This is the accessible text file for GAO report number GAO-02-654 
entitled 'Native American Housing: VA Could Address Some Barriers to 
Participation in Direct Loan Program' which was released on August 23, 
2002.



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Report to Congressional Requesters:



United States General Accounting Office:



GAO:



August 2002:



Native American Housing:



VA Could Address Some Barriers to Participation in Direct Loan Program:



Native American Housing:



GAO-02-654:



Contents:



Letter:



Results in Brief:



Background:



Several Factors May Explain Disparity in Number of Loans Made to 

Different Groups:



VA Has Conducted Various Outreach Activities but Has Taken Limited 

Steps to Meet Assessment and Reporting Requirements:



Conclusions:



Recommendations for Executive Action:



Agency Comments:



Scope and Methodology:



Appendix I: Other Federal Homeownership Programs for 

Native Americans on Trust Lands:



Appendix II: Comments from the Department of Veterans 

Affairs:



Appendix III: Contacts and Staff Acknowledgments:



GAO Contacts:



Acknowledgments:



Related GAO Products:



Table:



Table 1: Homeownership Assistance Programs for Native Americans on 

Trust Lands, in 2002:



Figures:



Figure 1: VA’s Nine Regional Loan Centers and the States They Serve:



Figure 2: Number of Loans Made by VA through Its Native American 

Veterans Direct Home Loan Program to Native American, Native Hawaiian, 

and Pacific Islander Veterans (Calendar years 1994-2001):



Abbreviations:



FHA: Federal Housing Administration 

HUD: Department of Housing and Urban Development 

VA: Department of Veterans Affairs:



August 23, 2002:



The Honorable John D. Rockefeller IV

Chairman, Committee on Veterans’ Affairs

United States Senate:



The Honorable Daniel K. Akaka

United States Senate:



The homeownership rate among Native Americans[Footnote 1] is one of the 

lowest in the United States. While over 67 percent of Americans own 

their homes, fewer than 33 percent of Native Americans own homes. For 

Native Americans living on trust lands--lands held by the federal 

government for the benefit of Native Americans--homeownership 

opportunities are more limited, because lenders typically require that 

buyers own the land on which their homes will be located.



Because private institutions have rarely supplied conventional home 

loans to Native Americans on trust lands, several federal programs have 

been developed to provide homeownership opportunities for Native 

Americans.[Footnote 2] For example, in 1992, the 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 program has a specific focus; it 

is intended to serve veterans living on trust or equivalent 

lands[Footnote 3] on the mainland and in Hawaii and the Pacific. To 

obtain loans under this program, veterans must meet income, credit, and 

other requirements; and VA must have memorandums of understanding 

covering foreclosure and other issues with tribes or other entities 

that have jurisdiction over the lands involved. The Congress 

reauthorized the program in 1997 and 2001 and is considering making the 

program permanent when it is up for reauthorization again in 2005.



To inform the Congress as it considers making this program permanent, 

you requested that we analyze which veterans the program has served and 

assess VA’s response to requirements specified in the program’s 

authorizing legislation. Specifically, you asked us to determine:



* if a disparity exists in participation in the program between Native 

American veterans and Native Hawaiian and Pacific Islander veterans and 

the reasons for any disparity; and:



* what actions VA has taken to meet outreach, assessment, and reporting 

requirements specified in the direct loan program’s authorizing 

legislation. 

:



To determine if there was a disparity in participation, we analyzed 

data from VA, the Census Bureau, and the Bureau of Indian Affairs. We 

also interviewed VA program officials in Washington, D.C., and in the 

four VA offices responsible for about 96 percent of all loans made 

under this program. To determine the steps that VA took to meet program 

requirements, we reviewed VA’s annual reports to the Congress; Census 

data and data obtained by VA, at our request, from its nine regional 

loan centers; and interviewed officials of selected federal agencies, 

Indian tribes, and interest groups.



