[Federal Register Volume 61, Number 45 (Wednesday, March 6, 1996)]
[Rules and Regulations]
[Pages 9052-9058]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-5050]
[[Page 9051]]
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Part VI
Department of Housing and Urban Development
_______________________________________________________________________
24 CFR Part 955
Loan Guarantees for Indian Housing; Final Rule
Federal Register / Vol. 61, No. 45 / Wednesday, March 6, 1996 / Rules
and Regulations
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[[Page 9052]]
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
24 CFR Part 955
[Docket No. FR-3614-F-04]
RIN 2577-AB40
Office of the Assistant Secretary for Public and Indian Housing;
Loan Guarantees for Indian Housing
AGENCY: Office of the Assistant Secretary for Public and Indian
Housing, HUD.
ACTION: Final rule.
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SUMMARY: This final rule sets forth regulations to implement the Indian
Loan Guarantee Program authorized by section 184 of the Housing and
Community Development Act of 1992. The purpose of the program is to
provide loan guarantees that will make private financing available to
Native Americans on restricted lands where no source of financing is
currently available.
EFFECTIVE DATE: April 5, 1996.
FOR FURTHER INFORMATION CONTACT: Dominic Nessi, Deputy Assistant
Secretary for Native American Programs, Room B-133, Department of
Housing and Urban Development, Washington, DC 20410; telephone (202)
755-0032 (voice) or (202) 708-0850 (TDD for speech or hearing impaired
individuals). These are not toll-free numbers.
SUPPLEMENTARY INFORMATION:
I. Paperwork Reduction Act Statement
The information collection requirements contained in Sec. 955.101
of this rule have been approved by the Office of Management and Budget
in accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-
3520), and assigned OMB control number 2577-0200. An agency may not
conduct or sponsor, and a person is not required to respond to, a
collection of information unless the collection displays a valid
control number.
II. Background
Section 184 of the Housing and Community Development Act of 1992
(HCDA 1992) (Pub. L. 102-550, approved October 28, 1992) authorized the
establishment of the Indian Housing Loan Guarantee Fund (the Fund) to
provide access to sources of private financing to Indian families and
Indian housing authorities who otherwise could not acquire housing
financing because of the unique legal status of Indian trust land. In
general, these lands, held in trust by the United States for the
benefit of an Indian or Indian tribe, are inalienable. Trust lands
under this program also include lands to which the title is held by an
Indian tribe subject to a restriction against alienation imposed by the
United States. Because titles to individual plots do not convey, and
liens do not attach, conventional mortgage lending practices do not
operate in this forum.
The Fund addresses these obstacles to mortgage financing by
guaranteeing loans made to Indian families or Indian housing
authorities to construct, acquire, or rehabilitate 1- to 4-family
dwellings that are standard housing and are located on trust land or
land located in an Indian or Alaska Native area. Loans may be made by
any lender approved by the Secretary of Housing and Urban Development,
the Secretary of Agriculture, or the Secretary of Veterans' Affairs;
or, any lender which is supervised, approved, regulated or insured by
any agency of the Federal Government.
The Department implemented the section 184 Loan Guarantees for
Indian Housing program at 24 CFR part 955 by an interim rule published
on August 18, 1994 (59 FR 42732). Six public comments, which are
discussed in section IV. of this preamble, below, were received in
response to the interim rule.
III. Changes Made in the Final Rule
In keeping with the President's mandate to reinvent and reform
regulations, part 955 is substantially streamlined in this rule. One of
the methods by which the Department is streamlining and reducing its
regulations is to remove rule text that only repeats statutory
language. Rules will only contain legally binding requirements that are
in addition to those contained in a statute. Besides reducing the sheer
bulk of rules, this practice will remove the problems that result when
a rule that echoes the language of a statute becomes inconsistent with
new statutory amendments. The period before such a rule is amended to
conform to new statutory language is often one of confusion and
uncertainty as to which law applies: the old provisions in the
regulations or the new provisions in the statute. The new part 955
promulgated here does not, therefore, repeat any statutory language,
but only implements requirements that are in addition to those in
Section 184.
The combined statutory and regulatory requirements that apply with
respect to Section 184 loan guarantees have been placed in an appendix
to this final rule. The final rule will be codified in the Code of
Federal Regulations; the appendix will not be codified. However, the
appendix is available to the public as a single document which provides
a unified overview of the general requirements under Section 184.
This final rule also adds a definition of Section 184, referring to
the loan guarantee program, that makes citing the program in the rule
more convenient.
IV. Comments on the Interim Rule
HUD solicited public comments on the interim rule. During the
comment period HUD received 6 comments from IHAs, Tribal leaders, and
financial institutions. This final rule summarizes below the comments
according to their relevant subparts and provides HUD's responses to
those comments.
Section 955.101 Applicability
Three commentors objected to the interim rule's definition of
eligible areas as ``restricted Indian lands.'' These commentors stated
that eligible areas should be defined as all lands in Indian country,
regardless of title status (including fee lands).
HUD response: Section 184 can be used only with respect to
properties which are located on trust/restricted lands or which are
located within an Indian area. Some tribes are currently expanding
their service area by purchasing fee simple land and placing that land
into trust status. These areas are eligible for section 184 assistance
because they are restricted lands within an Indian area.
