[Federal Register Volume 61, Number 45 (Wednesday, March 6, 1996)]
[Rules and Regulations]
[Pages 9052-9058]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-5050]




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Part VI





Department of Housing and Urban Development





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24 CFR Part 955



Loan Guarantees for Indian Housing; Final Rule

  Federal Register / Vol. 61, No. 45 / Wednesday, March 6, 1996 / Rules 
and Regulations  
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[[Page 9052]]


DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Part 955

[Docket No. FR-3614-F-04]
RIN 2577-AB40


Office of the Assistant Secretary for Public and Indian Housing; 
Loan Guarantees for Indian Housing

AGENCY: Office of the Assistant Secretary for Public and Indian 
Housing, HUD.

ACTION: Final rule.

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SUMMARY: This final rule sets forth regulations to implement the Indian 
Loan Guarantee Program authorized by section 184 of the Housing and 
Community Development Act of 1992. The purpose of the program is to 
provide loan guarantees that will make private financing available to 
Native Americans on restricted lands where no source of financing is 
currently available.

EFFECTIVE DATE: April 5, 1996.

FOR FURTHER INFORMATION CONTACT: Dominic Nessi, Deputy Assistant 
Secretary for Native American Programs, Room B-133, Department of 
Housing and Urban Development, Washington, DC 20410; telephone (202) 
755-0032 (voice) or (202) 708-0850 (TDD for speech or hearing impaired 
individuals). These are not toll-free numbers.

SUPPLEMENTARY INFORMATION:

I. Paperwork Reduction Act Statement

    The information collection requirements contained in Sec. 955.101 
of this rule have been approved by the Office of Management and Budget 
in accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-
3520), and assigned OMB control number 2577-0200. An agency may not 
conduct or sponsor, and a person is not required to respond to, a 
collection of information unless the collection displays a valid 
control number.

II. Background

    Section 184 of the Housing and Community Development Act of 1992 
(HCDA 1992) (Pub. L. 102-550, approved October 28, 1992) authorized the 
establishment of the Indian Housing Loan Guarantee Fund (the Fund) to 
provide access to sources of private financing to Indian families and 
Indian housing authorities who otherwise could not acquire housing 
financing because of the unique legal status of Indian trust land. In 
general, these lands, held in trust by the United States for the 
benefit of an Indian or Indian tribe, are inalienable. Trust lands 
under this program also include lands to which the title is held by an 
Indian tribe subject to a restriction against alienation imposed by the 
United States. Because titles to individual plots do not convey, and 
liens do not attach, conventional mortgage lending practices do not 
operate in this forum.
    The Fund addresses these obstacles to mortgage financing by 
guaranteeing loans made to Indian families or Indian housing 
authorities to construct, acquire, or rehabilitate 1- to 4-family 
dwellings that are standard housing and are located on trust land or 
land located in an Indian or Alaska Native area. Loans may be made by 
any lender approved by the Secretary of Housing and Urban Development, 
the Secretary of Agriculture, or the Secretary of Veterans' Affairs; 
or, any lender which is supervised, approved, regulated or insured by 
any agency of the Federal Government.
    The Department implemented the section 184 Loan Guarantees for 
Indian Housing program at 24 CFR part 955 by an interim rule published 
on August 18, 1994 (59 FR 42732). Six public comments, which are 
discussed in section IV. of this preamble, below, were received in 
response to the interim rule.

III. Changes Made in the Final Rule

    In keeping with the President's mandate to reinvent and reform 
regulations, part 955 is substantially streamlined in this rule. One of 
the methods by which the Department is streamlining and reducing its 
regulations is to remove rule text that only repeats statutory 
language. Rules will only contain legally binding requirements that are 
in addition to those contained in a statute. Besides reducing the sheer 
bulk of rules, this practice will remove the problems that result when 
a rule that echoes the language of a statute becomes inconsistent with 
new statutory amendments. The period before such a rule is amended to 
conform to new statutory language is often one of confusion and 
uncertainty as to which law applies: the old provisions in the 
regulations or the new provisions in the statute. The new part 955 
promulgated here does not, therefore, repeat any statutory language, 
but only implements requirements that are in addition to those in 
Section 184.
    The combined statutory and regulatory requirements that apply with 
respect to Section 184 loan guarantees have been placed in an appendix 
to this final rule. The final rule will be codified in the Code of 
Federal Regulations; the appendix will not be codified. However, the 
appendix is available to the public as a single document which provides 
a unified overview of the general requirements under Section 184.
    This final rule also adds a definition of Section 184, referring to 
the loan guarantee program, that makes citing the program in the rule 
more convenient.

IV. Comments on the Interim Rule

    HUD solicited public comments on the interim rule. During the 
comment period HUD received 6 comments from IHAs, Tribal leaders, and 
financial institutions. This final rule summarizes below the comments 
according to their relevant subparts and provides HUD's responses to 
those comments.

Section 955.101  Applicability

    Three commentors objected to the interim rule's definition of 
eligible areas as ``restricted Indian lands.'' These commentors stated 
that eligible areas should be defined as all lands in Indian country, 
regardless of title status (including fee lands).
    HUD response: Section 184 can be used only with respect to 
properties which are located on trust/restricted lands or which are 
located within an Indian area. Some tribes are currently expanding 
their service area by purchasing fee simple land and placing that land 
into trust status. These areas are eligible for section 184 assistance 
because they are restricted lands within an Indian area.

