Financing homes on trust lands presents unique difficulties. Because individuals do not hold unrestricted title to these lands, they cannot convey the title to lenders to secure financing. To help overcome these difficulties and promote homeownership among Native American, Native Hawaiian, and Pacific Islander veterans, the Congress established the Native American Veterans Direct Home Loan Program in 1992. Begun as a 5-year pilot, the program has been extended twice and is currently authorized through 2005. To support loans under the program, the Congress provided an appropriation of $4.5 million in 1993 that continues to be available for the lifetime of the program. This amount is sufficient to allow VA to make more than $58 million in home loans, and $26 million had been obligated for loans through February 2002. VA receives an additional $0.5 million each year for administration and outreach activities, including travel to meet with tribes and individuals on the mainland and in the Pacific. The program is intended to assist eligible veterans living on trust or equivalent lands to obtain loans at market rates to purchase, construct, or rehabilitate homes. On the mainland, most trust land is located on or near reservations, with about 55 million acres held in trust by the U.S. government for Indian tribes and individuals. In the Pacific, communally owned lands in American Samoa, Guam, and the Northern Marianas and 200,600 acres of Hawaiian homelands are also covered by this program. Under the program, individual loans are limited by law to the cost of the home or $80,000, whichever is less. However, the law permits VA to make exceptions to the loan limit if VA determines that the costs in an area are significantly higher than average housing costs nationwide. Loans are available only for single-family homes that the owner occupies, not for multifamily dwellings, rentals, or investment properties. To be eligible for a loan under this program, veterans must meet certain statutory requirements. Veterans must demonstrate that they are honorably released from active military duty or members of the Selected Reserve, including the National Guard, and have served the required length of time; creditworthy, that is, they are a satisfactory credit risk with stable and sufficient income to meet mortgage payments; holders of a meaningful interest in the trust or equivalent land on which their homes will be located that entitles them to use and occupy the land; and members of a federally recognized tribe or the equivalent that has signed a memorandum of understanding with VA. A meaningful interest in the land may take the form of a long-term lease, allotment or other interest conveyed by the tribe or entity with jurisdiction over the land. For example, this generally takes the form of 99-year leases on Hawaiian homelands. The meaningful interest serves as security for the loan and must be transferable in the event of foreclosure. The tribe or other responsible entity must enter into a memorandum of understanding with VA to cover standards and procedures for foreclosure and related issues before any loans can be made under this program to an eligible veteran of that tribe. Lands held in trust for tribes are generally leased and at foreclosure, cannot be taken out of trust status. Lands held in trust for individuals can be inherited and can lose their trust status at foreclosure. VA administers the program through nine regional loan centers and its Honolulu Regional Office in Hawaii, shown on the map in figure 1 below. The five regional loan centers in the East, however, have a limited role in the program’s operation, because many of the states they serve have few or no federally recognized tribes. However, the regional loan centers in Denver and St. Paul each serve eight states with federally recognized tribes, and the center in Phoenix serves three states with some of the largest concentrations of Native Americans in the country. In addition, Denver oversees loan activities conducted out of VA’s Anchorage office in Alaska. The Honolulu Regional Office administers the program in the South Pacific. Native Hawaiian and Pacific Islander veterans have received more loans than Native American veterans during the lifetime of the program, and several factors may explain this difference. VA cannot address some of these factors, such as applicants’ income levels and credit history, or their lack of a meaningful interest in the land; VA also cannot address the availability of infrastructure on trust lands. Other factors that VA can address are program-related, such as loan limits and assistance with the mortgage process. Four out of every five loans made under the program’s auspices have been provided to Native Hawaiian or Pacific Islander veterans. Of 227 total loans, 143 have been made to Native Hawaiians and 46 to Pacific Islanders. Combined, the 189 loans made to these two groups greatly exceed the 38 loans made to Native American veterans. The year-by-year analysis in figure 2 indicates that the number of loans made to Native Americans has been relatively constant. While the number of loans for Native Hawaiians and Pacific Islanders combined has varied, it has consistently exceeded the number of loans made to Native Americans, averaging twice as many loans since 1998. In the first 5 years of the program, Native Hawaiians received most of the loans. VA officials in the Honolulu office explained that the number of loans made to Native Hawaiians peaked in 1995 and 1996 because the officials were able to grant 60 loans to veterans purchasing homes in two housing subdivisions. VA officials said that loans to Pacific Islanders rose in 1996 and 1997 because they made a conscious decision to launch the program in stages—focusing initially on the nearest and easiest to serve areas of Hawaii and later moving on to promote the program in American Samoa, the Northern Marianas, and Guam. Although the number