Section 955.103 Definitions
One commentor noted that the Interim Rule refers to ``Native
Americans'' while the statute refers to ``Indian families'' and
``Indian Housing Authorities.'' The commentor recommended that
references to ``Native Americans'' be removed from the rule.
HUD response: The definition of Indian used in the rule means 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'', which has been added to the regulatory language at the
discretion of the Department.
One commentor requested clarification regarding whether Native
Hawaiians are eligible borrowers under the section 184 program.
HUD response: The statutory purpose of the section 184 program is
given at HCDA 1992 section 184(a) as: ``To provide access to sources of
private financing to Indian families and Indian housing authorities who
otherwise could not acquire housing financing
[[Page 9053]]
because of the unique legal status of Indian trust land * * *''. Native
Hawaiians, who are not included within the definition of the term
``Indian,'' do not qualify under this statutory purpose.
Section 955.105 Eligible Loans
Two commentors noted that the restriction on eligible loans should
be expanded to include adjustable rate mortgages and balloon payment
mortgages.
HUD response: The Department has determined that the section 184
program will be operating in a totally new lending environment and the
uncertainty of a balloon payment mortgage or an adjustable rate
mortgage of any type would create an unnecessary risk to the borrower,
the lender and the Department. This rule clarifies, at Sec. 955.105,
that only fixed rate, fixed term loans with even monthly payments are
eligible.
Two commentors noted that acquisition and rehabilitation is an
eligible activity and requested clarification whether a single
guaranteed loan can be made to cover both of these activities for one
structure.
HUD response: Yes, a single guaranteed loan can be made to cover
both acquisition and rehabilitation for one structure. A section 184
guaranteed loan may be used to ``pay off'' a Mutual Help home so that
the property may be conveyed to the homeowner. A guaranteed loan could
be used to pay off and rehabilitate a Mutual Help home.
Section 955.107 Eligible Housing
One commenter stated that fee lands within Indian country should be
eligible sites. HUD will allow fee simple lands in limited
circumstances. Fee simple lands within a designated Indian area are
eligible sites under section 184.
One commentor recommended that the term ``modest in size and
design'' be defined in specific terms.
HUD response: In order to determine ``modest'' the section 184
program loan may not exceed 150% of the FHA mortgage limits, as
adjusted for the area. These mortgage limits are published by the
Federal Housing Administration (FHA) by area of the country on a
periodic basis. Thus, the mortgage limit in Anchorage may differ
greatly from the mortgage limit in Oklahoma City.
One commentor criticized the lack of specificity in the
construction standards at Sec. 955.107(2). The commentor recommended
that structures be required to conform to the Uniform Building Code
(UBC) and other locally adopted Tribal building ordinances.
HUD response: The section 184 statute provides requirements
relating to size; heating, plumbing, and electrical requirements; and
energy efficiency. However, the Department emphasizes that the
standards represent a minimum level of requirements. The tribe,
individual owner, or IHA may design and construct a property that meets
a higher standard.
Section 955.109 Eligible Lenders
In addressing this section, one commentor stated that the rule
should cross reference prohibitions against housing discrimination. The
same commentor then stated that lenders should not be able to withhold
loans where the fund is fully obligated.
HUD response: The commentor appears to be asking HUD to prohibit
lenders from refusing to make loans to eligible borrowers as long as
there is section 184 guarantee authority available. Notwithstanding any
housing discrimination laws, HUD does not have the authority to compel
lenders to participate in this program.
Section 955.111 Eligible Collateral
One commentor suggested that the term ``leasehold'' be deleted from
section Sec. 955.111(b)(3).
HUD response: HUD agrees, and has removed the term ``leasehold''
from section Sec. 955.111(b)(3) of the final rule.
One commentor stated that there is no time period specified for
when the Notice of Default (NOD) is filed or for when it ends, or when
the 60 day period starts for the eviction action. Another commentor
stated that tribal eviction procedures under Sec. 955.111(4) should be
standardized and/or reviewed by OGC and ONAP for approval as a
precondition for participation in the section 184 program.
HUD response: Tribes are required to adopt foreclosure, eviction,
and priority of lien procedures to be eligible for participation in the
section 184 program. HUD does not approve or review the text of each
procedure. This function is left to Tribal discretion. The Department
will simply ensure that such procedures do exist. In order to provide
maximum flexibility and Tribal discretion in the matter of establishing
foreclosure and eviction policies HUD has determined to only recognize
the existence of such procedures and not a line by line technical
review of each tribe's policies.
One commentor stated that the 60-day time period for appealing
decisions under Sec. 955.111(b)(4)(ii) should be reduced to 30 days.
HUD response: HUD agrees with the commentor and will change the 60-
day time period for appealing decisions under Sec. 955.111(b)(4)(ii) to
30 days.
One commentor stated that Indian nation public policy allows for a
wide range of collateral arrangements.
HUD response: The rule takes this into account by specifying that
collateral may include, but is not limited to, the categories
specified.
One commentor objected to the priority of loan obligation
provision, asserting that it gives HUD oversight regarding the
substantive content of Indian nation law.
