Section 184 Indian Home Loan FAQs:
Here are some of the most asked question we get from our clients at USDA Loans. We created this guide page to better help you understand some of the most asked questions. No attempt has been made to answer all questions that we received. These are the Most Common.
- Why was Section 184 Created?
- Section 184 How does it work?
- Is trust land the only land eligible for a Section 184 loan?
- What Can I use the Section 184 Loan for?
- How Can a Tribe Participate in the HUD 184 Loan Program?
- What are Section Maximum Limits for loans?
Why was Section 184 Created?
The Section 184 program is a home mortgage federal loan guarantee for enrolled members of federally recognized tribes or for Tribally Designated Housing Entities.To help increase home ownership in Indian country, the Section 184 program provides a 100 percent guarantee on all housing loans made by private lenders and tribal housing agencies to American Indian and Alaska Native borrowers.
Reservations and Native American lands are being held in trust by the US government for specific tribes or individuals belonging to Native American tribes. Because of the legal status of a trust, these lands are difficult to secure mortgage loans to prevent the private seizure of Native American lands.Private lenders were unwilling to grant home loans and mortgages because of the difficulty in obtaining leverage for a loan. Section 184 was created and gave private lenders the reassurance they needed to go ahead with mortgage loans both on and off reservations. As of As of 2014, the Section 184 program has guaranteed over 24,000 loans (almost $4 billion dollars in guaranteed funds) to individuals, Tribes, and TDHEs.
- Land held in trust for a Tribe cannot be mortgaged
- Land held in trust for an individual must receive approval of the Bureau of Indian Affairs (BIA) before a lien is placed on the property to secure a loan.
The government made these regulations to prevent private seizure of Native American lands, which would occur if a private lender was to foreclose on a home owner of tribal land. Because of the difficulty in securing leverage against a loan (also known as a lien), private lenders were unwilling to grant home loans and mortgages to Native Americans. This made it difficult to build and maintain homes on reservation land. Creating Section 184 gives private lenders the insurance they need to proceed with mortgage loans.
Section 184 How does it work?
The Office of Loan Guarantee within HUD’s Office of Native American Programs guarantees the mortgage loan made to eligible borrowers. The loan guarantee assures the lender that its investment will be repaid in the event of a foreclosure. The borrower pays a 1% loan guarantee fee at closing which may be financed in the mortgage.The borrower applies for the loan with an approved lender. If leasing tribal land they work with the tribe and the Bureau of Indian Affairs to obtain an approved 50 year lease.
Is trust land the only land eligible for a Section 184 loan?
No. Land located in an Indian area or Alaska Native area are eligible locations for a 184 guaranteed home loan. Fee simple lands within an approved Indian area are allowed under Section 184.
What Can I use the Section 184 Loan for?
You can use the Section 184 Loan to:
- Purchase an Existing Home
- Construct a New Home (Site-Built or Manufactured Homes on permanent foundations)
- Rehabilitate a Home, including weatherization
- Purchase and Rehabilitate a Home
- Refinance a Home (Rate and Term, Streamline, Cash Out)
How Can a Tribe Participate in the HUD 184 Loan Program?
A Tribe interested in participating must have the following as part of their Tribal Laws:
- Tribal Court Jurisdiction over Real Property
- Defined Eligible Area (usually the Tribal formula area)
- Foreclosure Procedures
- Eviction Procedures
- Leasing Procedures
- Tribal Trust and/or Allotted Trust Land Leases
- Provision showing HUD 184 Guaranteed Loan as first lien priority.
- Provision granting HUD and/or private lenders access to tribal lands for the purpose of servicing guaranteed properties.
- Acknowledgement that should eviction and foreclosure procedures not be enforced, the Office of Loan Guarantee will cease making new loan guarantees within the tribe's area of jurisdiction
What are Section Maximum Limits for loans?
- Maximum loan limit is 150% of the HUD median home price for the county or max $417,000. Click here to see Section 184 county loan limits by state.
For further questions or concerns please contact us