In April 2002, we briefed your office on our key findings. As you 

requested at our briefing, we are also providing information on other 

federal programs that provide homeownership assistance to Native 

Americans. We did not analyze this information to determine if these 

other programs affected participation in VA’s direct loan program. See 

appendix I for additional information.



Results in Brief:



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 loans as Native Americans since the program was enacted. Several 

factors that apply to Native Americans, but not to Native Hawaiians and 

Pacific Islanders, may explain this difference--some that VA cannot 

address and others that VA can address. The former involve long-

standing barriers to lending on Native American trust lands, such as 

insufficient income and credit history and lack of meaningful interest 

in land among many Native Americans, as well as insufficient 

infrastructure on trust lands. Other factors that VA can address 

include program loan limits that may be lower than housing costs for 

some trust lands and potential applicants inexperience with the 

mortgage lending process. Although some barriers to lending will 

remain, we are recommending that VA seek to increase Native American 

participation in the program by addressing those barriers it can 

change.



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. 

The legislation also requires VA to assess its outreach efforts and 

identify the pool of veterans eligible for the program in annual 

reports to the Congress. VA has reported that it has made extensive 

outreach efforts but has not provided an assessment of the 

effectiveness of its outreach activities. VA has reported the number of 

Native American and Pacific Islander veterans who identified themselves 

as such in the 1990 census but has not identified how many of these 

individuals would be eligible for the program. VA plans to utilize the 

more detailed 2000 census data to develop a more accurate count of 

eligible veterans. We are recommending that VA comply with requirements 

to assess its outreach efforts.



VA’s comments on a draft of this report are reprinted in appendix II. 

VA concurred with our recommendations; and also provided technical 

clarifications to the report, which we incorporated where appropriate.



Background:



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.[Footnote 4] 

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.[Footnote 5] 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[Footnote 6] 

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[Footnote 7] 

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.[Footnote 8] 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.



Figure 1: VA’s Nine Regional Loan Centers and the States They Serve:



[See PDF for image]



Source: GAO map based on data provided by VA.



[End of figure]



Several Factors May Explain Disparity in Number of Loans Made to 

Different Groups:



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.[Footnote 9] 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.



Number of Loans to Native Hawaiian Veterans and Pacific Islander 

Veterans Is Almost Five Times That of Native American Veterans:



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.[Footnote 10] 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.



Figure 2: Number of Loans Made by VA through Its Native American 

Veterans Direct Home Loan Program to Native American, Native Hawaiian, 

and Pacific Islander Veterans (Calendar years 1994-2001):



[See PDF for image]



Source: GAO’s analysis of VA loan data.



[End of figure]



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.[Footnote 11] 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.



Factors That VA Cannot Address May Contribute to Lower Participation of 

Native American Veterans:



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[Footnote 12] 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.[Footnote 13] 

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.[Footnote 14] 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.



VA Can Address Some Factors That May Contribute to Lower Participation 

of Native American Veterans:



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[Footnote 15] 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[Footnote 16] 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[Footnote 17] 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 Various Outreach Activities but Has Taken Limited 

Steps to Meet Assessment and Reporting Requirements:



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.



VA Has Conducted Various Outreach Activities:



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.



VA Has Taken Limited Steps to Meet Assessment and Reporting 

Requirements:



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.



Conclusions:



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.



Recommendations for Executive Action:



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.



Agency Comments:



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.



Scope and Methodology:



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.



Stanley J. Czerwinski

Director, Physical Infrastructure Issues:



Signed by Stanley J. Czerwinski:



[End of section]



Appendix I: Other Federal Homeownership Programs for Native Americans 
on 

Trust Lands:



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,[Footnote 18] 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.



Table 1: Homeownership Assistance Programs for Native Americans on 

Trust Lands, in 2002:



[See PDF for image]



[A] Section 184 of the Housing and Community Development Act of 1992; 

12 U.S.C. 1715 z-13a.



[B] Section 248 of National Housing Act, as amended; 12 U.S.C. 1715 z-

13.