of loans completed in Hawaii in recent years has declined, VA officials anticipate an increase in the future as other eligible veterans obtain leases on Hawaiian homelands. Among the factors that VA cannot address that may contribute to lower participation of Native American veterans are low-income levels and unacceptable credit histories of potential applicants. To implement the statutory creditworthiness requirement, VA requires that an individual have sufficient income to qualify for a program loan. Based on 1990 census data, Native Americans had an average annual income of $16,800 while the average annual income of Native Hawaiians was $26,600. VA officials said that while they make every effort to assist applicants in qualifying for a loan, insufficient income and unacceptable credit history are still major barriers to loan approval for Native Americans who are found not to be creditworthy. Specifically, 23 of the 39 Native American loan applications in the St. Paul, Minnesota VA region were denied because of applicants’ insufficient income and unacceptable credit history. The remaining 16 were denied because of problems with land ownership. Officials at the Denver, Colorado, VA regional office also said that insufficient income and unacceptable credit history were the reasons for denying three of seven Native American veterans’ loan applications received in the region since the program’s inception. VA’s Honolulu field office stated that while insufficient income and unacceptable credit history have been a barrier for some veterans in American Samoa, other Native Hawaiian and Pacific Islanders have less difficulty meeting this eligibility requirement because of their higher income. Problems with establishing a meaningful interest in trust lands have also precluded some Native American veterans from obtaining a mortgage loan under this program. To obtain a mortgage loan, VA requires that veterans have a meaningful interest in the trust land on which their homes will be located. However, ownership of some Native American trust land has become fractionated as the ownership interests passed through several generations of multiple heirs, with an increasing number of people owning smaller shares of land over time. This land fractionation has increased at a rapid pace. Under such circumstances, a loan applicant would need to obtain the approval of everyone with shares in the land in order to mortgage it. For example, one applicant for a VA mortgage loan in the St. Paul region was unable to obtain a loan because he owned a 192nd interest in the trust land where he wanted to locate his home. This veteran would have had to obtain the approval of other co-owners to mortgage the land. In addition, all four federally recognized tribes in Kansas informed VA that they were not interested in participating in the VA direct loan program because of the extent of fractionated land interests within their reservation boundaries. In VA’s St. Paul region, 12 of the 39 loans, which have been denied since the program’s inception, were denied because the applicant had a fractionated interest in the land. This unique land ownership problem does not exist on the Hawaiian homelands because the land is leased. Another barrier for Native American veterans that VA cannot address is the lack of infrastructure that is needed for housing development on trust lands. The remoteness of some tribal lands has been an ongoing problem for housing development on Native American trust lands. In contrast to metropolitan areas, where basic infrastructure systems (such as sewers, electricity, and water supply) are already in place, building in remote trust lands requires the tribe or homeowner to install infrastructure to support new housing, or self-contained housing must be built. For example, much of the housing constructed on Navajo and Sioux trust lands is scattered across remote sites. A builder on Navajo lands told us that the cost to provide infrastructure to remote home sites is often too expensive for the tribe or homeowners and can cost over $20,000 per home. For Hawaiian veterans, infrastructure costs do not present such a barrier. The state of Hawaii, as part of its homeland development program, provides eligible Native Hawaiians (veterans and nonveterans) with infrastructure funding. For example, in a remote housing development containing homes purchased by Native Hawaiian veterans with VA loans, the Department of Hawaiian Homelands provided as much as $50,000 per lot for sewer, water, and electrical services. One program-related factor that VA can address that may have affected participation of Native American veterans is the $80,000 loan limit, established by the Congress when it created the program in 1992. VA has the authority to raise the loan limit for a geographic area if VA determines that the average housing cost in the area is significantly higher than the national average. Using this authority, VA officials said that the loan limit was raised to $120,000 for Hawaii, the Pacific Islands, and the state of Washington—and to $100,000 for one tribe in New Mexico, to more closely approximate the housing costs in those areas. However, VA has not attempted to determine if the maximum loan limit should be raised for other Native American tribes. VA reported that they have not initiated increases for other areas because neither the VA regional loan centers nor the tribes have requested a change. Officials at the Denver Regional Loan Center said that the $80,000 loan limit may prevent some veterans from participating in this program. One tribal housing specialist with the nation’s largest tribe, the Navajo, has directed veterans who wanted to purchase homes costing about $100,000 to other loan programs because he was not aware that VA could make exceptions to the $80,000 loan limit. In comparison, other federal programs that provide homeownership assistance to Native Americans on trust lands have loan limits