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Processing Guidelines February 2003


Chapter 1:
Program Overview

Chapter 2:
Tribal Legal And Administrative Framework

Chapter 3:
Lender Participation

Chapter 4:
Eligible Activities And Properties

Chapter 5:
Loan Processing And The Firm Commitment

Chapter 6:
Loan Closing And Endorsement

Chapter 7:
Administering Construction Loans

Chapter 8:
Loan Servicing

Chapter 9:
Alaska Processing Guidelines For Construction Loans

Chapter 10:
Direct Guarantee

Chapter 11:



Chapter 1: Program Overview

1.1 Introduction
1.2 Program Overview
1.3 Key Program Policies And Requirements
1.4 Land Ownership In Indian Country
1.5 Roles And Processing Steps
1.6 Definitions



This guide provides instructions for implementing the Section 184 Indian Housing Loan Guarantee Program. Although it is intended primarily as a guidance document for lenders, it provides information that will also be valuable to tribes, Indian Housing Authorities (IHAs)/Tribally Designed Housing Entities (TDHEs), and housing advocates.

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  1. Barriers to Homeownership in Indian Country. Much of the land in Indian country is held in trust by the U.S. government for the benefit of a particular tribe or individual Native Americans. Land held in trust for a tribe cannot be mortgaged, and land held in trust for an individual must receive federal approval before a lien is placed on the property. As a result, tribes, IHAs/TDHEs, and individual Native American families have historically had limited access to private mortgage capital.

    At the same time, demand for homeownership opportunities has steadily grown. Many families in Indian country have worked hard to achieve success, and now want to own a home of their own. Other Native Americans currently live away from traditional Indian lands and seek to return home to raise their families.

  2. The Section 184 Loan Guarantee Program.
    1. In 1992 Congress created a federal program specifically designed to address the lack of mortgage capital in Indian country. Under the provisions of Section 184 of the Housing and Community Development Act of 1992 and as amended under the provisions of the Native American Housing Assistance and Self-Determination Act of 1996, the U.S. Department of Housing and Urban Development (HUD) was authorized to guarantee loans made by private lenders to Native Americans, IHAs/TDHEs and Tribes.
    2. The Loan Guarantee Program is intended to increase the availability of mortgage lending in Indian country and is restricted to Native Americans, IHAs/TDHEs and Tribes selecting home sites within an Indian area.

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The following key program policies and requirements are discussed in more detail in the processing chapters that follow this introductory chapter.

  1. Guarantee Coverage.
    1. Single family residential loans made by eligible lenders to eligible borrowers. Commercial structures are not eligible under the Section 184 Program.
    2. 100 percent of the outstanding principal and interest and payment of other necessary and allowable expenses.

    Loans that are otherwise insured or guaranteed by the federal government are not eligible for the Program.

  2. Eligible Borrowers.
    1. An Indian or Alaska Native who will occupy the property as a principal residence and who has met the credit and underwriting standards specified in this handbook.
    2. An Indian Housing Authority/Tribally Designated Housing Entity. IHAs/TDHEs may borrow funds to develop single-family homes that are subsequently sold to eligible borrowers or to create IHA/TDHE-owned rental housing.
    3. An Indian tribe. As with IHAs/TDHEs, tribes may borrow funds to develop single-family homes that are subsequently sold to eligible borrowers or to create tribal owned rental housing.
    4. While tribally held fee simple land may be readily encumbered, there are special considerations which need to be addressed when the tribal borrower intends to encumber tribally held trust land as security for the loan. Tribes are encouraged to contact the Program ONAP when they are considering applying for Section 184 guaranteed loans for additional guidance on these issues.
  3. Participating Lenders. Lenders must be:
    1. Approved by the Secretary of Housing and Urban Development, the Secretary of Agriculture, or the Secretary of Veterans’ Affairs; or
    2. Supervised, approved, regulated, or insured by any agency of the federal government.
  4. Eligible Activities. Eligible borrowers may use the guarantee program for the:
    1. Acquisition of existing housing.
    2. Rehabilitation of existing housing.
    3. Acquisition and rehabilitation of existing housing.
    4. Construction of new housing units.
    5. Refinance

    Loan guarantees for commercial structures are not eligible under the Section 184 program.

