Native American Housing: VA Could Address Some Barriers to	 
Participation in Direct Loan Program (23-AUG-02, GAO-02-654).	 
                                                                 
Several federal programs have been developed to provide 	 
homeownership opportunities for Native Americans because private 
institutions have rarely supplied conventional home loans to	 
Native Americans on trust lands. In 1992, Congress directed the  
Department of Veterans Affairs (VA) to create the Native American
Veterans Direct Home Loan Program to assist veterans in 	 
purchasing, constructing and improving homes. The Native American
Veterans Direct Home Loan Program has been characterized by	 
differences in the numbers served, with Native Hawaiians and	 
Pacific Islanders together receiving almost five times as many as
loans as Native Americans. Several factors that apply to Native  
Americans, but not to Native Hawaiians and Pacific Islanders, may
explain this difference. Long-standing barriers to lending on	 
Native American trust lands include insufficient income and	 
credit history and a lack of meaningful interest in land among	 
many Native Americans, as well as insufficient infrastructure on 
trust lands. Other factors that VA can address include program	 
limits that may be lower than housing costs for some trust lands 
and potential applicants' inexperience with the mortgage lending 
process. VA has conducted outreach but has taken limited steps to
meet the assessment and reporting requirements specified in the  
program's authorizing legislation. VA attends housing		 
conferences, distributes promotional materials, and responds to  
inquiries about the program to meet outreach requirements	 
specified in its authorizing legislation.			 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-02-654 					        
    ACCNO:   A04559						        
  TITLE:     Native American Housing: VA Could Address Some Barriers  
to Participation in Direct Loan Program 			 
     DATE:   08/23/2002 
  SUBJECT:   Federal aid for housing				 
	     Homeowners loans					 
	     Housing						 
	     Housing programs					 
	     Indian lands					 
	     Low income housing 				 
	     Native Americans					 
	     VA Native American Veterans Direct Home		 
	     Loan Program					 
                                                                 

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GAO-02-654
     
Report to Congressional Requesters

United States General Accounting Office

GAO

August 2002 NATIVE AMERICAN HOUSING

VA Could Address Some Barriers to Participation in Direct Loan Program

GAO- 02- 654

Page i GAO- 02- 654 Native American Housing Letter 1

Results in Brief 2 Background 3 Several Factors May Explain Disparity in
Number of Loans Made to

Different Groups 7 VA Has Conducted Various Outreach Activities but Has
Taken

Limited Steps to Meet Assessment and Reporting Requirements 12 Conclusions
14 Recommendations for Executive Action 15 Agency Comments 15 Scope and
Methodology 16

Appendix I Other Federal Homeownership Programs for Native Americans on
Trust Lands 18

Appendix II Comments from the Department of Veterans Affairs 20

Appendix III Contacts and Staff Acknowledgments 24 GAO Contacts 24
Acknowledgments 24

Related GAO Products 25

Table

Table 1: Homeownership Assistance Programs for Native Americans on Trust
Lands, in 2002 19

Figures

Figure 1: VA?s Nine Regional Loan Centers and the States They Serve 6
Contents

Page ii GAO- 02- 654 Native American Housing

Figure 2: Number of Loans Made by VA through Its Native American Veterans
Direct Home Loan Program to Native American, Native Hawaiian, and Pacific
Islander Veterans (Calendar years 1994- 2001) 8

Abbreviations

FHA Federal Housing Administration HUD Department of Housing and Urban
Development VA Department of Veterans Affairs

Page 1 GAO- 02- 654 Native American Housing

August 23, 2002 The Honorable John D. Rockefeller IV Chairman, Committee on
Veterans? Affairs United States Senate

The Honorable Daniel K. Akaka United States Senate

The homeownership rate among Native Americans 1 is one of the lowest in the
United States. While over 67 percent of Americans own their homes, fewer
than 33 percent of Native Americans own homes. For Native Americans living
on trust lands- lands held by the federal government for the benefit of
Native Americans- homeownership opportunities are more limited, because
lenders typically require that buyers own the land on which their homes will
be located.

Because private institutions have rarely supplied conventional home loans to
Native Americans on trust lands, several federal programs have been
developed to provide homeownership opportunities for Native Americans. 2 For
example, in 1992, the Congress directed the Department of Veterans Affairs
(VA) to create the Native American Veterans Direct Home Loan Program to
assist veterans in purchasing, constructing, and improving homes. The
program has a specific focus; it is intended to serve veterans living on
trust or equivalent lands 3 on the mainland and in Hawaii and the Pacific.
To obtain loans under this program, veterans must meet income,

1 As defined in P. L. 102- 547, Native American means an Indian, a Native
Hawaiian, an Alaska Native or a Pacific Islander. In this report, except
when referring to the title of the program, we use the term Native American
more narrowly to refer to Indians and Alaska Natives, as distinguished from
Native Hawaiians and Pacific Islanders.

2 See app. I for additional programs serving this purpose and Native
American Housing: Homeownership Opportunities on Trust Lands Are Limited,
GAO/ RCED- 98- 49, (Washington, D. C.: Feb. 24, 1998) for a summary of the
involvement of the private sector and federal government in housing programs
for Native Americans on trust lands on the mainland.