HUD response: This is a critical step to ensure the financial
stability of this new loan program and will provide the tribes and the
Department with the assurance of prompt action and protection of the
guaranteed loan.
One commentor objected to the requirement that tribes must certify
that they have in place and will enforce procedures for eviction. The
commentor stated that it is not required by the Statute.
HUD response: The Department has attempted to provide the broadest
interpretation possible in all instances; however, in a totally new
lending environment it is necessary to have in place at least minimal
safeguards to the financial integrity of the loan guarantee fund.
One commentor objected to the enforcement requirement under
Sec. 955.111(b)(4)(i), stating that it infringes on Indian nation
sovereignty.
HUD response: Once again the Department has determined that, in
this entirely new lending environment, it is critical to have in place
minimal standards that will ensure the financial integrity of the loan
guarantee fund.
One commentor requested further clarification on the review of HUD
decisions to cease issuing guarantees to specific tribes, saying that
it is important to ensure due process rights.
HUD response: The Department has determined that due process rights
of appeal have been developed to ensure maximum protection to both the
Department and the tribes with several levels of appeal available and a
final option to resubmit the appeal based upon new evidence following
the exhaustion of all appeal levels.
Section 955.113 Certificate of Guarantee
No comments received concerning this section.
Section 955.115 Guarantee Fee
One commentor requested clarification on what happens to the one
percent guarantee fee.
HUD response: Funds received as a result of the one percent
guarantee fee are returned to the loan guarantee fund
[[Page 9054]]
to provide additional resources for additional loans.
Section 955.117 Liability Under Guarantee
No comments received concerning this section.
Section 955.119 Transfer and Assumptions
One commentor questioned whether HUD will require that all of the
loans under the section 184 program be assumable, stating that many
lenders are reluctant to underwrite assumable loans.
HUD response: There is no requirement that all of the loans under
the section 184 program be assumable.
One commentor requested clarification regarding whether sales and
assignments to financial institutions will be subject to the law of the
Indian nations where the loans are made, in addition to being subject
to agency supervision under state regulators.
HUD response: Transactions may be subject to tribal laws in
addition to agency supervision under state regulations.
Section 955.121 Disqualification of Lenders and Civil Money Penalties
No comments received concerning this section.
Section 955.123 Payment Under Guarantee
Three commentors recommended that consideration be given to the
issue of whether the loan guarantee program will allow nonjudicial
remedies such as deeds of trust and escrow agents to be utilized as an
alternative to judicial foreclosure, as referred to under
Sec. 955.123(a)(1)(i) of the interim rule.
HUD response: Any method that promotes collection is encouraged,
because the statute requires the holder of the guarantee to exhaust all
reasonable possibilities of collection before any payment under a
guarantee is made.
Section 955.125 Expiration of Interim Rule
No comments received concerning this section.
V. Other Matters
Impact on Small Entities
The Department, in accordance with the Regulatory Flexibility Act
(5 U.S.C. 605(b)), has reviewed this rule before publication and by
approving it certifies that this rule does not have a significant
economic impact on a substantial number of small entities.
Specifically, the requirements of this interim rule are directed to
individual borrowers, Indian Housing Authorities, Tribal governments
and financial institutions.
Environmental Review
A Finding of No Significant Impact with respect to the environment
has been made in accordance with HUD regulations at 24 CFR Part 50,
which implement section 102(2)(C) of the National Environmental Policy
Act of 1969. The Finding of No Significant Impact is available for
public inspection between 7:30 a.m. and 5:30 p.m. weekdays in the
Office of the Rules Docket Clerk.
Federalism Impact
The General Counsel, as the Designated Official under section 6(a)
of Executive Order 12612, Federalism, has determined that the policies
contained in this rule will not have substantial direct effects on
states or their political subdivisions, or the relationship between the
federal government and the states, or on the distribution of power and
responsibilities among the various levels of government. As a result,
the rule is not subject to review under this order. Specifically, the
requirements of this rule are directed to individual borrowers and
financial institutions.
Impact on the Family
The General Counsel, as the Designated Official under Executive
Order 12606, The Family, has determined that this rule has potential
for significant impact on family formation, maintenance, and general
well-being. The Indian Loan Guarantee Program will make it possible for
Native American families to build or acquire homes on their Native
lands where homeownership opportunities have been very limited in the
past. Accordingly, since the impact on the family is beneficial, no
further review is considered necessary.
List of Subjects in 24 CFR Part 955
Indians, Loan programs--Indians, Reporting and recordkeeping
requirements.
Accordingly, 24 CFR part 955 is revised to read as follows:
PART 955--LOAN GUARANTEES FOR INDIAN HOUSING
Sec.
955.101 Applicability and scope.
955.103 Definitions.
955.105 Eligible loans.
955.107 Eligible collateral.
955.109 Guarantee fee.
955.111 Safety and quality standards.
Authority: 42 U.S.C. 1715z-13a and 3535(d).
Sec. 955.101 Applicability and scope.
Under the provisions of section 184 of the Housing and Community
Development Act of 1992 (12 U.S.C. 1515z-13a), the Department of
Housing and Urban Development (the Department) has the authority to
guarantee loans for the construction, acquisition, or rehabilitation of
1- to 4-family homes to be owned by Native Americans on restricted
Indian lands. This part provides requirements that are in addition to
those in section 184.