between $144,000 and $278,000 (depending on the geographic region) and during 2001, guaranteed loans averaging $102,000. Finally, recent reports on mortgage lending concluded that Native Americans could benefit from homebuyer counseling and education. One report stated that Native Hawaiians could also benefit from homebuyer counseling and education. These two groups were found to have little experience with the mortgage lending process and the necessary steps required to obtain a mortgage loan. To overcome this barrier, the Director of VA’s Honolulu field office said that local housing authorities and other organizations in Hawaii and the Pacific Islands provide mortgage counseling and homebuyer education that assist Native Hawaiians and Pacific Islanders to negotiate the homebuying and mortgage process. Officials at VA’s Honolulu regional loan center said they help ensure that veterans receive the services and assistance of these organizations by actively communicating and partnering with them. VA’s mainland regional loan centers have not established similar relationships with organizations to provide the same types of services for Native American veterans. For example, VA regional loan centers have not partnered with other organizations that focus on mortgage lending on trust lands, such as the One-Stop Mortgage Centers located on the Navajo reservation in New Mexico and Arizona, and the Oglala Sioux reservation in South Dakota. The centers are nonprofit organizations that specialize in mortgage lending and credit counseling, guiding potential Native American borrowers through the homebuying process, simplifying procedures, and educating potential borrowers about the types of home loans available on trust lands. We found that VA regional offices in Phoenix and St. Paul have had little contact with these centers and have not used them to identify, educate, and assist prospective borrowers. For example, a One-Stop Mortgage Center official in Arizona estimated that as many as 200 Navajo veterans who had visited the center and expressed an interest in homeownership did not receive complete information about the VA program because the One-Stop Mortgage Center’s staff was not familiar with it. VA has conducted outreach but has taken limited steps to meet assessment and reporting requirements as specified in the program’s authorizing legislation. Outreach requirements specified in the program’s authorizing legislation state that VA, among other things, is to attend housing conferences, and provide information to veterans, tribal governments and organizations. VA has performed many of these activities. Other program requirements state that VA should annually assess and report to the Congress on the effectiveness of its outreach activities and annually report on the pool of eligible Native American, Native Hawaiian, and Pacific Islander veterans. VA has reported that it has undertaken extensive outreach activities but has not reported on how effective its outreach has been. VA’s annual report has included information on how many Native American and Pacific Islander veterans identified themselves as such on the 1990 census but has not indicated the number of these individuals who would meet the program’s eligibility requirements. However, VA said it will use new data available from the 2000 census to provide a more accurate count. The direct loan program’s authorizing legislation states that VA must, among other things, attend housing conferences and conventions; and produce and disseminate information to tribal governments, tribal veterans service organizations, and tribal organizations regarding the availability of such benefits. VA’s regional loan center staff have attended and made presentations at housing conferences sponsored by the Department of Housing and Urban Development’s Office of Native American Programs, the Department of Hawaiian Homelands, other Native American housing organizations, and Native American veterans forums. For example, the Phoenix regional loan center made a presentation on the direct loan program at the National Native American Veterans Symposium in February 2001. In addition, VA produced a video called “Coming Home: Native American Veteran Home Loans” that has been distributed to tribal officials and organizations. This video shows Native American veterans and tribal officials how the direct loan program may be used to help them achieve their homeownership goals. VA has also distributed information pamphlets and applications to interested veterans and organizations. VA’s regional loan center staff has also traveled to tribal trust lands to meet and talk with tribal representatives and veteran liaison representatives to solicit their assistance in reaching tribal members who are veterans. For example, the Phoenix and St. Paul regional loan centers sent representatives to talk to tribes in those areas about the program. Furthermore, the Honolulu field office has expanded on these outreach activities to promote the program to Native Hawaiian veterans. Officials at the Honolulu office said they use local media, including radio, television, and newspaper to promote the program. In addition, officials said they use local housing organizations to inform veterans of the program. The program’s authorizing legislation requires, among other things, that VA assess the effectiveness of outreach efforts it undertakes in connection with the direct loan program and report this assessment to the Congress annually. In its reports, VA states that the low level of program participation is not due to a lack of outreach on its part. However, program officials said that VA has not assessed the effectiveness of its outreach efforts. VA notified us that it plans to evaluate the Native American Veterans Direct Home Loan program as part of a larger study that it expects to complete in 2003, but an assessment of outreach effectiveness is not part of the planned work. The program’s