Section 955.103 Definitions

    One commentor noted that the Interim Rule refers to ``Native 
Americans'' while the statute refers to ``Indian families'' and 
``Indian Housing Authorities.'' The commentor recommended that 
references to ``Native Americans'' be removed from the rule.
    HUD response: The definition of Indian used in the rule means any 
person recognized as being Indian or Alaska Native by an Indian tribe, 
the Federal Government, or any State, and includes the term ``Native 
American'', which has been added to the regulatory language at the 
discretion of the Department.
    One commentor requested clarification regarding whether Native 
Hawaiians are eligible borrowers under the section 184 program.
    HUD response: The statutory purpose of the section 184 program is 
given at HCDA 1992 section 184(a) as: ``To provide access to sources of 
private financing to Indian families and Indian housing authorities who 
otherwise could not acquire housing financing 

[[Page 9053]]
because of the unique legal status of Indian trust land * * *''. Native 
Hawaiians, who are not included within the definition of the term 
``Indian,'' do not qualify under this statutory purpose.

Section 955.105 Eligible Loans

    Two commentors noted that the restriction on eligible loans should 
be expanded to include adjustable rate mortgages and balloon payment 
mortgages.
    HUD response: The Department has determined that the section 184 
program will be operating in a totally new lending environment and the 
uncertainty of a balloon payment mortgage or an adjustable rate 
mortgage of any type would create an unnecessary risk to the borrower, 
the lender and the Department. This rule clarifies, at Sec. 955.105, 
that only fixed rate, fixed term loans with even monthly payments are 
eligible.
    Two commentors noted that acquisition and rehabilitation is an 
eligible activity and requested clarification whether a single 
guaranteed loan can be made to cover both of these activities for one 
structure.
    HUD response: Yes, a single guaranteed loan can be made to cover 
both acquisition and rehabilitation for one structure. A section 184 
guaranteed loan may be used to ``pay off'' a Mutual Help home so that 
the property may be conveyed to the homeowner. A guaranteed loan could 
be used to pay off and rehabilitate a Mutual Help home.

Section 955.107 Eligible Housing

    One commenter stated that fee lands within Indian country should be 
eligible sites. HUD will allow fee simple lands in limited 
circumstances. Fee simple lands within a designated Indian area are 
eligible sites under section 184.
    One commentor recommended that the term ``modest in size and 
design'' be defined in specific terms.
    HUD response: In order to determine ``modest'' the section 184 
program loan may not exceed 150% of the FHA mortgage limits, as 
adjusted for the area. These mortgage limits are published by the 
Federal Housing Administration (FHA) by area of the country on a 
periodic basis. Thus, the mortgage limit in Anchorage may differ 
greatly from the mortgage limit in Oklahoma City.
    One commentor criticized the lack of specificity in the 
construction standards at Sec. 955.107(2). The commentor recommended 
that structures be required to conform to the Uniform Building Code 
(UBC) and other locally adopted Tribal building ordinances.
    HUD response: The section 184 statute provides requirements 
relating to size; heating, plumbing, and electrical requirements; and 
energy efficiency. However, the Department emphasizes that the 
standards represent a minimum level of requirements. The tribe, 
individual owner, or IHA may design and construct a property that meets 
a higher standard.

Section 955.109 Eligible Lenders

    In addressing this section, one commentor stated that the rule 
should cross reference prohibitions against housing discrimination. The 
same commentor then stated that lenders should not be able to withhold 
loans where the fund is fully obligated.
    HUD response: The commentor appears to be asking HUD to prohibit 
lenders from refusing to make loans to eligible borrowers as long as 
there is section 184 guarantee authority available. Notwithstanding any 
housing discrimination laws, HUD does not have the authority to compel 
lenders to participate in this program.

Section 955.111  Eligible Collateral

    One commentor suggested that the term ``leasehold'' be deleted from 
section Sec. 955.111(b)(3).
    HUD response: HUD agrees, and has removed the term ``leasehold'' 
from section Sec. 955.111(b)(3) of the final rule.
    One commentor stated that there is no time period specified for 
when the Notice of Default (NOD) is filed or for when it ends, or when 
the 60 day period starts for the eviction action. Another commentor 
stated that tribal eviction procedures under Sec. 955.111(4) should be 
standardized and/or reviewed by OGC and ONAP for approval as a 
precondition for participation in the section 184 program.
    HUD response: Tribes are required to adopt foreclosure, eviction, 
and priority of lien procedures to be eligible for participation in the 
section 184 program. HUD does not approve or review the text of each 
procedure. This function is left to Tribal discretion. The Department 
will simply ensure that such procedures do exist. In order to provide 
maximum flexibility and Tribal discretion in the matter of establishing 
foreclosure and eviction policies HUD has determined to only recognize 
the existence of such procedures and not a line by line technical 
review of each tribe's policies.
    One commentor stated that the 60-day time period for appealing 
decisions under Sec. 955.111(b)(4)(ii) should be reduced to 30 days.
    HUD response: HUD agrees with the commentor and will change the 60-
day time period for appealing decisions under Sec. 955.111(b)(4)(ii) to 
30 days.
    One commentor stated that Indian nation public policy allows for a 
wide range of collateral arrangements.
    HUD response: The rule takes this into account by specifying that 
collateral may include, but is not limited to, the categories 
specified.
    One commentor objected to the priority of loan obligation 
provision, asserting that it gives HUD oversight regarding the 
substantive content of Indian nation law.
    HUD response: This is a critical step to ensure the financial 
stability of this new loan program and will provide the tribes and the 
Department with the assurance of prompt action and protection of the 
guaranteed loan.
    One commentor objected to the requirement that tribes must certify 
that they have in place and will enforce procedures for eviction. The 
commentor stated that it is not required by the Statute.
    HUD response: The Department has attempted to provide the broadest 
interpretation possible in all instances; however, in a totally new 
lending environment it is necessary to have in place at least minimal 
safeguards to the financial integrity of the loan guarantee fund.
    One commentor objected to the enforcement requirement under 
Sec. 955.111(b)(4)(i), stating that it infringes on Indian nation 
sovereignty.
    HUD response: Once again the Department has determined that, in 
this entirely new lending environment, it is critical to have in place 
minimal standards that will ensure the financial integrity of the loan 
guarantee fund.
    One commentor requested further clarification on the review of HUD 
decisions to cease issuing guarantees to specific tribes, saying that 
it is important to ensure due process rights.
    HUD response: The Department has determined that due process rights 
of appeal have been developed to ensure maximum protection to both the 
Department and the tribes with several levels of appeal available and a 
final option to resubmit the appeal based upon new evidence following 
the exhaustion of all appeal levels.