(Approved by the Office of Management and Budget under control
number 2577-0200.)
Sec. 955.103 Definitions.
In addition to the definitions that appear in Section 184 of the
Housing and Community Development Act of 1992, the following
definitions are applicable to loan guarantees under Section 184--
Default means the failure by a borrower to make any payment or to
perform any other obligation under the terms of a loan, and such
failure continues for a period of more than 30 days.
Indian means 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''.
Mortgage as used in this part, means a first lien as is commonly
given to secure advances on, or the unpaid purchase price of, real
estate under the laws of the jurisdiction where the property is located
and may refer both to a security instrument creating a lien, whether
called a mortgage, deed of trust, security deed, or another term used
in a particular jurisdiction, as well as the credit instrument, or
note, secured thereby.
Principal residence means the dwelling where the mortgagor
maintains (or will maintain) his or her permanent place of abode, and
typically spends (or will spend) the majority of the calendar year. A
person may have only one principal residence at any one time.
Section 184 means section 184 (entitled, ``Loan Guarantees for
Indian Housing'') of the Housing and Community Development Act of 1992
(12 U.S.C. 1515z-13a).
Sec. 955.105 Eligible loans.
(a) In general. Only fixed rate, fixed term loans with even monthly
payments are eligible under the Section 184 program.
(b) Eligible borrowers. A loan guaranteed under Section 184 may be
made to a borrower that is:
(1) An Indian who will occupy it as a principal residence and who
is
[[Page 9055]]
otherwise qualified under Section 184; or
(2) An Indian Housing Authority.
(c) Appraisal of labor value. The value of any improvements to the
property made through the skilled or unskilled labor of the borrower,
which may be used to make a payment on account of the balance of the
purchase price, must be appraised in accordance with generally
acceptable practices and procedures.
(d) Construction advances. The Department may guarantee loans from
which advances will be made during construction. The Department will
provide guarantees for advances made by the mortgagee during
construction if all of the following conditions are satisfied:
(1) The mortgagor and the mortgagee execute a building loan
agreement, approved by HUD, setting forth the terms and conditions
under which advances will be made;
(2) The advances are made only as provided in the commitment;
(3) The principal amount of the mortgage is held by the mortgagee
in an interest bearing account, trust, or escrow for the benefit of the
mortgagor, pending advancement to the mortgagor or to his or her
creditors as provided in the loan agreement; and
(4) The mortgage shall bear interest on the amount advanced to the
mortgagor or to his or her creditors and on the amount held in an
account or trust for the benefit of the mortgagor.
(e) Environmental compliance. Prior to the guarantee of any loan,
there must be compliance with the environmental rules as stated in 24
CFR part 50.
Sec. 955.107 Eligible collateral.
(a) In general. A loan guaranteed under Section 184 may be secured
by any collateral authorized under Federal, State, or tribal law and
determined by the lender and approved by the Department to be
sufficient to cover the amount of the loan, and may include, but is not
limited to, the following:
(1) The property and/or improvements to be acquired, constructed,
or rehabilitated, to the extent that an interest in such property is
not subject to the restrictions of trust lands against alienation;
(2) A first or second mortgage on property other than trust land;
(3) Personal property; or
(4) Cash, notes, an interest in securities, royalties, annuities,
or any other property that is transferable and whose present value may
be determined.
(b) Trust land as collateral. If trust land is used as collateral
for the loan, the following additional provisions apply:
(1) Approved Lease. Any land lease for a unit financed under
Section 184 must be on a form approved by both HUD and the Bureau of
Indian Affairs, U.S. Department of Interior.
(2) Assumption or sale of leasehold. If a leasehold is used as
security for the loan, the loan form must contain a provision requiring
tribal consent before any assumption of an existing lease, except where
title to the leasehold interest is obtained by the Department through
foreclosure of the guaranteed mortgage. A mortgagee other than the
Department must obtain tribal consent before obtaining title through a
foreclosure sale. Tribal consent must be obtained on any subsequent
transfer from the purchaser, including the Department, at foreclosure
sale. The lease may not be terminated by the lessor without HUD's
approval while the mortgage is guaranteed or held by the Department.
(3) Priority of loan obligation. Any tribal government whose courts
have jurisdiction to hear foreclosures must enact a law providing for
the satisfaction of a loan guaranteed or held by the Department before
other obligations (other than tribal leasehold taxes against the
property assessed after the property is mortgaged) are satisfied.
(4) Eviction procedures. Before HUD will guarantee a loan secured
by trust land, the tribe having jurisdiction over such property must
notify the Department that it has adopted and will enforce procedures
for eviction of defaulted mortgagors where the guaranteed loan has been
foreclosed.
(i) Enforcement. If the Department determines that the tribe has
failed to enforce adequately its eviction procedures, HUD will cease
issuing guarantees for loans for tribal members except pursuant to
existing commitments. Adequate enforcement is demonstrated where prior
evictions have been completed within 60 days after the date of the
notice by HUD that foreclosure was completed.
