Local banks unlikely to lend on reservation trust land due to fractionation

The Eastern Shoshone Housing Authority is planning a new development near Fort Washakie where Tribal members can purchase their own homes.

ESHA executive director Charles Washakie said the project has been a personal priority of his for years.

“I thought, ‘If I ever get in charge, I’m going to start the homeownership back up and give people a chance to own their own home,’” he said. “There’s a lot of them out there … renting. (Let’s) give them a shot at owning their own house.”


The prospect is more complicated than it sounds, however.

For one thing, Washakie said, many local banks will not approve loans for real estate transactions on reservation trust lands.

“We have a bunch of people that are eligible for homeownership that make over $130,000 … but we can’t get our local banks to loan them any (money),” Washakie said. “They’re scared of trust land.”

Wyoming Bankers Association president Scott Meier referred to it as an “assessment of risk.”

He explained that title companies are often unwilling to fully guarantee reservation trust properties due to access issues.


Those access issues can arise when properties have multiple owners, Meier said – a common occurrence on reservation trust lands, and especially on individual allotments, which often are divided among the descendants of the original property owners.

“Today, individual parcels sometimes have more than 100 co-owners,” according to the U.S. Department of the Interior.

The situation is called “fractionation,” the DOI said, and it “limits economic development on reservations.”


For title companies, fractionation makes it difficult to certify that there is “guaranteed access” to a property on the reservation, since multiple people have to sign off on the easements that might be required to access the land.

As a result, Meier said title companies are often “reluctant” to issue title guarantees for trust properties – and without a title guarantee, the bank can’t “bundle” the loan and sell it to an institution like Fannie Mae or Freddie Mac.

Instead, the bank has to keep the loan in its own portfolio – and Meier said many are not willing to do that.

“That is the problem – and it has become a problem,” he said.

The solution lies with the federal government, he added.

“That would probably have to be where it starts,” Meier said. “Somebody up there in the federal government would have to change something (to) make the title companies happy.”

A shorter-term solution: Find a bank that is comfortable lending on trust land.

Some banks in Fremont County will do it, Meier said, but those instances are rare, according to Northern Arapaho Housing Authority executive director Patrick Goggles.

“I’ve been doing this for almost 20 years now,” Goggles said. “And banks in general have not mortgaged … a home loan on Tribal trust land.”

Instead, his agency – and Washakie’s – utilize the federal Indian Home Loan Guarantee Program, usually working through a financial institution called 1st Tribal Lending in Sioux Falls, South Dakota.

Washakie said most local banks “won’t touch” the federal program.

“There have been very few done (here),” Goggles agreed.

The program is “complicated,” he said, and there probably isn’t “enough business” to motivate local bankers to offer the service.

“It takes someone who understands the lending process on the back side as well as understanding it with the federal government involved,” Goggles said. “It’s not easy to do. … The process is very agitating and very time (consuming).”

The federal government doesn’t “move at the same speed” as the housing market, he pointed out.

For example, the traditional 30-day closing timeline for a real estate transaction is nearly impossible to meet while working through the “red tape” and “bureaucracy” that exists at the federal level.

“You can’t get anything done in 30 days,” Goggles said. “It’s been taking six months to a year to get a lease – much less a certified title status report for the lender.”

The situation is frustrating for many Tribal members, he said, who “have to learn how to navigate these issues, barriers and obstacles.”

“It takes time,” he said. “That’s the frustration. … It takes so long. (But) that’s the world we live in.”

Another lending option for trust land comes from the U.S. Department of Agriculture Rural Development program, Goggles said, and the Wind River Development Fund is working on becoming a mortgage lender, too.

More information about government and Tribal efforts to mitigate the effects of fractionation are outlined in the annual report of the Cobell Land Buy-Back Program for Tribal Nations, according to the DOI.

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