3 In this report, we use the term equivalent lands to refer to those
included under P. L. 102547 that are held by individual Indians, individual
Alaska Natives, or Alaskan regional or village corporations and are subject
to restrictions that may require the Secretary of the Interior?s approval
when ownership is transferred. Also included are the Hawaiian homelands and
lands on Pacific islands that have been communally owned by cultural
tradition.

United States General Accounting Office Washington, DC 20548

Page 2 GAO- 02- 654 Native American Housing

credit, and other requirements; and VA must have memorandums of
understanding covering foreclosure and other issues with tribes or other
entities that have jurisdiction over the lands involved. The Congress
reauthorized the program in 1997 and 2001 and is considering making the
program permanent when it is up for reauthorization again in 2005.

To inform the Congress as it considers making this program permanent, you
requested that we analyze which veterans the program has served and assess
VA?s response to requirements specified in the program?s authorizing
legislation. Specifically, you asked us to determine

 if a disparity exists in participation in the program between Native
American veterans and Native Hawaiian and Pacific Islander veterans and the
reasons for any disparity; and

 what actions VA has taken to meet outreach, assessment, and reporting
requirements specified in the direct loan program?s authorizing legislation.

To determine if there was a disparity in participation, we analyzed data
from VA, the Census Bureau, and the Bureau of Indian Affairs. We also
interviewed VA program officials in Washington, D. C., and in the four VA
offices responsible for about 96 percent of all loans made under this
program. To determine the steps that VA took to meet program requirements,
we reviewed VA?s annual reports to the Congress; Census data and data
obtained by VA, at our request, from its nine regional loan centers; and
interviewed officials of selected federal agencies, Indian tribes, and
interest groups.

In April 2002, we briefed your office on our key findings. As you requested
at our briefing, we are also providing information on other federal programs
that provide homeownership assistance to Native Americans. We did not
analyze this information to determine if these other programs affected
participation in VA?s direct loan program. See appendix I for additional
information.

The Native American Veterans Direct Home Loan Program has been characterized
by differences in the numbers served, with Native Hawaiians and Pacific
Islanders together receiving almost five times as many loans as Native
Americans since the program was enacted. Several factors that apply to
Native Americans, but not to Native Hawaiians and Pacific Islanders, may
explain this difference- some that VA cannot address and others that VA can
address. The former involve long- standing barriers to lending on Native
American trust lands, such as insufficient income and Results in Brief

Page 3 GAO- 02- 654 Native American Housing

credit history and lack of meaningful interest in land among many Native
Americans, as well as insufficient infrastructure on trust lands. Other
factors that VA can address include program loan limits that may be lower
than housing costs for some trust lands and potential applicants
inexperience with the mortgage lending process. Although some barriers to
lending will remain, we are recommending that VA seek to increase Native
American participation in the program by addressing those barriers it can
change.

VA has conducted outreach but has taken limited steps to meet the assessment
and reporting requirements specified in the program?s authorizing
legislation. VA attends housing conferences, distributes promotional
materials, and responds to inquiries about the program to meet outreach
requirements specified in its authorizing legislation. The legislation also
requires VA to assess its outreach efforts and identify the pool of veterans
eligible for the program in annual reports to the Congress. VA has reported
that it has made extensive outreach efforts but has not provided an
assessment of the effectiveness of its outreach activities. VA has reported
the number of Native American and Pacific Islander veterans who identified
themselves as such in the 1990 census but has not identified how many of
these individuals would be eligible for the program. VA plans to utilize the
more detailed 2000 census data to develop a more accurate count of eligible
veterans. We are recommending that VA comply with requirements to assess its
outreach efforts.

VA?s comments on a draft of this report are reprinted in appendix II. VA
concurred with our recommendations; and also provided technical
clarifications to the report, which we incorporated where appropriate.

Financing homes on trust lands presents unique difficulties. Because
individuals do not hold unrestricted title to these lands, they cannot
convey the title to lenders to secure financing. To help overcome these
difficulties and promote homeownership among Native American, Native
Hawaiian, and Pacific Islander veterans, the Congress established the Native
American Veterans Direct Home Loan Program in 1992. 4 Begun as a 5- year
pilot, the program has been extended twice and is currently authorized
through 2005.

4 P. L. 102- 547. Background

Page 4 GAO- 02- 654 Native American Housing

To support loans under the program, the Congress provided an appropriation
of $4.5 million in 1993 that continues to be available for the lifetime of
the program. This amount is sufficient to allow VA to make more than $58
million in home loans, and $26 million had been obligated for loans through
February 2002. 5 VA receives an additional $0. 5 million each year for
administration and outreach activities, including travel to meet with tribes
and individuals on the mainland and in the Pacific.

The program is intended to assist eligible veterans living on trust or
equivalent lands to obtain loans at market rates to purchase, construct, or
rehabilitate homes. On the mainland, most trust land is located on or near
reservations, with about 55 million acres held in trust by the U. S.
government for Indian tribes and individuals. In the Pacific, communally
owned lands in American Samoa, Guam, and the Northern Marianas and 200,600
acres of Hawaiian homelands 6 are also covered by this program.