(ii) Review. If the Department ceases issuing guarantees in
accordance with the first sentence of paragraph (c)(1) of this section,
HUD shall notify the tribe of the reasons for such action and that the
tribe may, within 30 days after notification of HUD's action, file a
written appeal with the Field Office of Native American Programs
(FONAP) Administrator. Within 30 days after notification of an adverse
decision of the appeal by the FONAP Administrator, the tribe may file a
written request for review with the Deputy Assistant Secretary, Office
of Native American Programs (ONAP). Upon notification of an adverse
decision by the Deputy Assistant Secretary, the tribe has 30 additional
days to file an appeal with the Assistant Secretary for Public and
Indian Housing. The determination of the Assistant Secretary shall be
final, but the tribe may resubmit the issue to the Assistant Secretary
for review at any subsequent time if new evidence or changed
circumstances warrant reconsideration. (Any other administrative
actions determined to be necessary to debar a tribe from participating
in this program will be subject to the formal debarment procedures
contained in 24 CFR part 24.)
Sec. 955.109 Guarantee fee.
The lender shall pay to the Department, at the time of issuance of
the guarantee, a fee for the guarantee of loans under Section 184, in
an amount equal to 1 percent of the principal obligation of the loan.
This amount is payable by the borrower at closing.
Sec. 955.111 Safety and quality standards.
Loans guaranteed under Section 184 shall be made only on dwelling
units which meet safety and quality standards set forth herein. Each
unit must:
(a) Be decent, safe, sanitary, and modest in size and design;
(b) Conform with applicable general construction standards for the
region;
(c) Contain a heating system that:
(1) Has the capacity to maintain a minimum temperature in the
dwelling of 65 degrees Fahrenheit during the coldest weather in the
area;
(2) Is safe to operate and maintain;
(3) Delivers a uniform distribution of heat; and
(4) Conforms to any applicable tribal heating code or, if there is
no applicable tribal code, an appropriate county, State, or National
code;
(d) Contain a plumbing system that:
(1) Uses a properly installed system of piping;
(2) Includes a kitchen sink and a partitional bathroom with
lavatory, toilet, and bath or shower; and
(3) Uses water supply, plumbing and sewage disposal systems that
conform to any applicable tribal code or, if there is no applicable
tribal code, the minimum standards established by the applicable county
or State;
(e) Contain an electrical system using wiring and equipment
properly installed to safely supply electrical energy for adequate
lighting and for operation of appliances that conforms to any
applicable tribal code or, if there is no applicable tribal code, an
appropriate county, State, or National code;
[[Page 9056]]
(f) Be not less than:
(1) 570 square feet in size, if designed for a family of not more
than 4 persons;
(2) 850 square feet in size, if designed for a family of not less
than 5 and more than 7 persons; and
(3) 1020 square feet in size, if designed for a family of not less
than 8 persons; or
(4) The size provided under the applicable locally adopted
standards for size of dwelling units; except that the Department, upon
the request of a tribe or Indian housing authority, may waive the size
requirements under this paragraph; and
(g) Conform with the energy performance requirements for new
construction established by the Department under section 526(a) of the
National Housing Act (12 U.S.C. 1735f-4).
Dated: February 26, 1996.
Michael B. Janis,
General Deputy Assistant Secretary for Public and Indian Housing.
[Note: The following appendix will not be codified in the Code of
Federal Regulations.]
Appendix--Guide to Loan Guarantees for Indian Housing
Section 1. Purpose, applicability and scope.
Section 2. Definitions.
Section 3. Eligible loans.
Section 4. Eligible housing.
Section 5. Eligible lenders.
Section 6. Eligible collateral.
Section 7. Certificate of Guarantee.
Section 8. Guarantee fee.
Section 9. Liability under guarantee.
Section 10. Transfer and assumptions.
Section 11. Disqualification of lenders and civil money penalties.
Section 12. Payment under guarantee.
Section 1. Purpose, Applicability and Scope
The purpose of this guide is to present, in a single document,
the statutory and regulatory requirements that apply to the Loan
Guarantees for Indian Housing Program under section 184 of the
Housing and Community Development Act of 1992 (P.L. 102-550,
approved October 28, 1992). Although it presents the regulatory and
statutory requirements in a combined format, this guide is a
secondary source for these requirements. The Code of Federal
Regulations (CFR), at 24 CFR, is the primary, governing source for
regulatory requirements, and section 184 of the Housing and
Community Development Act of 1992 is the primary, governing source
for statutory requirements.
Under the provisions of Section 184, the Department of Housing
and Urban Development (the Department) has the authority to
guarantee loans for the construction, acquisition, or rehabilitation
of 1- to 4-family homes to be owned by Native Americans on
restricted Indian lands. This guide describes the eligibility of
borrowers, lenders and property, as well as the benefits of the
Indian Loan Guarantee Program.
Section 2. Definitions
Default means the failure by a borrower to make any payment or
to perform any other obligation under the terms of a loan, and such
failure continues for a period of more than 30 days.
Department means the U. S. Department of Housing and Urban
Development (HUD).
Guarantee Fund means the Indian Housing Loan Guarantee Fund
established under section 184(i) of the Housing and Community
Development Act of 1992.
Indian means 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 means the area within which an Indian housing
authority is authorized to provide housing.
Indian Housing Authority (IHA) means 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 of 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.
