Independent Banker - October 2021 - 52

EXPLAINER: SECTION 184
What is it?
The Section 184 Loan Guarantee Program offers a 100% loan
guarantee. It was created by the Housing and Community
Development Act of 1992 to address the lack of mortgage lending
in Indian Country.
How does it work?
Loans to eligible borrowers are guaranteed by the Office of
Loan Guarantee within the Department of Housing and Urban
Development's Office of Native American Programs. The guarantee
assures the lender that its investment will be repaid in the
event of a foreclosure. Loans less than $50,000 require a 1.25%
down payment, loans more than $50,000 require a 2.25% down
payment, and the borrower pays a 1.5% loan guarantee fee at
closing that is typically financed in the mortgage.
To qualify, the customer has to be an enrolled member of a
federally recognized tribe.
Who can provide 184 loans?
Loans need to be originated and serviced by lenders that
have completed Section 184 training and have met program
requirements. To become a Section 184 lender, community banks
need to submit a lender application form to HUD for approval.
Where can loans be made?
They can be used in 38 states for Native Americans or Alaska
Natives who are enrolled members of a federally recognized Tribe,
Alaska Village or Regional Corporation.
for small-dollar loans among
unbanked and underbanked Native
Americans. Larger banks typically
have minimum loan sizes of $2,000
to $3,000. Some banks are reluctant
to make those small-dollar loans,
because the work put into a $1,000
loan is the same as for a $10,000
loan. Eagle Bank doesn't have
minimum loan amounts and makes
loans as small as $500 in some cases.
That type of lending often requires
looking beyond just a credit score to
understand the unique situation and
finances of an individual, West adds.
In the first quarter of the year, 37%
of Eagle Bank's consumer loans were
done with policy exceptions, and it
also has approved 81% of consumer
loan applications over the past nine
quarters. The community bank often
finds mitigating factors that make
risk more acceptable, allowing it to
build strong relationships with its
borrowers, which make them feel
more obliged to repay those loans.
" What that tells you is that we are
making loans to people who would
otherwise not get loans, " West says.
Using loan guarantee programs
To serve Native customers,
community banks can use
WA
MT
OR
ID
WY
NV
UT
CO
CA
AZ
NM
TX
AK
HI
KS
OK
AR
MS AL
LA
FL
GA
SC
MO
TN
KY
SD
NE
IA
OH
IL
IN
WV
NC
VA
DE
MD
DC
ND
MN
WI
MI
PA
NY
VT
NH
MA
CT
RI
NJ
ME
government loan guarantee programs
through the Department of Housing
and Urban Development (HUD),
Small Business Administration (SBA)
and other agencies.
One of the most in-demand
products for individuals is the
Section 184 Loan Guarantee
Program. Created by the Housing
and Community Development Act of
1992 to address the lack of mortgage
lending in Indian Country, this loan
program offers a 100% government
loan guarantee.
Partial approval
Full approval
Ineligible state
Section 184A program
" Having that guarantee in place is
a big incentive for lenders to be able
to loan money to tribes and tribal
members, " says Kyle R. Chavis, CEO
of Lumbee Guaranty Bank.
52 Q ICBA Independent Banker Q October 2021
Independent Banker - October 2021

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