Federal Government to Temporarily Cut Native American Loan Program

By Stevie Duffin Updated on 3/8/2013

By Daniel Duffield

As a result of the failure of Congress to agree on legislation to avoid the automatic budget cuts, the U.S. is now facing the impact of the sequester in a variety of areas. Public services are now being maintained by the Commitment Authority until Congress can find a solution to the budget crisis that has loomed over the American economy.

However, one program has already reached its spending limit and must now be suspended indefinitely.

The Department of Housing and Urban Development (HUD) issued a written statement to the Mortgage Broker’s Association (MBA) to cease all originations for the Indian Home Loan Guarantee Program (Section 184) that provides mortgage loans for Native American citizens. For mortgages not already approved by the HUD, sources state that the chance of these loans closing is zero.

Section 184 refers to an 11-year old mortgage product created specifically for the financing of loans for American Indian and Alaska Native families, Alaska Village tribes, or tribally designated housing entities. Essentially, this loan program was established to offer an opportunity to realize the American Dream of homeownership for populations with few other mortgage options.

HUD Secretary Shaun Donovan warned for weeks that such housing programs would be adversely affected by the reduction of the budget caused by sequestration.

Donovan criticized the severity of these budget cuts which could potentially push a subclass of Americans into unnecessary homelessness.

Providing an explanation of these ideas to the Senate Appropriations Committee last month, Donovan expressed that a significant portion of the sequester’s impact will be seen as a result of budget cuts to the HUD’s Continuum of Care programs, through which families and individuals that had previously suffered homelessness were promptly re-housed and provided with additional assistance in the hopes of regaining self-sufficiency.

Donovan added that the sequestration’s automatic budget cuts would abolish some of the critical funding for the U.S. homeless shelter system maintained by the Emergency Solutions Grants.

Furthermore, Donovan stated that the sequestration would remove approximately 100,000 formerly homeless Americans, veterans included, from their present residences or their residences as obtained through program which offer emergency housing.