance Allotted Individual Trust Land Section 184 Training, Sponsored by HUD

29. LAND CHARACTERISTICS Fee Simple Land • Estate in land that is absolute or unrestricted • Owner can dispose of land • Subsequent sale of home and/or foreclosure; land and home sold together • Located on reservation or within Tribe’s operating area for housing Section 184 Training, Sponsored by HUD

30. 184 LENDING ONTRIBAL TRUST LAND • Leasehold interest must be established between borrower and tribe • Title Status Report from BIA • preliminary with lease • final with lease/mortgage • Parties to lease: BIA, Tribe, and Borrower • HUD approval/review Section 184 Training, Sponsored by HUD

31. 184 LENDING ON TRIBAL TRUST LAND (cont.) Note: Leasing instrument normally approved when tribe submits documentation to participate in 184 program Section 184 Training, Sponsored by HUD

32. 184 LENDING ON INDIVIDUAL ALLOTTED TRUST LAND • Generally no lease • BIA approval required • BIA issues Title Status Report with recorded mortgage & approval Section 184 Training, Sponsored by HUD

33. 184 LENDING ON INDIVIDUAL ALLOTTED TRUST LAND • Fractionated ownership • Lease (due to fractionated ownership) • Foreclosure can result in loss of land • Excess land Section 184 Training, Sponsored by HUD

34. 184 LENDING ON FEE SIMPLE LAND • Lease not required • Title policy required • Property must be in a designated Indian Operating Area (Tribal certification on Land Status and Jurisdiction Form) Section 184 Training, Sponsored by HUD

35. 184 LEASE REQUIREMENTS • Not to exceed 50 year term • Provision preventing termination without HUD approval • Language indicating lessee can mortgage the leasehold, and foreclosure is allowed • Language preventing transfer or assignment of leasehold interest without HUD/Tribe approval Section 184 Training, Sponsored by HUD

36. LOAN PROCESS FOR TRUST TRANSACTIONS Section 184 Training, Sponsored by HUD

37. LOAN PROCESS For TRUST TRANSACTIONS • Land status verified with tribe and/or BIA: • Title Status Report needed to verify individual allotment ownership • Land Status and Jurisdiction Form Section 184 Training, Sponsored by HUD

38. LOAN PROCESS For TRUST TRANSACTIONS Underwriting the Title Status Report • Documentation required from the Bureau of Indian Affairs • Tribal Trust • Certified TSR (1 years or less) with/without recorded lease • Executed lease Section 184 Training, Sponsored by HUD

39. LOAN PROCESS For TRUST TRANSACTIONS Underwriting the Title Status Report (Cont.) • Individual Allotted Trust land • Certified TSR (6 months or less) • BIA approval to mortgage • Individual Allotted Trust Land with lease • Title Status Report with recorded lease • NO BIA approval to mortgage Section 184 Training, Sponsored by HUD

40. LOAN PROCESS For TRUST TRANSACTIONS (Cont.) • Borrower works with Tribe/BIA to obtain 184 lease if tribal trust land • Lease is recorded with BIA and TSR issued • Borrower works with Tribe/BIA to get environmental review completed. REQUIRED ON ALL LOANS Section 184 Training, Sponsored by HUD

41. LOAN PROCESS For TRUST TRANSACTIONS (Cont.) • Lender submits simultaneously: • Complete underwriting package to HUD (fee simple, tribal trust and individual allotment) • Copy of proposed mortgage/DOT to BIA for approval (trust land) • Complete underwriting package to BIA (individual allotted land) Section 184 Training, Sponsored by HUD

42. LOAN PROCESS For TRUST TRANSACTIONS (Cont.) • Lender receives commitment for BIA (individual allotment) • Lender receives commitment from HUD • BIA Issues Certificate of Mortgage Approval (trust land) • BIA Title Plant completes certified Title Status Report for lender (trust land) • Guarantee Package to HUD for Loan Guarantee Certificate Section 184 Training, Sponsored by HUD

43. SECTION 184 LOAN PROCESSING Section 184 Training, Sponsored by HUD

44. LOAN ORIGINATION • Borrower contacts approved lender • Lender determines if borrower meets program eligibility • Native American (ID/Enrollment Card) • Tribe on 184 approved list • Indian operating area • Lender requests case number from HUD using forms and process as described. Section 184 Training, Sponsored by HUD

45. LOAN ORIGINATION (Cont.) • Lender obtains loan documents and construction/purchase documents • Lender orders an appraisal • HUD Manual 4150.2 • Cost approach can be utilized if comps not available • FHA approved Appraiser • Appraisal good for 120 days • Lender prepares loan package and submits for underwriting Section 184 Training, Sponsored by HUD

46. REQUESTING A CASE NUMBER • Files will NOT be accepted for HUD underwriting until a case number has been assigned by OLG staff. • Case number assignments represent internal funds management for HUD and reservation of funds for lenders. Section 184 Training, Sponsored by HUD

47. REQUESTING A CASE NUMBER (Cont.) • Must be requested prior to submission of underwriting package • Electronic (MS Word compatible) form is available and preferred • Submit electronically as a Word document (.doc or .docx formats) via email to HUD for fastest turnaround Section 184 Training, Sponsored by HUD

48. Underwriting Components • Credit • Capacity • Collateral The underwriting review determines the borrower’s ability and willingness to repay the mortgage debt. Section 184 Training, Sponsored by HUD

49. Underwriting Components • The borrower’s ability to repay the debt is assessed by considering: • Income history and stability; • Employment history and stability • Debts • The borrower’s willingness to repay the mortgage debt is assessed by considering • Credit • Pay history Section 184 Training, Sponsored by HUD

50. Underwriting Components • The maximum allowable mortgage amount is determined as the lower of these 3 factors: • 150% of FHA Loan limits (03/2008) for the County where the property is located • Loan to Appraised Value Ratio: • 97.75% when $50,000 or greater • 98.75% when $49,999 or less • Acquisition cost (sales price + closing costs): • 97.75% when $50,000 or greater • 98.75% when $49,999 or less Section 184 Training, Sponsored by HUD