What You Need To Know About Home Loans on Reservation or Trust Land
To help more Native Americans enjoy the benefits of home ownership, the HUD184 program was designed to allow loans on native trust lands. These loans have special requirements that must be followed in order to qualify for the loan.
In particular, HUD requires very specific information about the status of the land and the tribal lease agreement before approving any loans.
Loans on native trust land
All loans on trust land require the borrower to acquire a Trust Status Report, or TSR, from the Bureau of Indian Affairs. This report determines the ownership status of the property and also identifies any liens against the property.
How is this different from conventional loans?
Most home loans are "fee simple," meaning you own the land as well as the house on the land. To determine ownership of the land, you must obtain a title report or title commitment from a local title company. The title company researches county records to identify the owner and determines whether there are any kind of deed restrictions or liens against the property that would impact the loan.
On Native American trust land, property ownership records are kept by the Bureau of Indian Affairs, not the local county recording office. In order to get a proper title to the property, you must work through the BIA rather than a regular title company.
Obtaining the title report from a private title company generally takes 30 to 45 days. Depending on the regional BIA office, obtaining the TSR report can take much longer.
Working with the BIA
To obtain your TSR, contact the regional BIA office serving your area. A listing of the BIA regional offices can be found online with this directory at https://www.bia.gov/as-ia/ieed/loan-guaranty-insurance-and-interest-subsidy-program.
The time it takes to obtain a TSR can vary greatly. Some BIA regional offices can produce them in a few weeks. Other regions may take several months or more. So be sure to contact your regional office and order the report as early as possible in the loan process.
Bank2 recommends asking your BIA office about their turnaround time for the TSR report before applying for your home loan. That way, if it takes more than 30 to 45 days, you can delay your loan application to coincide with the expected delivery date of the report.
If you experience delays in working with the BIA, you may want to ask your tribal housing authority for assistance. They usually have good working relationships with the regional BIA offices, and can often help to speed up the process.
Whether you are building a new home, buying an existing one, or refinancing your current mortgage, get started on the TSR process as soon as possible. HUD will not approve your loan until they receive the report.
Leasing tribal land
To qualify for a HUD 184 loan on tribal trust lands, you must establish a leasehold interest in the land on which the home will be located. In addition to HUD, Bank2 will require a copy of this tribal lease agreement.
In a leasehold situation, the tribe retains ownership of the land but provides a long-term leasehold agreement that allows them to mortgage the property. The term of the lease is typically 25 to 50 years, and must be approved by the BIA. Bank2 will submit the leasehold to the BIA for approval as part of your loan application process.
In order to qualify for the 184 loan program, HUD requires that certain provisions be written into the lease. These include:
- The lease must be executed by the tribe and borrower, and approved by the BIA.
- Lease payments should be negotiated between the tribe and the borrower.
- The tribe, HUD and the lender must approve all transfers or assignments of the leasehold interest, except foreclosure.
- Modifications to the lease form can be made with the approval of the BIA and the Office of Native American Programs (ONAP).
- The lease may not be terminated while the Section 184 guarantee is in effect. In the event of foreclosure, the lease will not be subject to any forfeiture or reversion, and will not be otherwise subject to termination.
For more information regarding trust land requirements, please visit this leasing requirements page at www.hud.gov.
The HUD 184 program allows you to do what other loan programs don't -- obtain home loans on tribal trust lands. But keep in mind that it may take longer than conventional loans to obtain your title report, so plan accordingly.
To minimize delays or missed deadlines, ask your BIA office how long it will take for them to produce the report. Submit your loan application 30 to 45 days in advance of their estimated delivery date. Check in with the BIA every couple of weeks to make sure things are going according to schedule. If you run into unexpected delays, ask your tribal housing authority to lend a hand.
To learn more about applying for a loan on Native American trust lands, please contact us at (phone or email). Our loan officers have years of experience handling trust land loans and can answer any questions you may have.
If you have any questions about the process, please contact a Bank2 representative at (405) 949-7000.