NCPA - National Center for Policy Analysis

Few Home Loans For Indians Living On Tribal Reservations

November 25, 1998

Mortgage bankers are wary of extending home loans to American Indians because of the ambiguity of titles to property on reservations which generally has to be put up as collateral for mortgages. Lenders question whether they can foreclose on a property in the event of a default on the loan. Consequently, Indians usually build their homes piecemeal from paycheck to paycheck or move off the reservations.

  • Generally, reservation land is owned by the federal government and held in trust on behalf of the tribe -- while the tribal government, in turn, parcels out home sites to tribal members under long-term leases of about 50 to 99 years.
  • From 1992 through 1996, the 1.2 million Native Americans living on tribal trust lands obtained a grand total of 91 conventional mortgages -- 80 of which were made to the members of just two tribes, the Tulalips of Washington state and the Oneidas of Wisconsin.
  • During that five-year period, the loans made totaled only $5 million -- a minuscule portion of the $785 billion in home loans in the U.S. in 1996 alone.
  • Few Indians apply for mortgages, but those who do experienced a 52 percent denial rate according to the latest data -- double the denial rate for whites and triple that for Asian Americans.

Absent clear property titles, the federal government has had to step in with special mortgage guarantee programs for Indians who want to build. Even so, the two programs made only 50 loans in fiscal 1997.

An official of the American Bankers Association says that banks would like to develop the market, but that trust status "has been the biggest historical impediment to lending on Indian lands."

Source: William Claiborne, "On Indian Reservations, Little Hope for Home Loans," Washington Post, November 25, 1998.


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