Mortgage as used in this part, means a first lien as is commonly
given to secure advances on, or the unpaid purchase price of, real
estate under the laws of the jurisdiction where the property is
located and may refer both to a security instrument creating a lien,
whether called a mortgage, deed of trust, security deed, or another
term used in a particular jurisdiction, as well as the credit
instrument, or note, secured thereby.
Principal residence means the dwelling where the mortgagor
maintains (or will maintain) his or her permanent place of abode,
and typically spends (or will spend) the majority of the calendar
year. A person may have only one principal residence at any one
time.
Secretary means the Secretary of Housing and Urban Development.
Section 184 means section 184 (entitled, ``Loan Guarantees for
Indian Housing'') of the Housing and Community Development Act of
1992 (Pub. L. 102-550, approved October 28, 1992).
Standard housing means a dwelling unit or housing that complies
with the requirements established in this part.
Tribe means any tribe, band, pueblo, group, community, or nation
of Indians or Alaska Natives.
Trust land means land, title to which is held by the United
States for the benefit of an Indian or Indian tribe; or, land, title
to which is held by an Indian tribe, subject to a restriction
against alienation imposed by the United States.
Section 3. Eligible Loans
(a) In general. Only fixed rate, fixed term loans with even
monthly payments are eligible under the Section 184 program.
(b) Eligible borrowers. A loan guaranteed under Section 184 may
be made to a borrower that is:
(1) An Indian who will occupy it as a principal residence and
who is otherwise qualified under this part; or
(2) An Indian Housing Authority
(c) Terms of loan. The loan shall:
(1) Be made for a term not exceeding 30 years;
(2) Bear interest (exclusive of the guarantee fee and service
charges, if any) at a fixed rate agreed upon by the borrower and the
lender and determined by the Department to be reasonable, which may
not exceed the rate generally charged in the area (as determined by
the Department) for home mortgage loans not guaranteed or insured by
any agency or instrumentality of the Federal Government.
(d) Maximum mortgage amounts.
(1) A principal obligation may not exceed:
(i) An amount equal to the sum of:
(A) 97 percent of the first $25,000 of the appraised value of
the property, as of the date the loan is accepted for guarantee, and
(B) 95 percent of such value in excess of $25,000; and
(ii) Amounts approved otherwise by the Department.
(2) The balance of the purchase price must involve a payment on
account of the property that may be:
(i) In cash or other property of equivalent value acceptable to
the lender and the Department, or
(ii) The value of any improvements to the property made through
the skilled or unskilled labor of the borrower, appraised in
accordance with generally acceptable practices and procedures.
(e) Construction advances. The Department may guarantee loans
from which advances will be made during construction. The Department
will provide guarantees for advances made by the mortgagee during
construction if all of the following conditions are satisfied:
(1) The mortgagor and the mortgagee execute a building loan
agreement, approved by HUD, setting forth the terms and conditions
under which advances will be made;
(2) The advances are made only as provided in the commitment;
(3) The principal amount of the mortgage is held by the
mortgagee in an interest bearing account, trust, or escrow for the
benefit of the mortgagor, pending advancement to the mortgagor or to
his or her creditors as provided in the loan agreement; and
(4) The mortgage shall bear interest on the amount advanced to
the mortgagor or to his or her creditors and on the amount held in
an account or trust for the benefit of the mortgagor.
(f) Environmental compliance. Prior to the guarantee of any
loan, there must be compliance with the environmental rules as
stated in 24 CFR part 50.
Section 4. Eligible Housing
(a) In general. A loan guaranteed under Section 184 may be used
for the construction, acquisition, or rehabilitation of a 1- to 4-
family dwelling unit located on trust land or land located in an
Indian area.
(b) Safety and quality standards. Loans guaranteed under Section
184 shall be made only on dwelling units which meet safety and
quality standards set forth herein. Each unit must:
[[Page 9057]]
(1) Be decent, safe, sanitary, and modest in size and design;
(2) Conform with applicable general construction standards for
the region;
(3) Contain a heating system that:
(i) Has the capacity to maintain a minimum temperature in the
dwelling of 65 degrees Fahrenheit during the coldest weather in the
area;
(ii) Is safe to operate and maintain;
(iii) Delivers a uniform distribution of heat; and
(iv) Conforms to any applicable tribal heating code or, if there
is no applicable tribal code, an appropriate county, State, or
National code;
(4) Contain a plumbing system that:
(i) Uses a properly installed system of piping;
(ii) Includes a kitchen sink and a partitional bathroom with
lavatory, toilet, and bath or shower; and
(iii) Uses water supply, plumbing and sewage disposal systems
that conform to any applicable tribal code or, if there is no
applicable tribal code, the minimum standards established by the
applicable county or State;
(5) Contain an electrical system using wiring and equipment
properly installed to safely supply electrical energy for adequate
lighting and for operation of appliances that conforms to any
applicable tribal code or, if there is no applicable tribal code, an
appropriate county, State, or National code;
(6) Be not less than:
(i) 570 square feet in size, if designed for a family of not
more than 4 persons;
(ii) 850 square feet in size, if designed for a family of not
less than 5 and more than 7 persons; and
(iii) 1020 square feet in size, if designed for a family of not
less than 8 persons, or
(iv) The size provided under the applicable locally adopted
standards for size of dwelling units; except that the Department,
upon the request of a tribe or Indian housing authority, may waive
the size requirements under this paragraph; and
(7) Conform with the energy performance requirements for new
construction established by the Department under section 526(a) of
the National Housing Act.