authorizing legislation directs VA to report annually on the pool of eligible veterans. To meet this requirement, VA reported that about 436,000 individuals had identified themselves as Native American and Pacific Islander veterans in the 1990 census. VA also acknowledged that the number of veterans obtained from census data did not wholly correlate to eligible veterans because the tally included veterans who were living in cities and who may not have been members of tribes—thus, included were some veterans not eligible for leases or ownership of trust lands. Also, VA officials stated that they could not definitively quantify the pool of veterans who might be eligible for the program because they are dependent on veterans volunteering to identify their race and ethnicity. We analyzed the 1990 census data, however, and were able to distinguish Native American veterans who were living in tribal areas with trust lands from those living elsewhere. Our analysis revealed that there were approximately 18,000 veterans living on trust lands associated with about 50 federally recognized tribes. Although, it is likely that there are eligible veterans associated with the remaining federally recognized tribes, the data were not readily available. Further identification of eligible veterans might be possible with an examination of 2000 census data. Population data for Native Hawaiians who live on their equivalent of trust lands—Hawaiian homelands—were not collected in the 1990 census but were collected in the 2000 census. The more recent census will also identify Native American veterans living on trust lands associated with nearly 90 federally recognized tribes. VA program officials said they have asked VA’s Office of Policy and Planning to analyze the 2000 census data and will use the data to provide a more current, accurate count of veterans eligible for the program. This analysis could allow VA to report to the Congress a more accurate count of the eligible pool of program participants. Although the program is designed to help Native American, Native Hawaiian, and Pacific Islander veterans living on trust lands achieve homeownership, our review suggests that certain elements of the program may be barriers to participation for Native Americans. Some of these barriers are difficult to overcome; for example, problems with establishing meaningful interest in trust lands. But, VA can address some of the other barriers. For example, the program loan limit of $80,000 may be limiting the usefulness of the program to Native American veterans on some trust lands. By not partnering with other organizations, VA may be missing opportunities to get Native American veterans into the program and to guide them through the mortgage process to buy a home. Furthermore, by not assessing its outreach efforts, VA cannot be certain that it is effectively reaching the population that the program was designed to serve. While VA has not completely met requirements for reporting on the pool of eligible veterans, we are not making a recommendation because VA plans to use the 2000 census data to provide a more accurate count of eligible veterans. Changes to VA’s loan program might improve the program’s contribution to the federal effort to increase opportunities for Native American homeownership on trust lands. To increase opportunities for participation for all Native American, Native Hawaiian, and Pacific Islander veterans, we recommend that the Secretary of Veterans Affairs: Direct regional loan centers to obtain local housing cost data for trust lands to determine the need for exceptions to the current loan limit. Additional exceptions should be granted if the data support such increases. Explore partnerships with local housing organizations, such as One-Stop Mortgage Centers, that assist and support Native Americans on trust lands with the mortgage lending process. Assess program outreach efforts to Native American, Native Hawaiian, and Pacific Islander veterans and report on this assessment to the Congress, as the program’s authorizing legislation directs. We provided a draft of this report to VA for its review and comment. We received written comments on the draft report (see app. II). VA agreed that it could do more in delivering its benefits, and concurred with our recommendations. In addition, VA provided technical clarifications to the report, which we have incorporated into this report where appropriate. As part of its comments, VA suggested that we use statistical data from its National Survey of Veterans 2000 on veteran homeownership and income, rather than the general population. VA did not provide a copy of this unpublished survey, and we were unable to verify these data to determine their validity. Therefore, we did not include them in this report. To address the issues discussed in this report, we reviewed the statute, regulations, annual reports, and informational materials on VA’s Native American Veterans Direct Home Loan program as well as our other work and related studies of Native American trust land issues. We also interviewed numerous officials in Washington, D.C., and elsewhere with responsibilities for the program or knowledge of Indian housing issues. To gain a fuller perspective on Native American housing and trust land issues, we interviewed HUD officials, who administer block grant and home-loan programs for Native Americans. We also interviewed an official at the Bureau of Indian Affairs, who is familiar with Native American tribes and trust land issues. We gained some perspective on the views of Native American veterans by interviewing officials from the National Congress of American Indians, the National American Indian Housing Council, and the Center for Minority Veterans as well as representatives of the Navajo Tribe and the Oglala Sioux Tribe. We selected these tribes because they are among the largest in the nation, have completed memorandums of understanding with VA, and