The federal Section 184 American Indian mortgage program may have been zeroed out in President Donald Trump’s 2018 budget, but that doesn’t mean it will stop making loans. Same goes for the Section 184A program, which serves Native Hawaiians.
In fact, the Department of Housing and Urban Development, which administers both of the loan programs, is projecting 2018 to be the hottest year of the last five for guaranteeing Indian mortgages.
The seeming magic of making mortgages without an appropriation is explained by holdover budget authorities from previous years. HUD says it has $1.8 billion in holdovers, and is estimating insuring $880 million in HUD 184s to nearly 5,000 Indian borrowers in fiscal 2018.
Since 2013 HUD has been insuring about 4,000 loans per year at an average mortgage of around $175,000.
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It is worth noting that Congress often restores Indian housing money cut by the President’s budget, which is the starting point of the budget process rather than the ending point. The House appropriations bill for HUD now moving through Congress, for instance, recommends $7.3 million dollars be included for the HUD 184, which would cover guarantees for nearly $2 billion in mortgages.
HUD does not make mortgages itself but provides a guarantee to private lenders that 100 percent of their outlay will be recouped in case of a default. The biggest private lender appears to be 1st Tribal Lending, Oceanside, California, a unit of Mid America Mortgage, Addison, Texas, which claims it makes more than a third of HUD 184s.
As of December 31, 2016, HUD had insured more than 36,000 loans worth more than $6 billion. The loans are eligible to be packaged into securities issued by the Government National Mortgage Association.
According to HUD “this program makes it possible for Indian tribes, Indian housing authorities, and tribally designated housing entities to promote the health of reservation economies and communities by making homeownership a realistic option for tribal members. It provides access to market-rate, private mortgage capital, and is not subject to income restrictions. The program allows Native Americans from across the income spectrum the opportunity to purchase quality housing in their Native community. Tribes can also use the program to diversify the type of housing on Native lands by developing housing for homeownership or as long-term rentals, without affordability restrictions.”
The Native Hawaiian version of the loan, the 184A, also was zeroed out in the 2018 budget and will be operating on a carryforward capable of insuring $23.3 million in loans. There, HUD is projecting 55 loans guaranteed during fiscal 2017 (which ends on September 30) and another 55 in fiscal 2018. In fiscal 2016 HUD guaranteed 64 home loans for more than $16 million.
Unlike the 184, which does more mortgages off-reservation than on, the 184A is targeted for Hawaiian home lands. HUD says total activity has been 538 home loans for almost $133 million in finance since 2005. Hawaiian homelands are roughly analogous to Indian reservations since trust land status makes mortgages impractical on them.
Despite the 184A, there is still a long way to go. HUD said that as of 2010, there were 6,150 Native Hawaiian families on the homelands and more than 14,000 households on the waiting list for leases.