Section 955.113  Certificate of Guarantee

    No comments received concerning this section.

Section 955.115  Guarantee Fee

    One commentor requested clarification on what happens to the one 
percent guarantee fee.
    HUD response: Funds received as a result of the one percent 
guarantee fee are returned to the loan guarantee fund 

[[Page 9054]]
to provide additional resources for additional loans.

Section 955.117  Liability Under Guarantee

    No comments received concerning this section.

Section 955.119  Transfer and Assumptions

    One commentor questioned whether HUD will require that all of the 
loans under the section 184 program be assumable, stating that many 
lenders are reluctant to underwrite assumable loans.
    HUD response: There is no requirement that all of the loans under 
the section 184 program be assumable.
    One commentor requested clarification regarding whether sales and 
assignments to financial institutions will be subject to the law of the 
Indian nations where the loans are made, in addition to being subject 
to agency supervision under state regulators.
    HUD response: Transactions may be subject to tribal laws in 
addition to agency supervision under state regulations.

Section 955.121  Disqualification of Lenders and Civil Money Penalties

    No comments received concerning this section.

Section 955.123  Payment Under Guarantee

    Three commentors recommended that consideration be given to the 
issue of whether the loan guarantee program will allow nonjudicial 
remedies such as deeds of trust and escrow agents to be utilized as an 
alternative to judicial foreclosure, as referred to under 
Sec. 955.123(a)(1)(i) of the interim rule.
    HUD response: Any method that promotes collection is encouraged, 
because the statute requires the holder of the guarantee to exhaust all 
reasonable possibilities of collection before any payment under a 
guarantee is made.

Section 955.125  Expiration of Interim Rule

    No comments received concerning this section.

V. Other Matters

Impact on Small Entities

    The Department, in accordance with the Regulatory Flexibility Act 
(5 U.S.C. 605(b)), has reviewed this rule before publication and by 
approving it certifies that this rule does not have a significant 
economic impact on a substantial number of small entities. 
Specifically, the requirements of this interim rule are directed to 
individual borrowers, Indian Housing Authorities, Tribal governments 
and financial institutions.

Environmental Review

    A Finding of No Significant Impact with respect to the environment 
has been made in accordance with HUD regulations at 24 CFR Part 50, 
which implement section 102(2)(C) of the National Environmental Policy 
Act of 1969. The Finding of No Significant Impact is available for 
public inspection between 7:30 a.m. and 5:30 p.m. weekdays in the 
Office of the Rules Docket Clerk.

Federalism Impact

    The General Counsel, as the Designated Official under section 6(a) 
of Executive Order 12612, Federalism, has determined that the policies 
contained in this rule will not have substantial direct effects on 
states or their political subdivisions, or the relationship between the 
federal government and the states, or on the distribution of power and 
responsibilities among the various levels of government. As a result, 
the rule is not subject to review under this order. Specifically, the 
requirements of this rule are directed to individual borrowers and 
financial institutions.

Impact on the Family

    The General Counsel, as the Designated Official under Executive 
Order 12606, The Family, has determined that this rule has potential 
for significant impact on family formation, maintenance, and general 
well-being. The Indian Loan Guarantee Program will make it possible for 
Native American families to build or acquire homes on their Native 
lands where homeownership opportunities have been very limited in the 
past. Accordingly, since the impact on the family is beneficial, no 
further review is considered necessary.

List of Subjects in 24 CFR Part 955

    Indians, Loan programs--Indians, Reporting and recordkeeping 
requirements.

    Accordingly, 24 CFR part 955 is revised to read as follows:

PART 955--LOAN GUARANTEES FOR INDIAN HOUSING

Sec.
955.101  Applicability and scope.
955.103  Definitions.
955.105  Eligible loans.
955.107  Eligible collateral.
955.109  Guarantee fee.
955.111  Safety and quality standards.

    Authority: 42 U.S.C. 1715z-13a and 3535(d).


Sec. 955.101  Applicability and scope.

    Under the provisions of section 184 of the Housing and Community 
Development Act of 1992 (12 U.S.C. 1515z-13a), the Department of 
Housing and Urban Development (the Department) has the authority to 
guarantee loans for the construction, acquisition, or rehabilitation of 
1- to 4-family homes to be owned by Native Americans on restricted 
Indian lands. This part provides requirements that are in addition to 
those in section 184.

(Approved by the Office of Management and Budget under control 
number 2577-0200.)


Sec. 955.103  Definitions.

