The White House recently released its proposed budget for fiscal year 2009, which totals $3.1 trillion. Within that budget is a proposed $29 million for the Community Development Financial Institutions (CDFI) Fund. Needless to say, it is a lot lower than CDFI supporters would have hoped for; last fiscal year's CDFI Fund budget was $94 million.
For those who are unfamiliar with the CDFI Fund, it is part of the Department of the Treasury. Yet its mission includes work that would be more applicable to the Department of Housing and Urban Development. According to the CDFI Fund, its goals include being able to ‘expand the supply and quality of housing units in underserved communities and increase homeownership in these markets by increasing the availability of housing financing that leverages conforming mortgages or that would likely not be made by traditional financial institutions.’
Part of this fiscal year's proposed cuts include the total elimination of funding for Native Initiatives, which the CDFI Fund defines as providing ‘financial assistance, technical assistance, and training to Native CDFIs and other Native entities proposing to become or create Native CDFIs.’ In the previous fiscal year budget, Native Initiatives received $10 million in funding.
It is not clear why the entire Native Initiatives was cut from the CDFI Fund's budget. There is nothing on the fund's Web site to explain this, and the official announcement of the fiscal year 2009 budget only acknowledges the cut by stating ‘No separate authorization exists for Native Initiatives, so no separate set aside is being requested in FY 2009.’
These cuts, if approved, could easily set back the cause of encouraging homeownership among American Indians. Among the nation's demographics, the American Indian population faces the greatest economic challenges – especially in regard to banking and housing.
According to the Native American Lending Study conducted in 2001 by the CDFI Fund, only 14% of tribal lands had a financial institution in their immediate community, and less than half of the tribes had one nearby. Furthermore, 15% of American Indians living in tribal communities without a financial institution had to travel more than 100 miles to reach one.
Today's American Indian homeownership rate is estimated at 33%, according to the Native American Indian Housing Council (NAIHC). This is half the rate for the general U.S. population and the lowest rate among the nation's racial/ethnic groups. NAIHC also records that American Indians have the second-highest level of mortgage application denials; only African Americans receive a higher percentage of mortgage rejections.
The complexity of dealing with home loans on tribal lands has been problematic for years. Few lenders are willing to go the distance of The Dime Bank in Norwich, Conn., which financed a $417,000 loan for a house built on the state's Mashantucket Pequot reservation in January 2007. The bank worked with Fannie Mae and the tribal attorneys to create a land-assignment process that will allow the house to be considered as collateral. The process took five years of planning and negotiating – yes, five years! (We first reported this story in the April 2007 edition of Secondary Marketing Executive – since then, few banks have followed The Dime Bank's example.)
The CDFI Fund's financing always go through a tug-of-war, and it is safe to assume that significantly more money will be going into its next budget than the $29 million that the White House is requesting. And, perhaps, the Native Initiatives program will also see its funding restored, which would greatly benefit American Indians seeking the chance at homeownership.
– Phil Hall, editor, Secondary Marketing Executive
(Please address all comments regarding this opinion column to hallp@sme-online.com)