  5. Mortgage Terms:
    1. The term of the loan may not exceed 30 years.
    2. Interest rates established by the lender must reflect current market rates and cannot be adjustable.
    3. Maximum mortgage amounts are set based on an established loan-to-value ratio and the borrower’s debt to income ratio, and, in no case, can these mortgage amounts exceed 150 percent of the FHA (HUD’s Federal Housing Administration) mortgage limit established for the locality.
  6. Property Requirements. Properties must be:
    1. Located on land that is either trust/restricted or within the operating area of an IHA/TDHE or tribe (called an "Indian area").
    2. Standard quality and must meet applicable construction and safety codes. In addition, homes must be modest in size and design.
    3. Single family structures (one to four units). Multifamily housing is not permitted.
  7. Alienation Policy. Section 184 properties may change ownership as a result of a voluntary assumption, a voluntary sale by the homeowner, or due to a default.
    1. Voluntary Transactions:
      • Assumptions
        • Eligible borrowers (Native Americans, IHAs/TDHEs and Indian tribes) may assume a Section 184 guaranteed loan. Any prospective borrower must qualify for the loan based upon both income and credit.
      • Sales
        • Owners of Section 184 properties on tribal trust land may voluntarily sell their home. However, the tribe has the right to review and approve the leasehold securing the property and thus may reject certain buyers based on tribal law.
        • Owners of Section 184 guaranteed properties on fee simple or allotted land may voluntarily sell their property.
    2. Default:
      • On tribal trust land and allotted trust land, neither HUD nor a lender may sell a defaulted property to a non-Native American (24 CFR 1005.107(b).
      • Defaulted fee simple properties may be sold to any purchaser or may be assumed by an eligible Native American borrower.
  8. Secondary Mortgage Market. Mortgages guaranteed under Section 184 may be sold in the secondary market.

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Understanding the various forms of Indian land ownership is important for lenders and program participants because program requirements and processing procedures vary depending upon the way land is held. This paragraph summarizes the basic types of land ownership in Indian country. The definitions provided in 1.6 below further clarify the legal aspects of homeownership and identify unique arrangements that exist in Alaska, California and Oklahoma. Differences in requirements and processing instructions, based upon the types of land ownership, are specified throughout this guide.

  1. Defining an Indian Area. An Indian area is the geographic area within which an Indian housing authority or tribe is authorized to provide housing through its power as a governmental entity. This may include land held in trust by the federal government for tribes or individual Native Americans as well as fee simple land within the operating area of the IHA/TDHE or tribe.
  2. Land Held in Trust for Tribes. Tribal trust lands are held in trust for the tribe by the federal government. The Department of the Interior, through the Bureau of Indian Affairs (BIA), administers the federal government’s trust responsibilities.
    1. Tribal trust land cannot be alienated (taken out of trust) or encumbered without BIA approval.
    2. Tribes may lease or otherwise assign portions of the tribal trust land for the use of specific individuals or purposes, but ownership, through the federal trust, remains with the tribe.
    3. Generally, tribal courts, together with BIA, have jurisdiction over key real estate transactions (lien recording, eviction and foreclosure procedures) on tribal trust lands.
  3. Land Held in Trust for Individual(s). Allotted trust land is held in trust by the federal government for individual Native Americans.
    1. Tribes generally have no property interest in allotted trust lands. However, like tribal trust land, allotted trust lands cannot be alienated or encumbered without BIA approval.
    2. Real estate transactions (lien recording, eviction, and foreclosure) are sometimes governed by tribal law but in other areas may be under the jurisdiction of state/local government laws.
  4. Unrestricted (Fee) Land Within Indian Areas. The term "fee title" or "fee simple title" generally denotes land in which the owner has an interest that entitles the owner to dispose of the entire property or various interests in the property without hindrance.
    1. Loans on fee land located in an Indian area are eligible for a Section 184 loan guarantee.
    2. Real estate transactions (lien recording, eviction, and foreclosure) are generally under the jurisdiction of state/local government laws. However, in some areas, fee land within the Indian area may be under the jurisdiction of tribal courts.
  5. Determining the Status of Proposed Home Sites. As a part of the initial application, the land status (tribal trust land, allotted or fee simple) of the proposed home site must be identified by the tribe. Lenders should send the Land Status and Jurisdiction Form found at Appendix 4 to the tribe for signature to document land status and court of jurisdiction.

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The roles of principal participants are summarized below.

  1. Borrower Responsibilities. Individual, IHA/TDHE and Indian tribe borrowers are responsible for making an application for financing to an approved Section 184 lender; providing the information needed to enable the lender to determine the borrower’s qualification for mortgage financing; and abiding by the terms of the loan agreement, once the loan is approved.
  2. Responsibilities of the Tribe:
    1. Each tribe must enact policies and procedures for processing foreclosure and eviction actions or identify a State/County court that will enforce these procedures.
    2. Tribes may also participate as a coordinator of the program by: assisting borrowers with loan applications; making available, through lease, trust lands for home sites; providing financial assistance to borrowers; and homebuyer education.
  3. Lender Responsibilities:
    1. Lenders accept and process borrower applications for financing, and, if the borrower qualifies, submit the loan application packages to HUD to request a firm commitment under the Section 184 Program. Lenders may contact the Program ONAP to determine eligibility, land status and other essential information.
    2. Once HUD has approved the firm commitment, and a closing has taken place, the lender makes the loan to the borrower. The loan may be held in their portfolio or sold.
    3. If a lender elects to participate as a Direct Guarantee lender, procedures in Chapter 10 must be followed.
    4. In the event of default, the lender has the option of either foreclosing or requesting assignment to HUD.
  4. HUD Responsibilities:
  5. The responsibility for review of tribal eligibility and land status issues lies with HUD’s Program Office of Native American Programs (ONAP). The address and phone number for the Program ONAP is included in Appendix 1. Responsibility for case number assignment, loan processing, underwriting, issuance of the firm commitment, and guarantee certificate also lies with HUD’s Program ONAP. HUD will:

