Eric Schmieder NM Mortgage Finance Authority NM Tribal Homeownership Coalition

1. Eric Schmieder NM Mortgage Finance Authority NM Tribal Homeownership Coalition 866 583-6041 Toll Free 505 767-2233 Direct 505 228-8670 Cell eschmieder@housingnm.org

2. WHY SECTION 184? • Available on Tribal Trust, Individual Allotted Trust or Fee Simple land in Indian Operating Areas (All Fee Simple in NM) • Low down payment (2.25%) • Flexible underwriting standards • No credit scores (good credit history required) • One qualifying ratio (41%) • 1.5 % Loan Guarantee Fee (Financeable) • No mortgage insurance • No income restrictions • Published Loan Limits

3. Reservations Indian Removal Act of 1830 Relocate tribal communities to Indian Territory • Reservation Policy More Pressures on Indian Territory Relocations to small geographical areas

5. Assimilation 1880-1934 Interior Sec Carl Schurz (1880) “The policy is……to dissolve….their tribal cohesion and merge them in the body politic” Day and Boarding schools BIA oversight increased Dawes Act of 1887 Allotments to individuals Convert to fee simple after 25 years

6. Changes 1934-1953 Indian Reorganization Act Reversal to Strengthen tribal institutions Repealed Dawes Act 1953-1970 Termination 100 Tribes targeted Relocation 12 major cities with relocation centers

7. Self-Determination 1975-present Indian Self Determination and Educational Assistance Act (1975) Native American Housing and Self Determination Act (1996) NAHASDA

8. HUD 184 • Section 184 indian Housing Loan Guarantee Program Substandard Housing Overcrowding Help for Higher Income tribal members New Markets Housing in Indian Areas

9. LAND OWNERSHIP IN INDIAN COUNTRY • Program requirements and processing procedures vary depending upon land status • Types of land ownership: • Tribal Trust with an approved lease • Land Assignment • Allotted Trust with BIA approval • Fee Simple within an Indian Operating Area (usually off reservation)

11. Sovereign NM Pueblos Almost all land is owned by the tribe in fee simple estate But Federal Trust responsibility applies Traditional Land Assignments HUD Homes Leases must be approved by the BIA Leasehold Mortgage must be approved by the BIA

12. TRIBAL TRUST LAND • Land or interest in land held in trust by Bureau of Indian Affairs (BIA) for a Tribe or In NM Fee Simple but subject to BIA Trust Responsibilities • Land itself may not be encumbered or alienated (leasehold) • Generally no property taxes or land cost

13. LENDING ON TRIBAL TRUST LAND • Leasehold interest must be established between borrower and tribe • Parties to Lease: • BIA • Tribe • Borrower • Title Status Report from BIA • Preliminary with lease • Final with lease/mortgage

14. Jemez 184 Home Loan

15. 30 Year old Home goes to DC

16. 184 Expansion In 2005, the Pueblo of Jemez petitioned the Office of Native American Programs to expand the service area of the 184 loan to all of New Mexico Now any enrolled member of a recognized tribe can use the 184 loan for purchase on fee simple land in New Mexico

17. FEE SIMPLE LAND • Estate in land that is absolute or unrestricted except for government rights • Owner can dispose of land • Subsequent sale of home and/or foreclosure; land and home sold together • Within Tribe’s operating area for housing (see map slide) • Title Policy is required • A “regular old loan”

18. 184 PROGRAM OPTIONS • Purchase • Purchase and rehabilitation • Single Close New construction: • Manufactured on permanent foundation • Modular and stick built • Rehabilitation • Refinancing (Including cash-out)

19. ELIGIBLE BORROWERS • American Indian or Alaska Native individual or family: • Owner occupant • A Tribal Housing Entity (TDHE/IHA) • Rental, sale or assumption • A Tribe: • Rental, sale, or assumption

20. San Felipe Built 28 Homes with Section 184

21. PROPERTY REQUIREMENTS are STANDARD FHA • Single family (1-4 units) • Permanent foundation • Infrastructure

22. 184 PARTNERS • Real Estate Brokers • Builders • Lenders • Tribes • Tribal Housing Authorities (TDHEs) • Bureau of Indian Affairs (BIA) • HUD 184 Program Staff