    In addition to the definitions that appear in Section 184 of the 
Housing and Community Development Act of 1992, the following 
definitions are applicable to loan guarantees under Section 184--
    Default means the failure by a borrower to make any payment or to 
perform any other obligation under the terms of a loan, and such 
failure continues for a period of more than 30 days.
    Indian means any person recognized as being Indian or Alaska Native 
by an Indian tribe, the Federal Government, or any State, and includes 
the term ``Native American''.
    Mortgage as used in this part, means a first lien as is commonly 
given to secure advances on, or the unpaid purchase price of, real 
estate under the laws of the jurisdiction where the property is located 
and may refer both to a security instrument creating a lien, whether 
called a mortgage, deed of trust, security deed, or another term used 
in a particular jurisdiction, as well as the credit instrument, or 
note, secured thereby.
    Principal residence means the dwelling where the mortgagor 
maintains (or will maintain) his or her permanent place of abode, and 
typically spends (or will spend) the majority of the calendar year. A 
person may have only one principal residence at any one time.
    Section 184 means section 184 (entitled, ``Loan Guarantees for 
Indian Housing'') of the Housing and Community Development Act of 1992 
(12 U.S.C. 1515z-13a).


Sec. 955.105  Eligible loans.

    (a) In general. Only fixed rate, fixed term loans with even monthly 
payments are eligible under the Section 184 program.
    (b) Eligible borrowers. A loan guaranteed under Section 184 may be 
made to a borrower that is:
    (1) An Indian who will occupy it as a principal residence and who 
is 

[[Page 9055]]
otherwise qualified under Section 184; or
    (2) An Indian Housing Authority.
    (c) Appraisal of labor value. The value of any improvements to the 
property made through the skilled or unskilled labor of the borrower, 
which may be used to make a payment on account of the balance of the 
purchase price, must be appraised in accordance with generally 
acceptable practices and procedures.
    (d) Construction advances. The Department may guarantee loans from 
which advances will be made during construction. The Department will 
provide guarantees for advances made by the mortgagee during 
construction if all of the following conditions are satisfied:
    (1) The mortgagor and the mortgagee execute a building loan 
agreement, approved by HUD, setting forth the terms and conditions 
under which advances will be made;
    (2) The advances are made only as provided in the commitment;
    (3) The principal amount of the mortgage is held by the mortgagee 
in an interest bearing account, trust, or escrow for the benefit of the 
mortgagor, pending advancement to the mortgagor or to his or her 
creditors as provided in the loan agreement; and
    (4) The mortgage shall bear interest on the amount advanced to the 
mortgagor or to his or her creditors and on the amount held in an 
account or trust for the benefit of the mortgagor.
    (e) Environmental compliance. Prior to the guarantee of any loan, 
there must be compliance with the environmental rules as stated in 24 
CFR part 50.


Sec. 955.107  Eligible collateral.

    (a) In general. A loan guaranteed under Section 184 may be secured 
by any collateral authorized under Federal, State, or tribal law and 
determined by the lender and approved by the Department to be 
sufficient to cover the amount of the loan, and may include, but is not 
limited to, the following:
    (1) The property and/or improvements to be acquired, constructed, 
or rehabilitated, to the extent that an interest in such property is 
not subject to the restrictions of trust lands against alienation;
    (2) A first or second mortgage on property other than trust land;
    (3) Personal property; or
    (4) Cash, notes, an interest in securities, royalties, annuities, 
or any other property that is transferable and whose present value may 
be determined.
    (b) Trust land as collateral. If trust land is used as collateral 
for the loan, the following additional provisions apply:
    (1) Approved Lease. Any land lease for a unit financed under 
Section 184 must be on a form approved by both HUD and the Bureau of 
Indian Affairs, U.S. Department of Interior.
    (2) Assumption or sale of leasehold. If a leasehold is used as 
security for the loan, the loan form must contain a provision requiring 
tribal consent before any assumption of an existing lease, except where 
title to the leasehold interest is obtained by the Department through 
foreclosure of the guaranteed mortgage. A mortgagee other than the 
Department must obtain tribal consent before obtaining title through a 
foreclosure sale. Tribal consent must be obtained on any subsequent 
transfer from the purchaser, including the Department, at foreclosure 
sale. The lease may not be terminated by the lessor without HUD's 
approval while the mortgage is guaranteed or held by the Department.
    (3) Priority of loan obligation. Any tribal government whose courts 
have jurisdiction to hear foreclosures must enact a law providing for 
the satisfaction of a loan guaranteed or held by the Department before 
other obligations (other than tribal leasehold taxes against the 
property assessed after the property is mortgaged) are satisfied.
    (4) Eviction procedures. Before HUD will guarantee a loan secured 
by trust land, the tribe having jurisdiction over such property must 
notify the Department that it has adopted and will enforce procedures 
for eviction of defaulted mortgagors where the guaranteed loan has been 
foreclosed.
    (i) Enforcement. If the Department determines that the tribe has 
failed to enforce adequately its eviction procedures, HUD will cease 
issuing guarantees for loans for tribal members except pursuant to 
existing commitments. Adequate enforcement is demonstrated where prior 
evictions have been completed within 60 days after the date of the 
notice by HUD that foreclosure was completed.
    (ii) Review. If the Department ceases issuing guarantees in 
accordance with the first sentence of paragraph (c)(1) of this section, 
HUD shall notify the tribe of the reasons for such action and that the 
tribe may, within 30 days after notification of HUD's action, file a 
written appeal with the Field Office of Native American Programs 
(FONAP) Administrator. Within 30 days after notification of an adverse 
decision of the appeal by the FONAP Administrator, the tribe may file a 
written request for review with the Deputy Assistant Secretary, Office 
of Native American Programs (ONAP). Upon notification of an adverse 
decision by the Deputy Assistant Secretary, the tribe has 30 additional 
days to file an appeal with the Assistant Secretary for Public and 
Indian Housing. The determination of the Assistant Secretary shall be 
final, but the tribe may resubmit the issue to the Assistant Secretary 
for review at any subsequent time if new evidence or changed 
circumstances warrant reconsideration. (Any other administrative 
actions determined to be necessary to debar a tribe from participating 
in this program will be subject to the formal debarment procedures 
contained in 24 CFR part 24.)


