Million-Dollar Mortgage Funds for South Dakota Tribes

Lakota Vogel, executive director of Four Bands, said she thought the CDFI might be able to make eight to 10 mortgages with the $1 million. (Courtesy Four Bands)

Residents of reservations in South and North Dakota will benefit from million-dollar mortgage funds from partnerships between two Native Community Development Financial Institutions and the U.S. Department of Agriculture.

The Native CDFIs, Mazaska Owecaso Otipi Financial, based on the Pine Ridge reservation of the Oglala Lakota tribe in South Dakota, and Four Bands Community Fund, based on the Cheyenne River Sioux Tribe reservation, will put up $200,000 apiece to get USDA loans of $800,000 apiece to make mortgage loans on reservation trust land.

The government money will come from USDA’s Rural Development section 502 direct mortgage. The direct program, in which loan money comes straight from the government, is a partner to the RD 502 guaranteed mortgage, in which lenders use their own money and are reimbursed by the government if the mortgage fails.

The CDFIs will “service” the loans for the government, meaning they will collect mortgage payments and do the required paperwork.

Lakota Vogel, executive director of Four Bands, said she thought the CDFI might be able to make eight to 10 mortgages with the $1 million. But she said that would be just a small dent in the hundreds of people found to need housing there by a needs assessment done by the Cheyenne River Sioux Tribe Housing Authority a couple of years ago.

“There’s a huge need,” she said.

The good news is that the CDFI has a pipeline of potential borrowers who can qualify for the loans, built up over several years as water line problems on the reservation that impeded housing got resolved. In all she thinks hundreds may be ready for mortgages. She said the lender would not discriminate on borrowers based on land status, meaning it is willing to make loans both to those on trust land and on private property or “fee simple” land.

By USDA regulations, only borrowers with less than 80 percent of the area median income (about $42,000) would be eligible, Vogel said. In the future she would like to do mortgage lending without income limits.

“We know we can’t serve the market alone,” said Vogel, a CRST member. So Four Bands, whose service area includes all of South Dakota, has invited other Native CDFIs (there are eight in South Dakota) to join with them in a bigger effort. The reservation of the Standing Rock Sioux Tribe extends into North Dakota.

Mortgages are a fairly new area for Four Bands, which concentrates on business loans. The CDFI does home improvement loans, and sometimes homes are used as collateral for business loans. In all it has extended $12 million in loans since startup in 2000.

The new venture is “exciting,” Vogel said. She noted that the CDFI has never “serviced” mortgages before as it will do under this pilot program.

Native CDFIs are a hot new approach to lending on tribal lands, a remedy for the general reluctance of more traditional lenders to make mortgages on tribal lands. Unlike banks or credit unions, they do not get their loan money from deposits, and they tend to be local organizations often led by tribal members and advocates for Indian lending. There are more than 70 Native CDFIs currently.

CDFIs were created by the U.S. Treasury and benefit from a CDFI Fund that disburses money to certified CDFIs each year and has targeted American Indians and tribes as one area for investment.

Mazaska Owecaso Otipi Financial has been in business since 2004. It provides affordable housing loans as well as financial education and homebuyer training to members of the Oglala Lakota tribe living on or near the Pine Ridge reservation. As of 2012 it had made 28 home loans to tribal members, according to its website, and was looking to do 42 more over the next three years for more than $1 million in finance, $750,000 of it coming from the CDFI Fund. Eight additional mortgages were closed in 2016, according to the Native CDFI Network.

Mazaska Owecaso Otipi offers home purchase, construction, rehab and credit building loans.