23. LEASE WHAT DOES THE TRIBE DO? FOR LAND LOCATED ON THE RESERVATION: • Develops and implements procedures for: • Foreclosure • Eviction • Provides land • Infrastructure • Financial assistance • Completes Land Status Form • Conducts environmental reviews • http://www.silverbulletproductions.com/completed-programs.html#Lincoln-Canes • Priority of lien • Leasing

24. WHAT DOES THE LENDER DO? • Lends the money! • Explains homeownership and the 184 mortgage loan process • Processes the loan, prepares the loan package • Serves as liaison between borrower and HUD

25. WHAT CAN Real Estate Brokers DO? • Create a niche market for the underserved Native American population. • Serve as liaison between borrower, builder, lender, and the Tribe’s Housing Authority. One of the biggest obstacles to homeownership is finding a trustworthy advisor who can guide a borrower through the home buying process. Real Estate Brokers who help buyers overcome such obstacles will stand to gain in the coming years as the Indian population and their buying power increase rapidly.

26. DO NATIVE AMERICANS NEED A Real Estate Broker? Whether they buy or build, the home buying process can be dramatically simplified with the help of a qualified Real Estate Broker. Real Estate Brokers: • Know the local money market • Understands the mortgage process and can assist • Can make sure the borrower gets the best loan product • Are familiar with local down payment assistance programs • Are familiar with local builders, subdivisions, and the contract process

27. WHAT IS THE MARKET? American Indian and Alaskan Native US Population Source: U.S. Census Bureau 2001 Contact list for Tribes and their Housing Entity: • www/hud.gov/offices/pih/ih/codetalk/onap/map/sw.xls

28. 20 Cities with Largest Urban Indian Population, Among Cities With Populations of 100,000 or More in 2000 MARKET cont. In the U.S., there are 245 places with 100,000 or more populations. “Race Alone” refers to individuals who reported only one race. “Race Alone or in Combination” refers to individuals who reported only one race together with those who reported that same race plus at least one other racial category.

29. WHERE TO MARKET • Property must be in a designated Indian Operating Area • See our website for approved counties in remaining states

30. New Mexico The HUD Office of Native American Programs 184 Loan is now available on all Fee Simple land in New Mexico. The following Reservation Lands are also approved: Pueblos: Cochiti, Isleta, Jemez, Laguna, Nambe, Pojoaque, San Felipe, Ohkay Owingeh (San Juan), Sandia, Santo Domingo, Santa Clara, Tesuque, San Ildefonso, Zia and Zuni. Tribal: Jicarilla Apache, Mescalero Apache, Navajo Nation

31. Add a Section 184 Loan Guarantee website link to your website • HUD has brochures and handouts that can be reproduced • Contact the tribe’s housing authority to offer your services • http://portal.hud.gov/hudportal/HUD?src=/program_offices/public_indian_housing/ih/homeownership/184 HUD Section 184 HOW TO MARKET

32. HUD Section 184 NM Section 184 Production 7/14 FY2013 FY2012 FY2011

33. Use these questions to help you decide: • Are you a Section 184 approved lender? • How long have you been originating Section 184? • How many Section 184 loans have you originated? • Do you have experience with any certain tribes? • Have you worked with any homebuyer assistance programs? • Are you familiar with the Tribe’s Housing Assistance programs? • Do you work with appraisers experienced with Section 184 in my area? • Do you have the capacity to administer an escrow account for the one-time construction closing? LENDER BROKER CHOOSING A LENDER TO WORK WITH

34. LOAN PROCESS BORROWER QUALIFICATIONS AND THE MORTGAGE LOAN PROCESS

35. GET STARTED • Real Estate Broker informs client of options for loans • Real Estate Broker helps borrower contact a Section 184 participating lender • Borrower provides lender with a copy of their Native American ID or enrollment card

36. Pre Qualifying • Most lenders will prequalify • Provide recent check stub(s) or other income verification • Release for credit check • Monthly Gross Income • Monthly payments on Credit Cards, Installment and Real Estate

37. BE PREPARED Standard checklist of items to start the process. • Tribal Affiliation (Enrollment) Card • Employment history (2 years) • Recent year-to-date pay stub • Prior year W-2 forms • Self-employed – Tax returns (2 years) • Two months recent bank statements • Monthly debt information

38. Tribal Enrollment • Forms of evidence of Tribal Enrollment: • Photo Tribal ID card that includes name of tribe, enrollment number, tribal member name • Letter notification on tribal letter head that includes enrollment number, tribal member name • NO CDIB cards • NOTE: Unusual forms of enrollment can be sent to HUD/ONAP for review and approval

39. 3 C’s • CAPACITY. The ability to meet your payments. • CAPITAL. Savings and assets for collateral. • CHARACTER. Credit history.