Section 5. Eligible Lenders
The loan shall be made only by a lender approved by and meeting
qualifications established in this part, except that loans otherwise
insured or guaranteed by any agency of the Federal Government, or
made by an organization of Indians from amounts borrowed from the
United States shall not be eligible for guarantee under this part.
The following lenders are deemed to be approved under this part:
(a) Any mortgagee approved by the Department of Housing and
Urban Development for participation in the single family mortgage
insurance program under title II of the National Housing Act.
(b) Any lender whose housing loans under chapter 37 of title 38,
United States Code are automatically guaranteed pursuant to section
1802(d) of such title.
(c) Any lender approved by the Department of Agriculture to make
guaranteed loans for single family housing under the Housing Act of
1949.
(d) Any other lender that is supervised, approved, regulated, or
insured by any agency of the Federal Government.
Section 6. Eligible Collateral
(a) In general. A loan guaranteed under Section 184 may be
secured by any collateral authorized under Federal, State, or tribal
law and determined by the lender and approved by the Department to
be sufficient to cover the amount of the loan, and may include, but
is not limited to, the following:
(1) The property and/or improvements to be acquired,
constructed, or rehabilitated, to the extent that an interest in
such property is not subject to the restrictions of trust lands
against alienation;
(2) A first or second mortgage on property other than trust
land;
(3) Personal property; or
(4) Cash, notes, an interest in securities, royalties,
annuities, or any other property that is transferable and whose
present value may be determined.
(b) Trust land as collateral. If trust land is used as
collateral for the loan, the following additional provisions apply:
(1) Approved Lease. Any land lease for a unit financed under
Section 184 must be on a form approved by both HUD and the Bureau of
Indian Affairs, U.S. Department of Interior.
(2) Assumption or sale of leasehold. If a leasehold is used as
security for the loan, the loan form must contain a provision
requiring tribal consent before any assumption of an existing lease,
except where title to the leasehold interest is obtained by the
Department through foreclosure of the guaranteed mortgage. A
mortgagee other than the Department must obtain tribal consent
before obtaining title through a foreclosure sale. Tribal consent
must be obtained on any subsequent transfer from the purchaser,
including the Department, at foreclosure sale. The lease may not be
terminated by the lessor without HUD's approval while the mortgage
is guaranteed or held by the Department.
(3) Eviction procedures. Before HUD will guarantee a loan
secured by trust land, the tribe having jurisdiction over such
property must notify the Department that it has adopted and will
enforce procedures for eviction of defaulted mortgagors where the
guaranteed loan has been foreclosed.
(i) Enforcement. If the Department determines that the tribe has
failed to enforce adequately its eviction procedures, HUD will cease
issuing guarantees for loans for tribal members except pursuant to
existing commitments. Adequate enforcement is demonstrated where
prior evictions have been completed within 60 days after the date of
the notice by HUD that foreclosure was completed.
(ii) Review. If the Department ceases issuing guarantees in
accordance with the first sentence of paragraph (c)(1) of this
section, HUD shall notify the tribe of the reasons for such action
and that the tribe may, within 30 days after notification of HUD's
action, file a written appeal with the Field Office of Native
American Programs (FONAP) Administrator. Within 30 days after
notification of an adverse decision of the appeal by the FONAP
Administrator, the tribe may file a written request for review with
the Deputy Assistant Secretary, Office of Native American Programs
(ONAP). Upon notification of an adverse decision by the Deputy
Assistant Secretary, the tribe has 30 additional days to file an
appeal with the Assistant Secretary for Public and Indian Housing.
The determination of the Assistant Secretary shall be final, but the
tribe may resubmit the issue to the Assistant Secretary for review
at any subsequent time if new evidence or changed circumstances
warrant reconsideration. (Any other administrative actions
determined to be necessary to debar a tribe from participating in
this program will be subject to the formal debarment procedures
contained in 24 CFR part 24).
Section 7. Certificate of Guarantee
(a) Extent of guarantee. A certificate issued in accordance with
Section 184 guarantees 100 percent of the unpaid principal and
interest of the underlying loan.
(b) Approval process. Before the Department approves any loan
for guarantee under this part, the lender shall submit the
application or the loan to the Department for examination. If the
Department approves the loan for guarantee, the Department will
issue a certificate under Section 184 as evidence of the guarantee.
(c) Standard for approval. The Department may approve a loan for
guarantee under Section 184 and issue a certificate only if the
Department determines there is a reasonable prospect of repayment of
the loan.
(d) Effect. A certificate of guarantee issued under Section 184
by the Department shall be conclusive evidence of the eligibility of
the loan for guarantee under the provisions of Section 184 and the
amount of such guarantee. Such evidence shall be incontestable in
the hands of the bearer and the full faith and credit of the United
States is pledged to the payment of all amounts agreed to be paid by
the Department as security for such obligations.