Under the program, individual loans are limited by law to the cost of the
home or $80,000, whichever is less. However, the law permits VA to make
exceptions to the loan limit if VA determines that the costs in an area are
significantly higher than average housing costs nationwide. Loans are
available only for single- family homes that the owner occupies, not for
multifamily dwellings, rentals, or investment properties.

To be eligible for a loan under this program, veterans must meet certain
statutory requirements. Veterans must demonstrate that they are

 honorably released from active military duty or members of the Selected
Reserve, including the National Guard, and have served the required length
of time;

 creditworthy, that is, they are a satisfactory credit risk with stable and
sufficient income to meet mortgage payments;

 holders of a meaningful interest in the trust or equivalent land on which
their homes will be located that entitles them to use and occupy the land;
and

5 The appropriation is for the subsidy cost of the loans, that is, the
portion of the loans? value that the government does not expect to be
repaid. 6 The Hawaiian Homelands were created by P. L. 67- 34 in 1921.
Hawaii, upon statehood in 1959, assumed responsibility for managing the
homelands through the Department of Hawaiian Homelands.

Page 5 GAO- 02- 654 Native American Housing

 members of a federally recognized tribe or the equivalent 7 that has
signed a memorandum of understanding with VA.

A meaningful interest in the land may take the form of a long- term lease,
allotment or other interest conveyed by the tribe or entity with
jurisdiction over the land. For example, this generally takes the form of
99- year leases on Hawaiian homelands. The meaningful interest serves as
security for the loan and must be transferable in the event of foreclosure.
The tribe or other responsible entity must enter into a memorandum of
understanding with VA to cover standards and procedures for foreclosure and
related issues before any loans can be made under this program to an
eligible veteran of that tribe. Lands held in trust for tribes are generally
leased and at foreclosure, cannot be taken out of trust status. Lands held
in trust for individuals can be inherited and can lose their trust status at
foreclosure.

VA administers the program through nine regional loan centers and its
Honolulu Regional Office in Hawaii, shown on the map in figure 1 below. The
five regional loan centers in the East, however, have a limited role in the
program?s operation, because many of the states they serve have few or no
federally recognized tribes. 8 However, the regional loan centers in Denver
and St. Paul each serve eight states with federally recognized tribes, and
the center in Phoenix serves three states with some of the largest
concentrations of Native Americans in the country. In addition, Denver
oversees loan activities conducted out of VA?s Anchorage office in Alaska.
The Honolulu Regional Office administers the program in the South Pacific.

7 In the Pacific, veterans eligible for loans in Hawaii must be Native
Hawaiians, and elsewhere they must be Pacific Islanders. The state or
territorial governments are considered the equivalents of tribal
organizations and must have signed memorandums of understanding with VA for
the program to provide loans on lands in these locations.

8 The states on the mainland without federally recognized tribes are
Arkansas, Delaware, Georgia, Illinois, Indiana, Kentucky, Maryland,
Missouri, New Hampshire, New Jersey, Ohio, Pennsylvania, Tennessee, Vermont,
Virginia and West Virginia. The District of Columbia has no federally
recognized tribes. Tribes with land in two or more states are considered to
be located in the state with the greatest share of the tribes? membership in
order to avoid double counting of tribes for the purposes of this report.

Page 6 GAO- 02- 654 Native American Housing

Figure 1: VA?s Nine Regional Loan Centers and the States They Serve

Source: GAO map based on data provided by VA.

Page 7 GAO- 02- 654 Native American Housing

Native Hawaiian and Pacific Islander veterans have received more loans than
Native American veterans during the lifetime of the program, and several
factors may explain this difference. 9 VA cannot address some of these
factors, such as applicants? income levels and credit history, or their lack
of a meaningful interest in the land; VA also cannot address the
availability of infrastructure on trust lands. Other factors that VA can
address are program- related, such as loan limits and assistance with the
mortgage process.

Four out of every five loans made under the program?s auspices have been
provided to Native Hawaiian or Pacific Islander veterans. Of 227 total
loans, 143 have been made to Native Hawaiians and 46 to Pacific Islanders.
Combined, the 189 loans made to these two groups greatly exceed the 38 loans
made to Native American veterans. 10 The year- by- year analysis in figure 2
indicates that the number of loans made to Native Americans has been
relatively constant. While the number of loans for Native Hawaiians and
Pacific Islanders combined has varied, it has consistently exceeded the
number of loans made to Native Americans, averaging twice as many loans
since 1998.

9 Data was not available to determine how the distribution of borrowers
among groups compares with the distribution of veterans among the groups. 10
No loans under this program have been made to Alaska Natives. VA officials
explained that Alaska Natives have not responded to their outreach efforts
and are utilizing other loan programs. Several Factors May

Explain Disparity in Number of Loans Made to Different Groups

Number of Loans to Native Hawaiian Veterans and Pacific Islander Veterans Is
Almost Five Times That of Native American Veterans

Page 8 GAO- 02- 654 Native American Housing

Figure 2: Number of Loans Made by VA through Its Native American Veterans
Direct Home Loan Program to Native American, Native Hawaiian, and Pacific
Islander Veterans (Calendar years 1994- 2001)

Source: GAO?s analysis of VA loan data.

