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Federal audit slams HUD’s Native American home-loan guarantee program

More than $700 million worth of loans guaranteed by a federal program serving Native America homebuyers were improperly underwritten, “resulting in an increased risk to the program,” according to a recently released government audit report.

The report, issued by the U.S. Department of Housing and Urban Development (HUD) Office of Inspector General (OIG), determined that the underwriting problems involve a pool of 3,845 Section 184 loans “that were not underwritten in accordance with program guidelines.” Based on a statistical sample of that portfolio, there is a potential, on an annualized basis, for $77 million in loans to “have a higher risk of loss in the first year,” the report states.

The Section 184 Indian Home Loan Guarantee program is overseen by HUD and can be used both on and off native lands by American Indian and Alaska Native families. The OIG report determined that the HUD unit responsible for guaranteeing the loans “did not adequately monitor, track and evaluate participating lenders to ensure that loans were underwritten in accordance with Section 184 processing guidelines.” The Office of Loan Guarantee within HUD’s Office of Native American Programs oversees the Section 184 program.

The OIG report recommends that HUD develop and implement better policies and procedures for monitoring and underwriting Section 184 loans and that the agency “deny payments to lenders for claims on loans that have material underwriting deficiencies” and seek “statutory authority to indemnify poorly underwritten loans.”

“This lack of oversight and high incidence of poorly underwritten loans has the potential to negatively impact the financial standing of Native American communities,” the OIG report concludes.

For more information about this story, contact Bill Conroy at or 425-984-6019.


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