Sec. 955.109  Guarantee fee.

    The lender shall pay to the Department, at the time of issuance of 
the guarantee, a fee for the guarantee of loans under Section 184, in 
an amount equal to 1 percent of the principal obligation of the loan. 
This amount is payable by the borrower at closing.


Sec. 955.111  Safety and quality standards.

    Loans guaranteed under Section 184 shall be made only on dwelling 
units which meet safety and quality standards set forth herein. Each 
unit must:
    (a) Be decent, safe, sanitary, and modest in size and design;
    (b) Conform with applicable general construction standards for the 
region;
    (c) Contain a heating system that:
    (1) Has the capacity to maintain a minimum temperature in the 
dwelling of 65 degrees Fahrenheit during the coldest weather in the 
area;
    (2) Is safe to operate and maintain;
    (3) Delivers a uniform distribution of heat; and
    (4) Conforms to any applicable tribal heating code or, if there is 
no applicable tribal code, an appropriate county, State, or National 
code;
    (d) Contain a plumbing system that:
    (1) Uses a properly installed system of piping;
    (2) Includes a kitchen sink and a partitional bathroom with 
lavatory, toilet, and bath or shower; and
    (3) Uses water supply, plumbing and sewage disposal systems that 
conform to any applicable tribal code or, if there is no applicable 
tribal code, the minimum standards established by the applicable county 
or State;
    (e) Contain an electrical system using wiring and equipment 
properly installed to safely supply electrical energy for adequate 
lighting and for operation of appliances that conforms to any 
applicable tribal code or, if there is no applicable tribal code, an 
appropriate county, State, or National code; 

[[Page 9056]]

    (f) Be not less than:
    (1) 570 square feet in size, if designed for a family of not more 
than 4 persons;
    (2) 850 square feet in size, if designed for a family of not less 
than 5 and more than 7 persons; and
    (3) 1020 square feet in size, if designed for a family of not less 
than 8 persons; or
    (4) The size provided under the applicable locally adopted 
standards for size of dwelling units; except that the Department, upon 
the request of a tribe or Indian housing authority, may waive the size 
requirements under this paragraph; and
    (g) Conform with the energy performance requirements for new 
construction established by the Department under section 526(a) of the 
National Housing Act (12 U.S.C. 1735f-4).
    Dated: February 26, 1996.
Michael B. Janis,
General Deputy Assistant Secretary for Public and Indian Housing.

[Note: The following appendix will not be codified in the Code of 
Federal Regulations.]

Appendix--Guide to Loan Guarantees for Indian Housing

Section 1. Purpose, applicability and scope.
Section 2. Definitions.
Section 3. Eligible loans.
Section 4. Eligible housing.
Section 5. Eligible lenders.
Section 6. Eligible collateral.
Section 7. Certificate of Guarantee.
Section 8. Guarantee fee.
Section 9. Liability under guarantee.
Section 10. Transfer and assumptions.
Section 11. Disqualification of lenders and civil money penalties.
Section 12. Payment under guarantee.

Section 1. Purpose, Applicability and Scope

    The purpose of this guide is to present, in a single document, 
the statutory and regulatory requirements that apply to the Loan 
Guarantees for Indian Housing Program under section 184 of the 
Housing and Community Development Act of 1992 (P.L. 102-550, 
approved October 28, 1992). Although it presents the regulatory and 
statutory requirements in a combined format, this guide is a 
secondary source for these requirements. The Code of Federal 
Regulations (CFR), at 24 CFR, is the primary, governing source for 
regulatory requirements, and section 184 of the Housing and 
Community Development Act of 1992 is the primary, governing source 
for statutory requirements.
    Under the provisions of Section 184, the Department of Housing 
and Urban Development (the Department) has the authority to 
guarantee loans for the construction, acquisition, or rehabilitation 
of 1- to 4-family homes to be owned by Native Americans on 
restricted Indian lands. This guide describes the eligibility of 
borrowers, lenders and property, as well as the benefits of the 
Indian Loan Guarantee Program.