In the first 5 years of the program, Native Hawaiians received most of the
loans. VA officials in the Honolulu office explained that the number of
loans made to Native Hawaiians peaked in 1995 and 1996 because the officials
were able to grant 60 loans to veterans purchasing homes in two housing
subdivisions. VA officials said that loans to Pacific Islanders rose in 1996
and 1997 because they made a conscious decision to launch the program in
stages- focusing initially on the nearest and easiest to serve areas of
Hawaii and later moving on to promote the program in American Samoa, the
Northern Marianas, and Guam. 11 Although the number of loans completed in
Hawaii in recent years has declined, VA officials anticipate an increase in
the future as other eligible veterans obtain leases on Hawaiian homelands.

11 Of the loans completed in these Pacific Islands, 29 have been in American
Samoa, 16 in the Northern Marianas, and 1 in Guam.

Page 9 GAO- 02- 654 Native American Housing

Among the factors that VA cannot address that may contribute to lower
participation of Native American veterans are low- income levels and
unacceptable credit histories of potential applicants. To implement the
statutory creditworthiness requirement, VA requires that an individual have
sufficient income to qualify for a program loan. Based on 1990 census data,
Native Americans had an average annual income of $16,800 while the average
annual income of Native Hawaiians was $26,600. VA officials said that while
they make every effort to assist applicants in qualifying for a loan,
insufficient income and unacceptable credit history are still major barriers
to loan approval for Native Americans who are found not to be creditworthy.
Specifically, 23 of the 39 Native American loan applications in the St.
Paul, Minnesota VA region were denied because of applicants? insufficient
income and unacceptable credit history. The remaining 16 were denied because
of problems with land ownership. Officials at the Denver, Colorado, VA
regional office also said that insufficient income and unacceptable credit
history were the reasons for denying three of seven Native American
veterans? loan applications received in the region since the program?s
inception. VA?s Honolulu field office stated that while insufficient income
and unacceptable credit history have been a barrier for some veterans in
American Samoa, other Native Hawaiian and Pacific Islanders have less
difficulty meeting this eligibility requirement because of their higher
income.

Problems with establishing a meaningful interest in trust lands have also
precluded some Native American veterans from obtaining a mortgage loan under
this program. To obtain a mortgage loan, VA requires that veterans have a
meaningful interest in the trust land on which their homes will be located.
However, ownership of some Native American trust land has become
fractionated 12 as the ownership interests passed through several
generations of multiple heirs, with an increasing number of people owning
smaller shares of land over time. This land fractionation has increased at a
rapid pace. 13 Under such circumstances, a loan applicant would need to
obtain the approval of everyone with shares in the land in order to mortgage
it. For example, one applicant for a VA mortgage loan in the St.

12 Lands held in trust for individuals are those most affected by
fractionation, because these are the lands where ownership can be inherited
and passed down through succeeding generations. About 10 million out of the
total 55 million acres on the mainland are held in trust for individuals
rather than tribes.

13 Indian Programs: Profile of Land Ownership at 12 Reservations (GAO/ RCED-
92- 96BR, Feb 10, 1992). Factors That VA Cannot

Address May Contribute to Lower Participation of Native American Veterans

Page 10 GAO- 02- 654 Native American Housing

Paul region was unable to obtain a loan because he owned a 192nd interest in
the trust land where he wanted to locate his home. This veteran would have
had to obtain the approval of other co- owners to mortgage the land. In
addition, all four federally recognized tribes in Kansas informed VA that
they were not interested in participating in the VA direct loan program
because of the extent of fractionated land interests within their
reservation boundaries. In VA?s St. Paul region, 12 of the 39 loans, which
have been denied since the program?s inception, were denied because the
applicant had a fractionated interest in the land. This unique land
ownership problem does not exist on the Hawaiian homelands because the land
is leased.

Another barrier for Native American veterans that VA cannot address is the
lack of infrastructure that is needed for housing development on trust
lands. The remoteness of some tribal lands has been an ongoing problem for
housing development on Native American trust lands. 14 In contrast to
metropolitan areas, where basic infrastructure systems (such as sewers,
electricity, and water supply) are already in place, building in remote
trust lands requires the tribe or homeowner to install infrastructure to
support new housing, or self- contained housing must be built. For example,
much of the housing constructed on Navajo and Sioux trust lands is scattered
across remote sites. A builder on Navajo lands told us that the cost to
provide infrastructure to remote home sites is often too expensive for the
tribe or homeowners and can cost over $20,000 per home. For Hawaiian
veterans, infrastructure costs do not present such a barrier. The state of
Hawaii, as part of its homeland development program, provides eligible
Native Hawaiians (veterans and nonveterans) with infrastructure funding. For
example, in a remote housing development containing homes purchased by
Native Hawaiian veterans with VA loans, the Department of Hawaiian Homelands
provided as much as $50,000 per lot for sewer, water, and electrical
services.