[C] Section 502 of Housing Act of 1949, as amended; 42 U.S.C. 1472 (h).



[D] Section 502 of Housing Act of 1949, as amended; 42 U.S.C. 1472.



[E] The Federal Housing Administration (FHA) loan limits are $144,000 -

$278,000 or $262,000-$503,000 in high cost areas.



Sources: GAO analysis of HUD and Rural Housing Service data.



[End of table]



[End of section]



Appendix II: Comments from the Department of Veterans Affairs:



THE SECRETARY OF VETERANS AFFAIRS WASHINGTON:



July 12, 2002:



Mr. Stanley J. Czerwinski:



Director, Physical Infrastructure Issues U. S. General Accounting 

Office:



441 G Street, NW Washington, DC 20548:



Dear Mr. Czerwinski:



This is in response to your draft report, NATIVE AMERICAN HOUSING: VA 

Could Address Some Barriers to Participation In Direct Loan Program 

(GAO-02-654). The Department of Veterans Affairs (VA) is strongly 

committed to providing its benefits to all eligible veterans including 

Native Americans. Given the focus of your report, VA believes it is 

more meaningful for the General Accounting Office (GAO) to use 

homeownership data for veterans rather than the American population in 

general. Homeownership rates for veterans are considerably higher than 

for the general population. According to National Survey of Veterans 

(NSV) 2000, 78 percent of veterans own their own home. Furthermore, 64 

percent of Native American Veterans own their own homes. These 

statistics illustrate the success of VA’s home loan program benefits.



VA agrees it can do more in delivering its benefits, and concurs with 

your recommendations. The Department will continue working to obtain 

local housing cost data for trust lands to determine the need for 

exceptions to the current loan limit. VA will also explore partnerships 

with local housing organizations and assess its program outreach 

efforts based upon new data from the 2000 census.



The enclosure provides action plans to implement GAO’s recommendations.



Sincerely yours,



Anthony J. Principi:



Signed by Anthony J. Principi:



Enclosure:



DEPARTMENT OF VETERANS AFFAIRS COMMENTS TO GAO DRAFT REPORT, NATIVE 

AMERICAN HOUSING: VA Could Address Some Barriers to Participation In 

Direct Loan Program (GAO-02-654):



To increase opportunities for participation for all Native American, 

Native Hawaiian, and Pacific Islander veterans, GAO recommends that I:



* 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.



Concur - The authorizing statute (38 U.S.C. §3762(c)) established that 

the principal amount of any direct housing loan made to a Native 

American under this program may not exceed $80,000. This statute also 

provided an exception to this limit. Pursuant to 38 U.S.C. 

§3762(c)(1)(B), the Secretary may make loans exceeding $80,000 in a 

geographic area if the Secretary determines that housing costs in the 

area are significantly higher than average housing costs nationwide. 

There is no statutory cap on the amount of any increase the Secretary 

might determine is appropriate.



Since this program’s inception, VA has increased the statutory limit 

for loans made under this program every time a request has been made. 

In addition, in at least three cases, increased loan limits were 

established when VA field office personnel determined that the existing 

loan limit was insufficient, without a request from a tribal government 

or individual. Shortly after the Native American Direct Housing Loan 

Program started, the Veterans Benefits Administration’s (VBA) Loan 

Guaranty Service determined that requests would be granted when and 

wherever supportable by local data and for all land subject to a 

particular Memorandum of Understanding (MOU), instead of on a loan-by-

loan basis. To date, loan limits have been increased under 11 MOUs, as 

follows:



Loan Limit; $120,000; Tribal Government; Samoa; Guam *; Hawaiian 
Homelands; 

Northern Marianas; Loan Type: All.



Loan Limit; $120,000; Tribal Government; All Federal Trust Land in 
Washington

State (6 tribes currently participating from Washington State); Loan 
Type: 

Stick-builthomes.