Section 2. Definitions

    Default means the failure by a borrower to make any payment or 
to perform any other obligation under the terms of a loan, and such 
failure continues for a period of more than 30 days.
    Department means the U. S. Department of Housing and Urban 
Development (HUD).
    Guarantee Fund means the Indian Housing Loan Guarantee Fund 
established under section 184(i) of the Housing and Community 
Development Act of 1992.
    Indian means any person recognized as being Indian or Alaska 
Native by an Indian tribe, the Federal Government, or any State, and 
includes the term ``Native American''.
    Indian area means the area within which an Indian housing 
authority is authorized to provide housing.
    Indian Housing Authority (IHA) means any entity that is 
authorized to engage in or assist in the development or operation of 
low-income housing for Indians and that is established either (1) by 
exercise of the power of self-government of an Indian tribe 
independent of State law; or (2) by operation of State law providing 
specifically for housing authorities for Indians, including regional 
housing authorities in the State of Alaska.
    Mortgage as used in this part, means a first lien as is commonly 
given to secure advances on, or the unpaid purchase price of, real 
estate under the laws of the jurisdiction where the property is 
located and may refer both to a security instrument creating a lien, 
whether called a mortgage, deed of trust, security deed, or another 
term used in a particular jurisdiction, as well as the credit 
instrument, or note, secured thereby.
    Principal residence means the dwelling where the mortgagor 
maintains (or will maintain) his or her permanent place of abode, 
and typically spends (or will spend) the majority of the calendar 
year. A person may have only one principal residence at any one 
time.
    Secretary means the Secretary of Housing and Urban Development.
    Section 184 means section 184 (entitled, ``Loan Guarantees for 
Indian Housing'') of the Housing and Community Development Act of 
1992 (Pub. L. 102-550, approved October 28, 1992).
    Standard housing means a dwelling unit or housing that complies 
with the requirements established in this part.
    Tribe means any tribe, band, pueblo, group, community, or nation 
of Indians or Alaska Natives.
    Trust land means land, title to which is held by the United 
States for the benefit of an Indian or Indian tribe; or, land, title 
to which is held by an Indian tribe, subject to a restriction 
against alienation imposed by the United States.

Section 3. Eligible Loans

    (a) In general. Only fixed rate, fixed term loans with even 
monthly payments are eligible under the Section 184 program.
    (b) Eligible borrowers. A loan guaranteed under Section 184 may 
be made to a borrower that is:
    (1) An Indian who will occupy it as a principal residence and 
who is otherwise qualified under this part; or
    (2) An Indian Housing Authority
    (c) Terms of loan. The loan shall:
    (1) Be made for a term not exceeding 30 years;
    (2) Bear interest (exclusive of the guarantee fee and service 
charges, if any) at a fixed rate agreed upon by the borrower and the 
lender and determined by the Department to be reasonable, which may 
not exceed the rate generally charged in the area (as determined by 
the Department) for home mortgage loans not guaranteed or insured by 
any agency or instrumentality of the Federal Government.
    (d) Maximum mortgage amounts. 
    (1) A principal obligation may not exceed:
    (i) An amount equal to the sum of:
    (A) 97 percent of the first $25,000 of the appraised value of 
the property, as of the date the loan is accepted for guarantee, and
    (B) 95 percent of such value in excess of $25,000; and
    (ii) Amounts approved otherwise by the Department.
    (2) The balance of the purchase price must involve a payment on 
account of the property that may be:
    (i) In cash or other property of equivalent value acceptable to 
the lender and the Department, or
    (ii) The value of any improvements to the property made through 
the skilled or unskilled labor of the borrower, appraised in 
accordance with generally acceptable practices and procedures.
    (e) Construction advances. The Department may guarantee loans 
from which advances will be made during construction. The Department 
will provide guarantees for advances made by the mortgagee during 
construction if all of the following conditions are satisfied:
    (1) The mortgagor and the mortgagee execute a building loan 
agreement, approved by HUD, setting forth the terms and conditions 
under which advances will be made;
    (2) The advances are made only as provided in the commitment;
    (3) The principal amount of the mortgage is held by the 
mortgagee in an interest bearing account, trust, or escrow for the 
benefit of the mortgagor, pending advancement to the mortgagor or to 
his or her creditors as provided in the loan agreement; and
    (4) The mortgage shall bear interest on the amount advanced to 
the mortgagor or to his or her creditors and on the amount held in 
an account or trust for the benefit of the mortgagor.
    (f) Environmental compliance. Prior to the guarantee of any 
loan, there must be compliance with the environmental rules as 
stated in 24 CFR part 50.

Section 4. Eligible Housing

    (a) In general. A loan guaranteed under Section 184 may be used 
for the construction, acquisition, or rehabilitation of a 1- to 4-
family dwelling unit located on trust land or land located in an 
Indian area.
    (b) Safety and quality standards. Loans guaranteed under Section 
184 shall be made only on dwelling units which meet safety and 
quality standards set forth herein. Each unit must: 

[[Page 9057]]

    (1) Be decent, safe, sanitary, and modest in size and design;
    (2) Conform with applicable general construction standards for 
the region;
    (3) Contain a heating system that:
    (i) Has the capacity to maintain a minimum temperature in the 
dwelling of 65 degrees Fahrenheit during the coldest weather in the 
area;
    (ii) Is safe to operate and maintain;
    (iii) Delivers a uniform distribution of heat; and
    (iv) Conforms to any applicable tribal heating code or, if there 
is no applicable tribal code, an appropriate county, State, or 
National code;
    (4) Contain a plumbing system that:
    (i) Uses a properly installed system of piping;
    (ii) Includes a kitchen sink and a partitional bathroom with 
lavatory, toilet, and bath or shower; and
    (iii) Uses water supply, plumbing and sewage disposal systems 
that conform to any applicable tribal code or, if there is no 
applicable tribal code, the minimum standards established by the 
applicable county or State;
    (5) Contain an electrical system using wiring and equipment 
properly installed to safely supply electrical energy for adequate 
lighting and for operation of appliances that conforms to any 
applicable tribal code or, if there is no applicable tribal code, an 
appropriate county, State, or National code;
    (6) Be not less than:
    (i) 570 square feet in size, if designed for a family of not 
more than 4 persons;
    (ii) 850 square feet in size, if designed for a family of not 
less than 5 and more than 7 persons; and
    (iii) 1020 square feet in size, if designed for a family of not 
less than 8 persons, or
    (iv) The size provided under the applicable locally adopted 
standards for size of dwelling units; except that the Department, 
upon the request of a tribe or Indian housing authority, may waive 
the size requirements under this paragraph; and
    (7) Conform with the energy performance requirements for new 
construction established by the Department under section 526(a) of 
the National Housing Act.