(e) Fraud and misrepresentation. Nothing in Section 184 may
preclude the Department from establishing:
(1) Defenses against the original lender based on fraud or
material misrepresentation; and
(2) Establishing partial defenses, based upon regulations in
effect on the date of issuance or disbursement (whichever is
earlier), to the amount payable on the guarantee.
Section 8. Guarantee Fee
The lender shall pay to the Department, at the time of issuance
of the guarantee, a fee for the guarantee of loans under Section
184, in an amount equal to 1 percent of the principal obligation of
the loan. This amount is payable by the borrower at closing.
Section 9. Liability Under Guarantee
The liability under a guarantee provided in accordance with
Section 184 shall decrease or increase on a pro rata basis according
to any decrease or increase in the amount of the unpaid obligation
under the provisions of the loan agreement.
[[Page 9058]]
Section 10. Transfer and Assumptions
Notwithstanding any other provision of law, any loan guaranteed
under this part, including the security given for the loan, may be
sold or assigned by the lender to any financial institution subject
to examination and supervision by an agency of the Federal
Government or of any State or the District of Columbia.
Section 11. Disqualification of Lenders and Civil Money Penalties
(a) General. If the Department determines that a lender or
holder of a guarantee certificate under Section 184 has failed to
maintain adequate accounting records, to adequately service loans
guaranteed under Section 184, to exercise proper credit or
underwriting judgement, or has engaged in practices otherwise
detrimental to the interest of a borrower or the United States, the
Department may:
(1) Refuse, either temporarily or permanently, to guarantee any
further loans made by such lender or holder;
(2) Bar such lender or holder from acquiring additional loans
guaranteed under Section 184; and
(3) Require that such lender or holder assume not less than 10
percent of any loss on further loans made or held by the lender or
holder that are guaranteed under Section 184.
(b) Civil money penalties for intentional violations. If the
Department determines that any lender or holder of a guarantee
certificate under Section 184 has intentionally failed to maintain
adequate accounting records, to adequately service loans guaranteed
under Section 184, or to exercise proper credit or underwriting
judgement, the Department may impose a civil money penalty on such
lender or holder in the manner and amount provided under section 536
of the National Housing Act with respect to mortgagees and lenders
under such Act.
(c) Payment of loans made in good faith. Notwithstanding
paragraphs (a) and (b), the Department may not refuse to pay
pursuant to a valid guarantee on loans of a lender or holder barred
under Section 184, if the loans were previously made in good faith.
Section 12. Payment Under Guarantee
(a) Lender options.
(1) General. In the event of default by the borrower on a loan
guaranteed under this part, the holder of the guarantee certificate
shall provide written notice of the default to the Department. Upon
providing this notice, the holder of the guarantee certificate will
be entitled to payment under the guarantee (subject to the
provisions of this part) and may proceed to obtain payment in one of
the following manners:
(i) Foreclosure. The holder of the certificate may initiate
foreclosure proceedings in a court of competent jurisdiction (after
providing written notice of such action to the Department) and upon
a final order by the court authorizing foreclosure and submission to
the Department of a claim for payment under the guarantee, the
Department will pay to the holder of the certificate the pro rata
portion of the amount guaranteed (as determined in accordance with
Section 9 of this guide) plus reasonable fees and expenses as
approved by the Department. The Department will be subrogated to the
rights of the holder of the guarantee and the holder shall assign
the obligation and security to the Department.
(ii) No foreclosure. Without seeking a judicial foreclosure (or
in any case in which a foreclosure proceeding initiated under
paragraph (i) of this section continues for a period in excess of 1
year), the holder of the guarantee may submit to the Department a
claim for payment under the guarantee and the Department will only
pay to such holder for a loss on any single loan an amount equal to
90 percent of the pro rata portion of the amount guaranteed (as
determined in accordance with Section 9 of this guide). The
Department will be subrogated to the rights of the holder of the
guarantee and the holder shall assign the obligation and security to
the Department.
(2) Requirements. Before any payment under a guarantee is made
under paragraph (1) of this section, the holder of the guarantee
shall exhaust all reasonable possibilities of collection. Upon
payment, in whole or in part, to the holder, the note of judgement
evidencing the debt shall be assigned to the United States and the
holder shall have no further claim against the borrower or the
United States.
(b) Assignment by the Department. Notwithstanding paragraph (a)
of this section, upon receiving notice of default on a loan
guaranteed under Section 184 from the holder of the guarantee, the
Department may accept assignment of the loan if the Department
determines that the assignment is in the best interests of the
United States. Upon assignment the Department will pay to the holder
of the guarantee the pro rata portion of the amount guaranteed (as
determined in accordance with Section 9 of this guide). The
Department will be subrogated to the rights of the holder of the
guarantee and the holder shall assign the obligation and security to
the Department.
(c) Limitations on liquidation. In the event of default by the
borrower on a loan guaranteed under Section 184 involving a security
interest in tribal allotted or trust land, the Department will only
pursue liquidation after offering to transfer the account to an
eligible tribal member, the tribe, or the Indian housing authority
serving the tribe or tribes. If the Department subsequently proceeds
to liquidate the account, the Department will not sell, transfer,
otherwise dispose of or alienate the property except to one of the
entities described in the preceding sentence.
[FR Doc. 96-5050 Filed 3-5-96; 8:45 am]
BILLING CODE 4210-33-P