One program- related factor that VA can address that may have affected
participation of Native American veterans is the $80, 000 loan limit,
established by the Congress when it created the program in 1992. VA has the
authority to raise the loan limit for a geographic area if VA determines
that the average housing cost in the area is significantly higher than the
national average. Using this authority, VA officials said that the loan
limit

14 GAO/ RCED- 98- 49. VA Can Address Some

Factors That May Contribute to Lower Participation of Native American
Veterans

Page 11 GAO- 02- 654 Native American Housing

was raised to $120,000 for Hawaii, the Pacific Islands, and the state of
Washington- and to $100,000 for one tribe in New Mexico, to more closely
approximate the housing costs in those areas. However, VA has not attempted
to determine if the maximum loan limit should be raised for other Native
American tribes. VA reported that they have not initiated increases for
other areas because neither the VA regional loan centers nor the tribes have
requested a change. Officials at the Denver Regional Loan Center said that
the $80,000 loan limit may prevent some veterans from participating in this
program. One tribal housing specialist with the nation?s largest tribe, the
Navajo, has directed veterans who wanted to purchase homes costing about
$100,000 to other loan programs because he was not aware that VA could make
exceptions to the $80,000 loan limit. In comparison, other federal programs
that provide homeownership assistance to Native Americans on trust lands 15
have loan limits between $144,000 and $278,000 (depending on the geographic
region) and during 2001, guaranteed loans averaging $102,000.

Finally, recent reports 16 on mortgage lending concluded that Native
Americans could benefit from homebuyer counseling and education. One report
stated that Native Hawaiians could also benefit from homebuyer counseling
and education. These two groups were found to have little experience with
the mortgage lending process and the necessary steps required to obtain a
mortgage loan. To overcome this barrier, the Director of VA?s Honolulu field
office said that local housing authorities and other organizations in Hawaii
and the Pacific Islands provide mortgage counseling and homebuyer education
that assist Native Hawaiians and Pacific Islanders to negotiate the
homebuying and mortgage process. Officials at VA?s Honolulu regional loan
center said they help ensure that veterans receive the services and
assistance of these organizations by actively communicating and partnering
with them. VA?s mainland regional loan centers have not established similar
relationships with organizations to provide the same types of services for
Native American veterans.

15 See appendix I for details on other Native American homeownership
assistance programs and their loan limits. 16 One- Stop Mortgage Center
Initiative in Indian Country, the Department of Housing and Urban
Development and the Department of the Treasury, October 2000; The Report of
the Native American Lending Study, Community Development Financial
Institutions Fund, the Department of the Treasury, November 2001.

Page 12 GAO- 02- 654 Native American Housing

For example, VA regional loan centers have not partnered with other
organizations that focus on mortgage lending on trust lands, such as the
One- Stop Mortgage Centers 17 located on the Navajo reservation in New
Mexico and Arizona, and the Oglala Sioux reservation in South Dakota. The
centers are nonprofit organizations that specialize in mortgage lending and
credit counseling, guiding potential Native American borrowers through the
homebuying process, simplifying procedures, and educating potential
borrowers about the types of home loans available on trust lands. We found
that VA regional offices in Phoenix and St. Paul have had little contact
with these centers and have not used them to identify, educate, and assist
prospective borrowers. For example, a One- Stop Mortgage Center official in
Arizona estimated that as many as 200 Navajo veterans who had visited the
center and expressed an interest in homeownership did not receive complete
information about the VA program because the One- Stop Mortgage Center?s
staff was not familiar with it.

VA has conducted outreach but has taken limited steps to meet assessment and
reporting requirements as specified in the program?s authorizing
legislation. Outreach requirements specified in the program?s authorizing
legislation state that VA, among other things, is to attend housing
conferences, and provide information to veterans, tribal governments and
organizations. VA has performed many of these activities. Other program
requirements state that VA should annually assess and report to the Congress
on the effectiveness of its outreach activities and annually report on the
pool of eligible Native American, Native Hawaiian, and Pacific Islander
veterans. VA has reported that it has undertaken extensive outreach
activities but has not reported on how effective its outreach has been. VA?s
annual report has included information on how many Native American and
Pacific Islander veterans identified themselves as such on the 1990 census
but has not indicated the number of these individuals who would meet the
program?s eligibility requirements. However, VA said it will use new data
available from the 2000 census to provide a more accurate count.

17 An Executive Memorandum established the One- Stop Mortgage Center
Initiative in 1998. It directed HUD and the Department of Treasury to
develop recommendations to streamline mortgage lending on trust lands. VA
Has Conducted

Various Outreach Activities but Has Taken Limited Steps to Meet Assessment
and Reporting Requirements

Page 13 GAO- 02- 654 Native American Housing

The direct loan program?s authorizing legislation states that VA must, among
other things, attend housing conferences and conventions; and produce and
disseminate information to tribal governments, tribal veterans service
organizations, and tribal organizations regarding the availability of such
benefits. VA?s regional loan center staff have attended and made
presentations at housing conferences sponsored by the Department of Housing
and Urban Development?s Office of Native American Programs, the Department
of Hawaiian Homelands, other Native American housing organizations, and
Native American veterans forums. For example, the Phoenix regional loan
center made a presentation on the direct loan program at the National Native
American Veterans Symposium in February 2001.

