Nonprofit Serving the Navajo Nation Builds on '09 Rebound

By Fogarty, Mark | American Banker, June 29, 2010 | Go to article overview

Nonprofit Serving the Navajo Nation Builds on '09 Rebound


Fogarty, Mark, American Banker


Byline: Mark Fogarty

Good reasons for becoming a homeowner are listed on signs taped up around the Navajo Partnership for Housing's homeowner education training room: "Financial security. Social recognition. Family security. Sense of accomplishment. Self respect. A comfortable life."

The scrappy nonprofit, which turns15 next year, has bucked the housing depression and continuedbringing mortgage finance to members of the Navajo Nation on or near their reservation, which sprawls across New Mexico, Arizona and Utah.

Lanalle Smith, executive director at Navajo Partnership for Housing, said the community development financial institution has ambitious plans to branch out into housing project development on or near the reservation to go along with its scattered site financings.

NPH, which works out of a storefront in Gallup, N.M., a border town adjacent to the Navajo reservation, has arranged or provided 435 loans and grants to 334 families to help tribal members buy, build or rehabilitate a home. Total financing comes to $36.3 million.

To be sure, NPH represents a very small portion of the mortgage market; many lenders do more volume in a single month than NPH has done in nearly 15 years.

Still, NPH has overcome more than a few obstacles to get where it is today.Until the 1990s, no private bank had ever done mortgage lending for the Navajo Nation, which is the size of West Virginia and has nearly 200,000 residents.

No real estate market exists there as the rest of the country knows it. And there is very little mortgage infrastructure: no Realtors, no home builders, no appraisers, no title plants, no closing attorneys.

What's more, many potential borrowers are less than optimal mortgagors. According to a Neighborhood Reinvestment Corp. study of NPH, 25% to 43% of people on the reservation are unemployed, 40% of families are below poverty level and the median household income is $20,000.

More of the group's volume is done off than on the reservation, where land status has made it hard for lenders to perfect a security interest. As a result of a dispute (recently resolved) with the Department of Agriculture over home-site lease documents,NPH made only one Rural Housing Service loan over the past several years. Its 2009 balance sheet shows an imbalance between revenues and expenditures.

And, like all lenders, NPH has suffered higher rates of delinquency and foreclosure in the recession, and in the fall-off-the-table year of 2008 it managed just seven loans.

But volume rebounded in fiscal 2009, to 40 loans and grants totaling $4.2 million, and NPH's fiscal 2010 goal is an ambitious 63 loans. Twenty-one have closed to date.

If the 13 employees of NPH are not miracle workers, they are not far off, either.

Conventional mortgage lending is still elusive on the Navajo Nation. It makes up less than 10% of the NPH total, at 37 mortgages, and no lender has made a conventional mortgage to an NPH client since the mortgage bust began in 2008. …

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