After her enlistment with the U.S. Navy ended in 2013, Bonnie Faye returned home to the Crow Creek Sioux Reservation in South Dakota, where she met her fiancé, Juan Arevalo, himself an Army Vet. Together, they have spent the last two years working full-time, saving up to buy their first home.

But despite qualifying for a loan through the Department of Veterans Affairs — a longstanding benefit under the G.I. Bill — Koster and Arevalo have struggled to get a mortgage. Banks, they learned, are wary of lending on tribal lands, where foreclosing can be difficult, and therefore set steep financial requirements that the young veterans struggled to meet.

“We just don’t quite have the credit,” says Fayre.  “I’ve worked for the state government for over two years, but it seems like two steps forward and one step back.”

But now, help may be on the way in the form of a federal program that aims to help Native American veterans buy homes. Under the program, Koster and vets like her could qualify for a mortgage directly from the government with an interest rate of 2.5% — a huge benefit at a time when most buyers are paying 6% or more to borrow.

The V.A. created the Native American Direct Loan (NADL) program more than 30 years ago. But while sound in principle, the program has historically had lackluster success rates in assisting Native vets buy a home, with only 89 loans disbursed in the last decade, according to a scathing government report from April last year.

Now, however, the government is making changes that should make the program more attractive, just as soaring mortgage rates have made it necessary. 

Native Americans serve in the United States military at five times the national average, and since 9/11, nearly 19% of Native Americans have served in the U.S. armed forces, according to the United Service Organization. But they have historically struggled to buy homes at the same rate as other veterans. In fact, the same critical government report that came out last year found that the V.A. gets less than 1% of eligible Native vets to use their homeownership benefits.

NADL was designed to help close that gap. But the program was plagued by a lack of tribal outreach, complicated paperwork, and having to set up special Memorandums of Understanding with federally recognized tribal reservations should a foreclosure occur.  

Perhaps the most significant barrier has been the high bar credit requirements to qualify for the loan. According to census data, nearly 27% of Native Americans live below the poverty line. That’s significantly more than the rest of the country, which averages close to 15%. To many Native Vets, the financial bar is simply set too high.

The VA says it does not require a specific minimum credit score for those meeting basic eligibility for the program but assesses a Veteran’s ability to repay a home loan through a spectrum of criteria, which includes but is not limited to credit history and income. 

“We are one of the poorest reservations in the United States. This is not conducive to good credit ratings,” said Kay Koster, who also serves as the Veteran Service Officer for the Crow Creek Sioux Tribe and is Bonnie Koster’s father. “I have had three veterans ask about the VA home loan program, but they did not come back in after their initial contact with me. The application process seems daunting.”

In response to the report, the VA set up a new NADL task force in October 2021 with an agenda to improve the program and provide better outreach. “We are committed to serving Native American Veterans and plan to do everything we can to help them realize the American dream of homeownership,” said John Bell, acting executive director for VA’s Loan Guaranty Service. He said the task force would more effectively conduct outreach to tribal governments, including those without Memorandums of Understanding in place.

Most recently, the VA announced on March 22 that they would be lowering their 30-year mortgage interest rate from 6% down to 2.5%, an astonishingly low rate at a time when interest rates on nearly all other loans have gone sharply in the other direction.

Reached for comment, the V.A. said that for the 2023 fiscal year, it had completed 29 tribal outreach events and that nineteen NADL applications had been received since the announcement of the lower interest rate.

The VA also indicated that South Dakota is historically the leading state in the continental U.S. for overall NADL utilization. However, the process and requirements still seem daunting to those it aims to help.  

Additionally, there is a lack of communication and cooperation with other housing programs that could be improved. “It seems to me that if these agencies would all talk to each other a little more, it would be one less hurdle for everybody. Just streamline it a little bit more,” says Nancy Pindus, Senior Fellow at the Urban Institute who has worked extensively on Native American Housing studies.You can say, oh, do you have an approval with VA? Well, we’ll speed this one up, or vice versa.” Still, she does hold some hope for the NADL’s new initiatives “I think it’s possible. These are all things that will help. But there’s got to be real attention to outreach and working with local groups to get it to happen.”

“I can’t seem to find anyone who knows how I can even get a mortgage and build on the reservation, but I know it’s possible,” Bonnie Koster said. Her tribe does offer houses for sale, but that has its own complications.  She and Arevalo have been on their tribe’s housing list for over seven years but are still only ninth in line for what will only be a two-bedroom house. They’re both concerned that even if a house becomes available, it won’t be big enough to house their blended family of four kids.

Still, she remains hopeful that with time she and Arevalo will qualify for the program and get approval to build a modular home on her reservations land. “My biggest dream right now is to be a homeowner,” she said.

“I think it is safe to say that every family on our reservation has at least one family member who is a veteran,’ says Mr. Koster, noting that there are about 40 living Vietnam-era veterans and about 25 Iraqi Era veterans on the tribe’s land. “The sad thing is, many of our vets and getting up in age, and we are losing them.”

Comments are closed.