    1. Issue a Section 184 case number to reserve Loan Guarantee Funds (if available) and issues the loan guarantee certificate after closing.
    2. Review all underwriting recommendations submitted by lenders.
    3. Approve or disapprove firm commitments based on lenders’ submissions.
    4. For assigned loans, HUD determines the claim payment amount to be paid to the lender and may foreclose on the loan.
    5. In the case of a foreclosure, HUD will sell the property to another eligible buyer.
    6. For lender conveyed properties after completion of the foreclosure, HUD determines the claim amount paid to the lender and resells the property.
  6. Role of the Bureau of Indian Affairs: For trust lands, BIA issues Title Status Reports (TSR) and reviews, approves, and records lease contracts, deeds of trust, leasehold mortgages and/or real estate mortgages.
  7. Indian Health Service Responsibilities: The Indian Health Service is available to evaluate the adequacy of water and sewer systems for Native Americans and may also provide for the cost and/or installation of water and sewer systems on an individual or community-wide basis.

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Alaskan Native Lands.
Alaskan Natives (Indian, Eskimo, and Aleut) hold land under a unique system imposed by the Alaska Natives Claims Settlement Act of 1971 (Act). This statute was a congressional response to conflict between non-Indians seeking to develop Alaska and Natives who claimed extensive tracts of aboriginal territory. The Act extinguished all aboriginal rights to lands in Alaska and established, under State law, village and regional corporations in which enrolled Natives would receive corporate stock. The corporations then select lands set aside under the Act for the Alaska Natives and, through corporate bylaws, protect against alienation of the land.
Allotted Trust Land.
Land or any interest in land held in trust by the United States for the benefit of individual Indians or held by individual Indians subject to federal restrictions against alienation or encumbrance.
Assignment Program.
The transfer of the mortgage and security interest to HUD by a lender that holds the rights to the mortgage or deed of trust. This action occurs when a mortgagor is in default and the Program ONAP makes a determination that it is in HUD’s best interest to become the holder of the mortgage and security interest. As of the date of this guidebook, it is our policy to accept the assignment of a loan in default if the holder of the guarantee certificate elects not to foreclose.
A demand for something due. A request or demand for payment in accordance with an insurance policy or guarantee. To assert and demand the recognition of right, title and\or possession of or to personal property.
The failure by a borrower to make any payment or to perform any other obligation under the terms of a loan for a period of more than 30 days.
The U.S. Department of Housing and Urban Development (HUD or the Department).
The legal process by which households in violation of their lease and/or mortgage terms are removed from occupancy of a given residence.
Fee Land.
The terms "fee title" or "fee simple title" generally denotes an estate in land that is absolute and unrestricted. The owner is entitled to dispose of the entire property or various interests in the property without hindrance. Upon death, the land, or any remaining interests, passes to heirs or those to whom the owner has given it by will. Within Indian reservations, lands may be owned in fee simple by both Indians and non-Indians. The former may have received a fee patent or some other document removing the restrictions against alienation on land formerly held in a trust or restricted status. The latter may have entered the reservation by purchasing allotted land at an advertised sale, from an Indian having the fee or unrestricted title to the land, or from the federal government at a sale of the ceded and surplus tribal land that remained after allotments were granted to individual tribal members. In some cases, fee ownership within an Indian reservation may predate the establishment of the reservation. Furthermore, a tribe/tribal member may convert fee land to trust land.
The legal process by which title to a given residence is transferred from a homeowner in default of a mortgage and/or lease terms to the note holder. On fee simple and mortgaged allotted trust properties, this includes the conveyance of the land as well as the structure. On tribal trust or leased allotted trust properties, the structure is conveyed to the note holder, as well as the leasehold interest in the land. Title to the land itself remains in trust.
Fractionated Ownership.
The term used to note ownership of a property in the name of more than one individual. The term is typically used in conjunction with allotted or individual trust lands to describe situations where, over time and through division of inheritance, multiple parties have claim to a single property.
Guarantee Fund.
The Indian Housing Loan Guarantee Fund established under Section 184(i) of the Housing and Community Development Act of 1992.
Any person recognized as being Indian or Alaska Native by an Indian tribe, the federal government or any state and includes the term "Native American."
Indian Area.
The area within which an Indian housing authority or a tribal housing entity is authorized to provide housing.
Indian Housing Authority.
Any entity that is authorized to engage in or assist in the development or operation of low-income housing for Indians and that is established either (1) by exercise of the power of self-government by an Indian tribe independent of State law; or (2) by operation of State law providing specifically for housing authorities for Indians, including regional housing authorities in the State of Alaska.