40. CAPACITY • 41% debt-to-income ratios (guide): • Determines if borrower(s) has the ability to repay the mortgage • Compensating factors allowed when 41% guide is exceeded. • Liabilities: • Recurring obligations • Contingent liabilities • Projected obligations • P.I.T.I (Principle, Interest, Taxes, Insurance)

41. COMPENSATING FACTORS • Payment history • Savings history • Job prospects • Overtime • Nontaxable income adjustments.

42. CHARACTER • Credit History: • HUD is concerned about a borrower’s overall payment pattern. Lenders look for: • Borrowing and payment habits • Previous and existing credit • Judgments, collections and liens • Lenders must investigate all major indications of derogatory credit and give the borrower an opportunity to explain in writing.

43. CAPITAL Cash Investment: • Difference between the mortgage loan and the cost to acquire the property • Minimum investment: 1.25% to 2.25% based on maximum mortgage amount • 2nd mortgage • Security agreement • Value in infrastructure Tribe / TDHE financial assistance : • Gift from tribal funds (No restriction on use or amounts) • Grant from NAHASDA funds Down payment sources : • Savings • Cash • Gift • 401K • Investments • MFA • Secured funds • Sale of personal property • Sweat equity • Land • Home buyer assistance programs 43

44. CLOSING COSTS • Expenses incurred to borrow money • How can they be paid? • Added to the purchase price • Financed (secured loan) • Prepaid • Paid by buyer or seller

45. FINANCED COSTS When calculating the acquisition cost, lenders may add allowable closing costs to the sales price or contractor’s price. The costs are those to be paid by the borrower and must be typical and reasonable, and may include: • Loan origination fee, not to exceed 1%, or 2.5% if involves construction draws • Appraisal and inspection fees, including borrower home inspection fees • Actual cost of credit reports • Deposit verification fees • Cost of title examination and title insurance • Document preparation (if performed by a third party not controlled by the lender) • Property survey • Attorney’s fees (if the attorney is not an employee of the mortgagee) • Recording fees • Test and certification fees (such as water and environmental tests) • Settlement fees (if not an employee of the mortgagee and an independent company)

46. LOAN AMOUNT • Mortgage Caps: • No mortgage may exceed 97.75% of the appraised value, excluding closing costs (98.75% for if value is 50,000 or less) • All mortgages are capped at 1.5% of the FHA limit for the area • Loan Amount is Lowest of: • 184 Loan limits for county • http://portal.hud.gov/hudportal/HUD?src=/program_offices/public_indian_housing/ih/homeownership/184 LTV ratio: 97.75% or 98.75% of appraised value • Acquisition cost (sales price + closing costs): • 97.75% or 98.75%

47. Seller contributions (or interested third party) are not subtracted from the sales price, but are limited to six percent of the sales price before a dollar-for-dollar reduction is required. Seller contributions include: • Payment of closing costs normally paid by the buyer • Discount points • Interest rate buy downs • Prepaid and escrow items collected at closing • Payments of mortgage interest (but not principal) • Loan guarantee fee. Excluded from the six percent limit on financing concessions are unplanned permanent buy down points resulting from a shift in interest rates during the period between the date of the sales contract and the date of loan closing. The sales agreement must provide for specific financing terms that could not be met, due to a change in market conditions.

48. REVIEW • Membership of Recognized Tribe--ID Card • 1.5 Point Financeable Guarantee Fee • 2.25% Downpayment • 41% Total Debt Ratio (43% with compensating factors) • MFA Eligible • Rate • Downpayment & Closing Cost Loan • No Income Limits • All Fee Simple Properties in NM