Section 5. Eligible Lenders

    The loan shall be made only by a lender approved by and meeting 
qualifications established in this part, except that loans otherwise 
insured or guaranteed by any agency of the Federal Government, or 
made by an organization of Indians from amounts borrowed from the 
United States shall not be eligible for guarantee under this part. 
The following lenders are deemed to be approved under this part:
    (a) Any mortgagee approved by the Department of Housing and 
Urban Development for participation in the single family mortgage 
insurance program under title II of the National Housing Act.
    (b) Any lender whose housing loans under chapter 37 of title 38, 
United States Code are automatically guaranteed pursuant to section 
1802(d) of such title.
    (c) Any lender approved by the Department of Agriculture to make 
guaranteed loans for single family housing under the Housing Act of 
1949.
    (d) Any other lender that is supervised, approved, regulated, or 
insured by any agency of the Federal Government.

Section 6. Eligible Collateral

    (a) In general. A loan guaranteed under Section 184 may be 
secured by any collateral authorized under Federal, State, or tribal 
law and determined by the lender and approved by the Department to 
be sufficient to cover the amount of the loan, and may include, but 
is not limited to, the following:
    (1) The property and/or improvements to be acquired, 
constructed, or rehabilitated, to the extent that an interest in 
such property is not subject to the restrictions of trust lands 
against alienation;
    (2) A first or second mortgage on property other than trust 
land;
    (3) Personal property; or
    (4) Cash, notes, an interest in securities, royalties, 
annuities, or any other property that is transferable and whose 
present value may be determined.
    (b) Trust land as collateral. If trust land is used as 
collateral for the loan, the following additional provisions apply:
    (1) Approved Lease. Any land lease for a unit financed under 
Section 184 must be on a form approved by both HUD and the Bureau of 
Indian Affairs, U.S. Department of Interior.
    (2) Assumption or sale of leasehold. If a leasehold is used as 
security for the loan, the loan form must contain a provision 
requiring tribal consent before any assumption of an existing lease, 
except where title to the leasehold interest is obtained by the 
Department through foreclosure of the guaranteed mortgage. A 
mortgagee other than the Department must obtain tribal consent 
before obtaining title through a foreclosure sale. Tribal consent 
must be obtained on any subsequent transfer from the purchaser, 
including the Department, at foreclosure sale. The lease may not be 
terminated by the lessor without HUD's approval while the mortgage 
is guaranteed or held by the Department.
    (3) Eviction procedures. Before HUD will guarantee a loan 
secured by trust land, the tribe having jurisdiction over such 
property must notify the Department that it has adopted and will 
enforce procedures for eviction of defaulted mortgagors where the 
guaranteed loan has been foreclosed.
    (i) Enforcement. If the Department determines that the tribe has 
failed to enforce adequately its eviction procedures, HUD will cease 
issuing guarantees for loans for tribal members except pursuant to 
existing commitments. Adequate enforcement is demonstrated where 
prior evictions have been completed within 60 days after the date of 
the notice by HUD that foreclosure was completed.
    (ii) Review. If the Department ceases issuing guarantees in 
accordance with the first sentence of paragraph (c)(1) of this 
section, HUD shall notify the tribe of the reasons for such action 
and that the tribe may, within 30 days after notification of HUD's 
action, file a written appeal with the Field Office of Native 
American Programs (FONAP) Administrator. Within 30 days after 
notification of an adverse decision of the appeal by the FONAP 
Administrator, the tribe may file a written request for review with 
the Deputy Assistant Secretary, Office of Native American Programs 
(ONAP). Upon notification of an adverse decision by the Deputy 
Assistant Secretary, the tribe has 30 additional days to file an 
appeal with the Assistant Secretary for Public and Indian Housing. 
The determination of the Assistant Secretary shall be final, but the 
tribe may resubmit the issue to the Assistant Secretary for review 
at any subsequent time if new evidence or changed circumstances 
warrant reconsideration. (Any other administrative actions 
determined to be necessary to debar a tribe from participating in 
this program will be subject to the formal debarment procedures 
contained in 24 CFR part 24).

Section 7. Certificate of Guarantee

    (a) Extent of guarantee. A certificate issued in accordance with 
Section 184 guarantees 100 percent of the unpaid principal and 
interest of the underlying loan.
    (b) Approval process. Before the Department approves any loan 
for guarantee under this part, the lender shall submit the 
application or the loan to the Department for examination. If the 
Department approves the loan for guarantee, the Department will 
issue a certificate under Section 184 as evidence of the guarantee.
    (c) Standard for approval. The Department may approve a loan for 
guarantee under Section 184 and issue a certificate only if the 
Department determines there is a reasonable prospect of repayment of 
the loan.
    (d) Effect. A certificate of guarantee issued under Section 184 
by the Department shall be conclusive evidence of the eligibility of 
the loan for guarantee under the provisions of Section 184 and the 
amount of such guarantee. Such evidence shall be incontestable in 
the hands of the bearer and the full faith and credit of the United 
States is pledged to the payment of all amounts agreed to be paid by 
the Department as security for such obligations.
    (e) Fraud and misrepresentation. Nothing in Section 184 may 
preclude the Department from establishing:
    (1) Defenses against the original lender based on fraud or 
material misrepresentation; and
    (2) Establishing partial defenses, based upon regulations in 
effect on the date of issuance or disbursement (whichever is 
earlier), to the amount payable on the guarantee.