In addition, VA produced a video called ?Coming Home: Native American
Veteran Home Loans? that has been distributed to tribal officials and
organizations. This video shows Native American veterans and tribal
officials how the direct loan program may be used to help them achieve their
homeownership goals. VA has also distributed information pamphlets and
applications to interested veterans and organizations.

VA?s regional loan center staff has also traveled to tribal trust lands to
meet and talk with tribal representatives and veteran liaison
representatives to solicit their assistance in reaching tribal members who
are veterans. For example, the Phoenix and St. Paul regional loan centers
sent representatives to talk to tribes in those areas about the program.

Furthermore, the Honolulu field office has expanded on these outreach
activities to promote the program to Native Hawaiian veterans. Officials at
the Honolulu office said they use local media, including radio, television,
and newspaper to promote the program. In addition, officials said they use
local housing organizations to inform veterans of the program.

The program?s authorizing legislation requires, among other things, that VA
assess the effectiveness of outreach efforts it undertakes in connection
with the direct loan program and report this assessment to the Congress
annually. In its reports, VA states that the low level of program
participation is not due to a lack of outreach on its part. However, program
officials said that VA has not assessed the effectiveness of its outreach
efforts. VA notified us that it plans to evaluate the Native American
Veterans Direct Home Loan program as part of a larger study that it expects
to complete in 2003, but an assessment of outreach effectiveness is not part
of the planned work. VA Has Conducted Various

Outreach Activities VA Has Taken Limited Steps to Meet Assessment and
Reporting Requirements

Page 14 GAO- 02- 654 Native American Housing

The program?s authorizing legislation directs VA to report annually on the
pool of eligible veterans. To meet this requirement, VA reported that about
436,000 individuals had identified themselves as Native American and Pacific
Islander veterans in the 1990 census. VA also acknowledged that the number
of veterans obtained from census data did not wholly correlate to eligible
veterans because the tally included veterans who were living in cities and
who may not have been members of tribes- thus, included were some veterans
not eligible for leases or ownership of trust lands. Also, VA officials
stated that they could not definitively quantify the pool of veterans who
might be eligible for the program because they are dependent on veterans
volunteering to identify their race and ethnicity.

We analyzed the 1990 census data, however, and were able to distinguish
Native American veterans who were living in tribal areas with trust lands
from those living elsewhere. Our analysis revealed that there were
approximately 18,000 veterans living on trust lands associated with about 50
federally recognized tribes. Although, it is likely that there are eligible
veterans associated with the remaining federally recognized tribes, the data
were not readily available.

Further identification of eligible veterans might be possible with an
examination of 2000 census data. Population data for Native Hawaiians who
live on their equivalent of trust lands- Hawaiian homelands- were not
collected in the 1990 census but were collected in the 2000 census. The more
recent census will also identify Native American veterans living on trust
lands associated with nearly 90 federally recognized tribes. VA program
officials said they have asked VA?s Office of Policy and Planning to analyze
the 2000 census data and will use the data to provide a more current,
accurate count of veterans eligible for the program. This analysis could
allow VA to report to the Congress a more accurate count of the eligible
pool of program participants.

Although the program is designed to help Native American, Native Hawaiian,
and Pacific Islander veterans living on trust lands achieve homeownership,
our review suggests that certain elements of the program may be barriers to
participation for Native Americans. Some of these barriers are difficult to
overcome; for example, problems with establishing meaningful interest in
trust lands. But, VA can address some of the other barriers. For example,
the program loan limit of $80,000 may be limiting the usefulness of the
program to Native American veterans on some trust lands. By not partnering
with other organizations, VA may be missing opportunities to get Native
American veterans into the program and to Conclusions

Page 15 GAO- 02- 654 Native American Housing

guide them through the mortgage process to buy a home. Furthermore, by not
assessing its outreach efforts, VA cannot be certain that it is effectively
reaching the population that the program was designed to serve. While VA has
not completely met requirements for reporting on the pool of eligible
veterans, we are not making a recommendation because VA plans to use the
2000 census data to provide a more accurate count of eligible veterans.
Changes to VA?s loan program might improve the program?s contribution to the
federal effort to increase opportunities for Native American homeownership
on trust lands.

To increase opportunities for participation for all Native American, Native
Hawaiian, and Pacific Islander veterans, we recommend that the Secretary of
Veterans Affairs:

 Direct regional loan centers to obtain local housing cost data for trust
lands to determine the need for exceptions to the current loan limit.
Additional exceptions should be granted if the data support such increases.

 Explore partnerships with local housing organizations, such as One- Stop
Mortgage Centers, that assist and support Native Americans on trust lands
with the mortgage lending process.

 Assess program outreach efforts to Native American, Native Hawaiian, and
Pacific Islander veterans and report on this assessment to the Congress, as
the program?s authorizing legislation directs.

