The facts are clear—many Indian people, especially those living on reservations, have a tough time borrowing money to buy a house. But backers of a proposed Montana and Wyoming tribal lending consortium believe they can help Indian homebuyers by offering loans internally. Along with increasing the number of tribal members who can purchase houses, the consortium also can serve as an economic spark plug for tribal entrepreneurs, says Bob Gauthier, longtime director of the Salish and Kootenai Housing Authority on the Flathead Indian Reservation.
“To me, this is one way to capitalize on the true meaning of sovereignty,” he says. “Once this is going, it can create many other opportunities.”
Gauthier (prnounced Go-chee) says many mainstream lenders are wary of investing money on reservations, especially for home mortgages. One problem is that tribal members often want to build or buy a home on land held in federal trust, which is difficult to use as collateral. Trust land is typically ineligible for title insurance, and the property often isn’t located in prime service areas for top-flight fire insurance policies, he says. Tribal politics and a lack of trust in tribal systems also contribute to the dearth of loans available for reservation residents, he adds.
“The problem is many lenders are scared of tribal governments,” Gauthier says. “They’re scared of tribal courts.” Tribal courts, he explains, are where potential default cases and related actions would have to be settled. “We don’t feel that fear is justified.”
Gauthier says the consortium concept is simple. Any tribe in Montana or Wyoming that wishes to become a member needs to deposit seed money into a general fund. Once the sum is large enough to begin issuing loans, individual tribes would set up the transactions, manage the repayments, and embark on any needed enforcement actions. Under the current proposal, the group would be operated as a for-profit entity, with member tribes serving as stockholders.
A key reason to form a consortium, Gauthier says, is that a larger pool of money would attract the interest of secondary markets, where the tribal cash can be leveraged. A combined fund would help ensure that member tribes could earn a slice of interest revenue.
“You have to have big enough packages to make them attractive to the bigger entities,” he says of the strategy. “The more of these the better, because we can then offer rates similar to the rest of America.”
Gauthier says the consortium will be in business when $1 million to $2 million is raised for the initial fund. He estimates there’s already at least 5,000 mortgage loans that could be made on reservations within the two states. He contends that if tribes don’t create such a program, it won’t be long before non-tribal financial interests realize the potential and jump in.
“Why not have tribes seize this opportunity and make the money?” he asks.
Dick Brinck, Montana coordinator for the federal Department of Housing and Urban Development (HUD), says other factors are also at play when it comes to reservation lending.
Typically, he says, reservations don’t have a lot of land suitable for single-family developments, and they often lack easy-to-reach utility hookups, water lines and sewage systems.
Buying a home on a typical reservation, Brinck says, can be a complicated affair, and one of the biggest impediments is clearly a lack of mortgaging infrastructure, including real estate brokers, title insurance companies and even developers. “There’s a number of innovative ideas to deal with that lack of infrastructure, and this is one of them,” Brinck says. “I think Bob’s idea is a good one. It needs to be done, but it’s not going to cure the whole problem.”
The proposed Montana-Wyoming Intertribal Development Consortium was first broached in 1995 by Gauthier and former Salish and Kootenai Tribal Chairman Mickey Pablo, who died last year. Reservation leaders from around the region have repeatedly embraced the concept, but pulling the new organization together has remained a continuing challenge, Gauthier says.
“This is going to take some leadership,” he says. “We have a lot of education to do. It will take a lot of political will from tribal leaders.” In the early 1990s, Gauthier served on a national blue-ribbon panel that studied inadequacies in Native American housing programs. Much of the panel’s work was incorporated in the 1996 Native American Housing Assistance and Self-Determination Act. Under the act, tribes can apply for block grants that enable them to have much broader control over how their housing programs are managed. The law also allows tribes to leverage HUD money with their own resources, which is where the consortium idea fits in.
“This is a collective effort,” says Gauthier, one that would have no ties to the federal government. “But we accomplish the same thing. We create liquidity for tribes. We’ve got the support. We haven’t heard any opposition to it.”
“There’s a lot of people working on this,” Brinck says. “There’s a lot of efforts going on. I think there’s movement forward, but not as fast as many of us think is reasonable.”
In most of the country, Gauthier says, home equity is often used to start new businesses, which fuels economic development. But on many reservations, that practice is hampered because so few tribal members own their own houses. Gauthier says he realizes that new ideas need time to evolve, and the consortium project will move forward only when the time is right. “I’m a firm believer in things happening when they’re ready,” he says.