Land Assignments.
Assignments are an internal tribal assignment of tribal trust/restricted lands to tribal members. Assignments are not normally recorded against title to the land and are not normally recognized as valid unless they are recorded. Therefore, assignments cannot be recognized as site control. Unless the terms of the assignment provide for the leasing of the land by the holder of the assignment, the tribe must join with the assignee in the grant of a lease.
A written agreement between the owner of real property and another party detailing the specific terms by which the use and possession of real property is granted by the owner to the other party.
Lease Assignments.
A lease assignment is the transfer or conveyance of a valid existing lease to a third party, who becomes the new lessee. Generally, an assignment must cover the entire leasehold interest.
Leasehold Encumbrance.
This term refers to a mortgage, deed of trust, or other lien on the leasehold interest given to secure the repayment of a loan obtained by the lessee.
Leasehold Interest.
This is the name given to the interest conveyed by the tribe to the borrower under the lease; in other words, the borrower’s interest in the land. It consists of the right to the quiet enjoyment of the leased premises for the term of the lease, subject to the requirements of the lease.
The party to a lease who receives the right to use and possess real property.
The owner of real property who leases the property to another (lessee).
The mortgage is a pledge of property as security for repaying the indebtedness evidenced by the note.
Mutual Help Program.
A HUD housing program offering homeownership opportunities for Native American families. Under this Program, funds are allocated from HUD to Indian Housing Authorities who construct Mutual Help homes and determine the price of these homes. The housing authority then establishes a schedule that amortizes the prices of these homes over a set term. Mutual Help participants may use the Section 184 Program to acquire the property or acquire and rehabilitate their home, or may use Section 184 to rehabilitate Mutual Help homes that have been paid off.
Principal Residence.
The dwelling where the borrower maintains (or will maintain) a permanent place of abode, and typically spends (or will spend) the majority of the calendar year. A borrower may have only one principal residence at any one time.
Public Domain Allotments.
Trust/restricted property located outside the exterior boundaries of a federally recognized reservation. Public Domain property is generally considered to be the original allotted tract, but may also include purchased tracts which have been accepted in trust/restricted status.
Rancheria is a term used synonymously with "reservations" in the State of California. Lands within a "Rancheria/reservation" may be owned by a tribe or individuals and held in trust by the federal government.
Restricted Land.
Land or any interest in land which is held by an individual Indian or tribe and is subject to federal restrictions against alienation or encumbrance. This land can be alienated or encumbered only with the approval of the Secretary of the Interior as mandated by federal law.
The Secretary of the U.S. Department of Housing and Urban Development.
Standard housing.
A dwelling unit or housing that complies with the physical condition requirements established in the Section 184 statute. These requirements are stated in Paragraph 4.7 of this guidebook.
Certain leases may permit the lessee to create several leases in place of the original lease (so-called spin-off leases). Each of these subleases may then be assigned to another lessee.
Title Status Report.
A report issued by the Land Titles and Records Office of the Bureau of Indian Affairs having administrative jurisdiction over the specific Indian land indicating the type of ownership of the land, listing any restrictions or encumbrances on the land; the current owners; and any specific conditions or exceptions.
Tribal Land.
Land or any interest therein held by the United States in trust for a tribe, band, community, group, or pueblo of Indians subject to federal restrictions against alienation or encumbrance, including such land reserved for BIA administrative purposes when it is not immediately needed for such purposes. The term also includes lands held by the United States in trust for an Indian corporation chartered under Section 17 of the Act of June 18, 1934 (48 Stat. 984: 25 U.S.C. 476). This term also includes assignments of tribal land.
Any tribe, band, rancheria, colony, pueblo, group, community, or nation of Indians or Alaska Natives.
Tribally Designated Housing Entity.
An entity other than the tribal government authorized by an Indian tribe by exercise of the power of self-government independent of state law or by operation of state law providing specifically for housing authorities or housing entities for Indians, including regional housing authorities in the State of Alaska, to receive grant amounts and provide assistance under the Native American Housing Assistance Act and Self-Determination Act of 1996 for affordable housing for Indians. A TDHE may be authorized or established by one or more Indian tribes to act on behalf of each such tribe authorizing or establishing the housing entity.
Trust land.
Land or any interest in land held in trust by the U.S. Government for an individual Indian or tribe.

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