We provided a draft of this report to VA for its review and comment. We
received written comments on the draft report (see app. II). VA agreed that
it could do more in delivering its benefits, and concurred with our
recommendations. In addition, VA provided technical clarifications to the
report, which we have incorporated into this report where appropriate.

As part of its comments, VA suggested that we use statistical data from its
National Survey of Veterans 2000 on veteran homeownership and income, rather
than the general population. VA did not provide a copy of this unpublished
survey, and we were unable to verify these data to determine their validity.
Therefore, we did not include them in this report. Recommendations for

Executive Action Agency Comments

Page 16 GAO- 02- 654 Native American Housing

To address the issues discussed in this report, we reviewed the statute,
regulations, annual reports, and informational materials on VA?s Native
American Veterans Direct Home Loan program as well as our other work and
related studies of Native American trust land issues. We also interviewed
numerous officials in Washington, D. C., and elsewhere with responsibilities
for the program or knowledge of Indian housing issues. To gain a fuller
perspective on Native American housing and trust land issues, we interviewed
HUD officials, who administer block grant and home- loan programs for Native
Americans. We also interviewed an official at the Bureau of Indian Affairs,
who is familiar with Native American tribes and trust land issues. We gained
some perspective on the views of Native American veterans by interviewing
officials from the National Congress of American Indians, the National
American Indian Housing Council, and the Center for Minority Veterans as
well as representatives of the Navajo Tribe and the Oglala Sioux Tribe. We
selected these tribes because they are among the largest in the nation, have
completed memorandums of understanding with VA, and are served by the two VA
regional loan centers we visited.

To determine if there was a disparity in program participation, we used VA
data to calculate the number of loans made to Native Americans on the
mainland by each regional loan center in every year since 1992 and compared
the results with the number of loans made to Native Hawaiians and Pacific
Islanders during the same period. To identify the factors contributing to
the disparity, we interviewed program officials at VA headquarters in
Washington D. C., and at four VA centers: Honolulu, Denver, St. Paul, and
Phoenix. We selected these four centers because they are responsible for
about 96 percent of all loans made under the program since its inception.
During site visits to the St. Paul and Phoenix centers, we reviewed case
files to determine the reasons that loan applications had been rejected and
describe contacts with veterans and tribes. To see how income and other
program requirements may affect eligibility for the program, we reviewed
available census data on Native Americans? incomes, poverty levels, veteran
status, and residency on or near reservations. We also interviewed an
official at the One- Stop Mortgage Center in Window Rock, Arizona, to
discuss the significance of providing assistance with the mortgage process.

To determine the steps VA has taken to meet outreach, assessment, and
reporting requirements, we reviewed data provided at our request from all
nine VA regional loan centers. This data provided information on VA program
staffing, loan activity, and outreach efforts. We assessed the availability
of information that VA could use to better identify the pool of Scope and

Methodology

Page 17 GAO- 02- 654 Native American Housing

eligible veterans by reviewing Census Bureau statistical reports and by
interviewing officials concerning the availability of 2000 census data on
Native Hawaiians and on Native Americans residing on trust lands. We
conducted our work from November 2001 through May 2002 in accordance with
generally accepted government auditing standards. We checked data that we
obtained from federal agencies for internal consistency, but we did not
independently verify the data.

As arranged with your offices, we will also send copies of this report to
the Secretary, Department of Veterans Affairs; the Ranking Minority Member
of the Committee on Veterans? Affairs, U. S. Senate; and the Committee on
Veterans? Affairs, U. S. House of Representatives. We will make copies
available to others on request. In addition, this report is also available
on GAO?s Web site for no charge at http:// www. gao. gov. If you or your
staff have any questions about this report, please call me at (202) 512-
2834. Key contacts and major contributors to this report are listed in
appendix III.

Stanley J. Czerwinski Director, Physical Infrastructure Issues

Appendix I: Other Federal Homeownership Programs for Native Americans on
Trust Lands

Page 18 GAO- 02- 654 Native American Housing

In addition to VA?s Native American Veterans Direct Home Loan program, four
other federal programs provide homeownership assistance to Native American
individuals or tribes on trust lands on the mainland. The Department of
Housing and Urban Development (HUD) administers two programs, 18 and the
Department of Agriculture administers two programs through its Rural Housing
Service. Key aspects of each of these programs are shown in table 2.

18 HUD also provides housing assistance to Native Americans on the mainland
through a block grant, enacted by the Native American Housing Assistance and
Self- Determination Act of 1996. In fiscal year 2002, HUD provided about
$649 million in block grants to tribal entities to use for housing. Appendix
I: Other Federal Homeownership

Programs for Native Americans on Trust Lands

Appendix I: Other Federal Homeownership Programs for Native Americans on
Trust Lands

Page 19 GAO- 02- 654 Native American Housing

Table 1: Homeownership Assistance Programs for Native Americans on Trust
Lands, in 2002 Program feature

Indian Home Loan Guarantee Program- Housing and Urban Development Dept. Sec.
184 a

