HUD Measure Seeks to Reduce Mortgage Fees for Native Americans

The U.S. Department of Housing and Urban Development (HUD), through the Office of Native American Programs (ONAP), has announced reductions to both the Upfront Loan Guarantee fee and the Annual Loan Guarantee fee charged to homebuyers who obtain a Section 184 Indian Home Loan.

The Section 184 program is a home mortgage product specifically designed for American Indian and Alaska Native families, Alaska villages, tribes, or tribally designated housing entities. Congress established this program in 1992 to facilitate homeownership and increase access to capital in Native American Communities. With Section 184 financing, borrowers can get into a home with a low down payment and flexible underwriting. Section 184 loans can be used, both on and off native lands, for new construction, rehabilitation, purchase of an existing home, or refinance.

HUD’s new Upfront Loan Guarantee fee will be reduced from 1.50% to 1%, and the Annual Loan Guarantee fee will be reduced from 0.25% to 0% for homebuyers seeking a Section 184 guaranteed loan. In addition to providing savings to borrowers, the lower fees can help more people qualify for a mortgage. As a result of the fee reductions, a Section 184 borrower purchasing a $194,000 home will save approximately $500 this year, and up to $6,800 over the term of the loan. Overall, the reduction could mean a savings of $1.5 million for an estimated 3,000 Native American families in the first year alone.

“For this country to truly succeed, all Americans must have access to opportunity. That means expanding access to wealth-building and home ownership,” said HUD Secretary Marcia L. Fudge. “Today, we are building on the steps we’ve taken to make homeownership more affordable, and HUD is acting to ensure people feel comfortable purchasing a home as they build toward their future. As we reduce housing costs for Native American families with Section 184 loans, we continue our work to address longstanding disparities in homeownership.”

HUD’s action supports the Biden-Harris Administration’s goal of making homeownership more accessible and affordable for the Nation’s families, particularly Tribal communities for whom Section 184 guaranteed loans have been a cornerstone for access to homeownership.

Dear Lender Letter 2023-05 provides guidance to lenders on the implementation of the fee reductions as published in the Federal Register on May 4, 2023. The fee reductions will apply to all new Section 184 guaranteed loans effective July 1, 2023. The fee reductions will not apply to Section 184 guaranteed loans closed prior to the effective date.