are served by the two VA regional loan centers we visited. To determine if there was a disparity in program participation, we used VA data to calculate the number of loans made to Native Americans on the mainland by each regional loan center in every year since 1992 and compared the results with the number of loans made to Native Hawaiians and Pacific Islanders during the same period. To identify the factors contributing to the disparity, we interviewed program officials at VA headquarters in Washington D.C., and at four VA centers: Honolulu, Denver, St. Paul, and Phoenix. We selected these four centers because they are responsible for about 96 percent of all loans made under the program since its inception. During site visits to the St. Paul and Phoenix centers, we reviewed case files to determine the reasons that loan applications had been rejected and describe contacts with veterans and tribes. To see how income and other program requirements may affect eligibility for the program, we reviewed available census data on Native Americans’ incomes, poverty levels, veteran status, and residency on or near reservations. We also interviewed an official at the One-Stop Mortgage Center in Window Rock, Arizona, to discuss the significance of providing assistance with the mortgage process. To determine the steps VA has taken to meet outreach, assessment, and reporting requirements, we reviewed data provided at our request from all nine VA regional loan centers. This data provided information on VA program staffing, loan activity, and outreach efforts. We assessed the availability of information that VA could use to better identify the pool of eligible veterans by reviewing Census Bureau statistical reports and by interviewing officials concerning the availability of 2000 census data on Native Hawaiians and on Native Americans residing on trust lands. We conducted our work from November 2001 through May 2002 in accordance with generally accepted government auditing standards. We checked data that we obtained from federal agencies for internal consistency, but we did not independently verify the data. As arranged with your offices, we will also send copies of this report to the Secretary, Department of Veterans Affairs; the Ranking Minority Member of the Committee on Veterans’ Affairs, U.S. Senate; and the Committee on Veterans’ Affairs, U.S. House of Representatives. We will make copies available to others on request. In addition, this report is also available on GAO’s Web site for no charge at http://www.gao.gov. If you or your staff have any questions about this report, please call me at (202) 512-2834. Key contacts and major contributors to this report are listed in appendix III. In addition to VA’s Native American Veterans Direct Home Loan program, four other federal programs provide homeownership assistance to Native American individuals or tribes on trust lands on the mainland. The Department of Housing and Urban Development (HUD) administers two programs, and the Department of Agriculture administers two programs through its Rural Housing Service. Key aspects of each of these programs are shown in table 2. Dwayne Curry, Shelia Drake, Patricia Elston, Colin Fallon, John McGrail, Michael Mgebroff, and William Sparling made key contributions to this report. Welfare Reform: Tribes Are Using TANF Flexibility To Establish Their Own Programs. GAO-02-768. Washington, D.C.: July 5, 2002. Economic Development: Federal Assistance Programs for American Indians and Alaska Natives. GAO-02-193. Washington, D.C.: December 21, 2001. Indian Issues: Improvements Needed in Tribal Recognition Process. GAO-02-49. Washington, D.C.: November 2, 2001. Rural Housing: Options for Optimizing the Federal Role in Rural Housing Development. GAO/RCED-00-241. Washington, D.C.: September 15, 2000. Native American Housing: Information on HUD’s Funding of Indian Housing Programs. GAO/RCED-99-16. Washington, D.C.: November 30, 1998. Native American Housing: Homeownership Opportunities on Trust Lands Are Limited. GAO/RCED-98-49. Washington, D.C.: February 24, 1998. Hawaiian Homelands: Hawaii’s Efforts to Address Land Use Issues. GAO/RCED-94-24. Washington, D.C.: May 26, 1994. Veterans’ Benefits: Availability of Benefits in American Samoa. GAO/HRD-93-16. Washington, D.C.: November 18, 1992. Indian Programs: Profile of Land Ownership at 12 Reservations. GAO/RCED-92-96BR. Washington, D.C.: February 10, 1992.

Summary: Several federal programs have been developed to provide homeownership opportunities for Native Americans because private institutions have rarely supplied conventional home loans to Native Americans on trust lands. In 1992, Congress directed the Department of Veterans Affairs (VA) to create the Native American Veterans Direct Home Loan Program to assist veterans in purchasing, constructing and improving homes. The Native American Veterans Direct Home Loan Program has been characterized by differences in the numbers served, with native Hawaiians and Pacific Islanders together receiving almost five times as many as loans as Native Americans. Several factors that apply to Native Americans, but not to native Hawaiians and Pacific Islanders, may explain this difference. Long-standing barriers to lending on Native American trust lands include insufficient income and credit history, a lack of meaningful interest in land among many Native Americans, and insufficient infrastructure on trust lands. Other factors that VA can address include program limits that may be lower than housing costs for some trust lands and potential applicants' inexperience with the mortgage lending process. VA has conducted outreach but has taken limited steps to meet the assessment and reporting requirements specified in the program's authorizing legislation. VA attends housing conferences, distributes promotional materials, and responds to inquiries about the program to meet outreach requirements specified in its authorizing legislation.