Mortgage Insurance Program- Federal Housing Administration Sec. 248 b

Rural Housing Guaranteed Loan Program- Rural Housing Service Sec. 502 c

Rural Housing Direct Loan Program- Rural Housing Service Sec. 502 d

Year enacted 1992 1983 1990 1949 Number of loans made since inception

354 on trust land out of 948 total 760 on trust land Five on trust lands out
of

396 total to Native Americans in FY 2000 and 2001

153 on trust lands out of 1937 total to Native Americans since 1995

Value of loans made since inception

$28 million on trust land out of $92. 5 million total $31 million on trust
land $29.3 million to Native

Americans in FY 2000 and 2001

$78.4 million to Native Americans since 1995

Type of funding available Home loan Home loan Home loan, with priority for

first- time buyer Home loan with interest subsidy available

Nature of program Loan guaranty for private lenders FHA insured loan Loan
guaranty for private

lenders Direct home loan Loan purpose Purchase, construct, or

rehabilitate owner occupied single- family homes with up to four dwelling
units; tribes may construct rental homes

Purchase, construct, or rehabilitate owner occupied single- family homes
with up to four dwelling units

Purchase, construct, or rehabilitate owner occupied single- family homes

Purchase, construct, or rehabilitate owner occupied single- family homes

Loan limits Lesser of 150 percent of local FHA limits e or home value

Lesser of FHA limits e or home value None, based upon

appraisal and repayment ability

HUD?s 203b limit as of 9/ 30/ 98

Lands covered by loans Trust lands held for

individuals or tribes or fee simple land in Indian areas

Trust lands held for individuals or tribes Trust lands held for

individuals or tribes and other rural properties

Trust lands held for individuals or tribes and other rural properties
Entities eligible for loans Families/ individuals, tribes

or Indian housing authorities

Families/ individuals or tribes Families/ individuals with

low or moderate incomes Families/ individuals with low or very low incomes

Agency requirements Tribal resolutions and

letters certifying procedures for foreclosures, evictions, and priority of
liens

Tribal ordinances and documentation certifying procedures for foreclosures
and evictions

Interagency memorandums of understanding developed for One- Stop Mortgage
Initiative

For tribal trust lands an approved lease is required

a Section 184 of the Housing and Community Development Act of 1992; 12 U. S.
C. 1715 z- 13a. b Section 248 of National Housing Act, as amended; 12 U. S.
C. 1715 z- 13. c Section 502 of Housing Act of 1949, as amended; 42 U. S. C.
1472 (h). d Section 502 of Housing Act of 1949, as amended; 42 U. S. C.
1472. e The Federal Housing Administration (FHA) loan limits are $144,000 -$
278,000 or $262, 000-$ 503,000 in high cost areas. Sources: GAO analysis of
HUD and Rural Housing Service data.

Appendix II: Comments from the Department of Veterans Affairs Page 20 GAO-
02- 654 Native American Housing

Appendix II: Comments from the Department of Veterans Affairs

Appendix II: Comments from the Department of Veterans Affairs Page 21 GAO-
02- 654 Native American Housing

Appendix II: Comments from the Department of Veterans Affairs Page 22 GAO-
02- 654 Native American Housing

Appendix II: Comments from the Department of Veterans Affairs Page 23 GAO-
02- 654 Native American Housing

Appendix III: Contacts and Staff Acknowledgments Page 24 GAO- 02- 654 Native
American Housing

Carol Anderson- Guthrie, (214) 777- 5600 Dwayne Curry, Shelia Drake,
Patricia Elston, Colin Fallon, John McGrail, Michael Mgebroff, and William
Sparling made key contributions to this report. Appendix III: Contacts and
Staff

Acknowledgments GAO Contacts Acknowledgments

Related GAO Products Page 25 GAO- 02- 654 Native American Housing

Welfare Reform: Tribes Are Using TANF Flexibility To Establish Their Own
Programs. GAO- 02- 768. Washington, D. C.: July 5, 2002.

Economic Development: Federal Assistance Programs for American Indians and
Alaska Natives. GAO- 02- 193. Washington, D. C.: December 21, 2001.

Indian Issues: Improvements Needed in Tribal Recognition Process.

GAO- 02- 49. Washington, D. C.: November 2, 2001.

Rural Housing: Options for Optimizing the Federal Role in Rural Housing
Development. GAO/ RCED- 00- 241. Washington, D. C.: September 15, 2000.

Native American Housing: Information on HUD?s Funding of Indian Housing
Programs. GAO/ RCED- 99- 16. Washington, D. C.: November 30, 1998.

Native American Housing: Homeownership Opportunities on Trust Lands Are
Limited. GAO/ RCED- 98- 49. Washington, D. C.: February 24, 1998.

Hawaiian Homelands: Hawaii?s Efforts to Address Land Use Issues.

GAO/ RCED- 94- 24. Washington, D. C.: May 26, 1994.

Veterans? Benefits: Availability of Benefits in American Samoa.

GAO/ HRD- 93- 16. Washington, D. C.: November 18, 1992.

Indian Programs: Profile of Land Ownership at 12 Reservations.

GAO/ RCED- 92- 96BR. Washington, D. C.: February 10, 1992. Related GAO
Products

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