Section 8. Guarantee Fee

    The lender shall pay to the Department, at the time of issuance 
of the guarantee, a fee for the guarantee of loans under Section 
184, in an amount equal to 1 percent of the principal obligation of 
the loan. This amount is payable by the borrower at closing.

Section 9. Liability Under Guarantee

    The liability under a guarantee provided in accordance with 
Section 184 shall decrease or increase on a pro rata basis according 
to any decrease or increase in the amount of the unpaid obligation 
under the provisions of the loan agreement. 

[[Page 9058]]


Section 10. Transfer and Assumptions

    Notwithstanding any other provision of law, any loan guaranteed 
under this part, including the security given for the loan, may be 
sold or assigned by the lender to any financial institution subject 
to examination and supervision by an agency of the Federal 
Government or of any State or the District of Columbia.

Section 11. Disqualification of Lenders and Civil Money Penalties

    (a) General. If the Department determines that a lender or 
holder of a guarantee certificate under Section 184 has failed to 
maintain adequate accounting records, to adequately service loans 
guaranteed under Section 184, to exercise proper credit or 
underwriting judgement, or has engaged in practices otherwise 
detrimental to the interest of a borrower or the United States, the 
Department may:
    (1) Refuse, either temporarily or permanently, to guarantee any 
further loans made by such lender or holder;
    (2) Bar such lender or holder from acquiring additional loans 
guaranteed under Section 184; and
    (3) Require that such lender or holder assume not less than 10 
percent of any loss on further loans made or held by the lender or 
holder that are guaranteed under Section 184.
    (b) Civil money penalties for intentional violations. If the 
Department determines that any lender or holder of a guarantee 
certificate under Section 184 has intentionally failed to maintain 
adequate accounting records, to adequately service loans guaranteed 
under Section 184, or to exercise proper credit or underwriting 
judgement, the Department may impose a civil money penalty on such 
lender or holder in the manner and amount provided under section 536 
of the National Housing Act with respect to mortgagees and lenders 
under such Act.
    (c) Payment of loans made in good faith. Notwithstanding 
paragraphs (a) and (b), the Department may not refuse to pay 
pursuant to a valid guarantee on loans of a lender or holder barred 
under Section 184, if the loans were previously made in good faith.

Section 12. Payment Under Guarantee

    (a) Lender options.
    (1) General. In the event of default by the borrower on a loan 
guaranteed under this part, the holder of the guarantee certificate 
shall provide written notice of the default to the Department. Upon 
providing this notice, the holder of the guarantee certificate will 
be entitled to payment under the guarantee (subject to the 
provisions of this part) and may proceed to obtain payment in one of 
the following manners:
    (i) Foreclosure. The holder of the certificate may initiate 
foreclosure proceedings in a court of competent jurisdiction (after 
providing written notice of such action to the Department) and upon 
a final order by the court authorizing foreclosure and submission to 
the Department of a claim for payment under the guarantee, the 
Department will pay to the holder of the certificate the pro rata 
portion of the amount guaranteed (as determined in accordance with 
Section 9 of this guide) plus reasonable fees and expenses as 
approved by the Department. The Department will be subrogated to the 
rights of the holder of the guarantee and the holder shall assign 
the obligation and security to the Department.
    (ii) No foreclosure. Without seeking a judicial foreclosure (or 
in any case in which a foreclosure proceeding initiated under 
paragraph (i) of this section continues for a period in excess of 1 
year), the holder of the guarantee may submit to the Department a 
claim for payment under the guarantee and the Department will only 
pay to such holder for a loss on any single loan an amount equal to 
90 percent of the pro rata portion of the amount guaranteed (as 
determined in accordance with Section 9 of this guide). The 
Department will be subrogated to the rights of the holder of the 
guarantee and the holder shall assign the obligation and security to 
the Department.
    (2) Requirements. Before any payment under a guarantee is made 
under paragraph (1) of this section, the holder of the guarantee 
shall exhaust all reasonable possibilities of collection. Upon 
payment, in whole or in part, to the holder, the note of judgement 
evidencing the debt shall be assigned to the United States and the 
holder shall have no further claim against the borrower or the 
United States.
    (b) Assignment by the Department. Notwithstanding paragraph (a) 
of this section, upon receiving notice of default on a loan 
guaranteed under Section 184 from the holder of the guarantee, the 
Department may accept assignment of the loan if the Department 
determines that the assignment is in the best interests of the 
United States. Upon assignment the Department will pay to the holder 
of the guarantee the pro rata portion of the amount guaranteed (as 
determined in accordance with Section 9 of this guide). The 
Department will be subrogated to the rights of the holder of the 
guarantee and the holder shall assign the obligation and security to 
the Department.
    (c) Limitations on liquidation. In the event of default by the 
borrower on a loan guaranteed under Section 184 involving a security 
interest in tribal allotted or trust land, the Department will only 
pursue liquidation after offering to transfer the account to an 
eligible tribal member, the tribe, or the Indian housing authority 
serving the tribe or tribes. If the Department subsequently proceeds 
to liquidate the account, the Department will not sell, transfer, 
otherwise dispose of or alienate the property except to one of the 
entities described in the preceding sentence.

[FR Doc. 96-5050 Filed 3-5-96; 8:45 am]
BILLING CODE 4210-33-P