Loan Limit; $100,000; Tribal Government; Picuris Pueblo; Loan Type: 
All.



Loan Limit; $90,000; Tribal Government; All Federal Trust Land in 
Washington State 

(6 tribes currently participating from Washington State) *; Loan Type: 

Double-wide manufactured homes.



[End of table]



* Limits increased by VA based on its own findings of housing costs. 

The tribal governments submitted no requests.



VBA has been pro-active in implementing this program and in working 

with tribes to establish appropriate loan limits. At the same time, VA 

recognizes that other Federal loan programs available to Native 

Americans and Pacific Islanders have higher loan limits. VA will 

continue working to obtain local housing cost data for trust lands to 

determine the need for exceptions to the current loan limit. VA will 

also continue to grant exceptions 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.



Concur - VA has and will continue to explore partnerships with local 

housing organizations, such as the 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.



Concur - VA’s ability to assess program outreach has been subject to 

limitations on information regarding the location of potentially 

eligible veterans. The data available to VA in recent years has been 

dated and of limited use. As VBA officials discussed with GAO staff, VA 

plans to use the 2000 census data to provide a more accurate count of 

eligible veterans. This should help VBA assess program outreach in the 

future.



[End of section]



Appendix III: Contacts and Staff Acknowledgments:



GAO Contacts:



Carol Anderson-Guthrie, (214) 777-5600:



Acknowledgments:



Dwayne Curry, Shelia Drake, Patricia Elston, Colin Fallon, John 

McGrail, Michael Mgebroff, and William Sparling made key contributions 

to this report.



[End of section]



Related GAO Products:



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.



[End of section]



FOOTNOTES:



[1] As defined in P.L. 102-547, Native American means an Indian, a 

Native Hawaiian, an Alaska Native or a Pacific Islander. In this 

report, except when referring to the title of the program, we use the 

term Native American more narrowly to refer to Indians and Alaska 

Natives, as distinguished from Native Hawaiians and Pacific Islanders.



[2] See app. I for additional programs serving this purpose and Native 

American Housing: Homeownership Opportunities on Trust Lands Are 

Limited, GAO/RCED-98-49, (Washington, D.C.: Feb. 24, 1998) for a 

summary of the involvement of the private sector and federal government 

in housing programs for Native Americans on trust lands on the 

mainland.



[3] In this report, we use the term equivalent lands to refer to those 

included under P.L. 102-547 that are held by individual Indians, 

individual Alaska Natives, or Alaskan regional or village corporations 

and are subject to restrictions that may require the Secretary of the 

Interior’s approval when ownership is transferred. Also included are 

the Hawaiian homelands and lands on Pacific islands that have been 

communally owned by cultural tradition. 



[4] P.L. 102-547.



[5] The appropriation is for the subsidy cost of the loans, that is, 

the portion of the loans’ value that the government does not expect to 

be repaid.



[6] The Hawaiian Homelands were created by P.L. 67-34 in 1921. Hawaii, 

upon statehood in 1959, assumed responsibility for managing the 

homelands through the Department of Hawaiian Homelands.



[7] In the Pacific, veterans eligible for loans in Hawaii must be 

Native Hawaiians, and elsewhere they must be Pacific Islanders. The 

state or territorial governments are considered the equivalents of 

tribal organizations and must have signed memorandums of understanding 

with VA for the program to provide loans on lands in these locations.



[8] The states on the mainland without federally recognized tribes are 

Arkansas, Delaware, Georgia, Illinois, Indiana, Kentucky, Maryland, 

Missouri, New Hampshire, New Jersey, Ohio, Pennsylvania, Tennessee, 

Vermont, Virginia and West Virginia. The District of Columbia has no 

federally recognized tribes. Tribes with land in two or more states are 

considered to be located in the state with the greatest share of the 

tribes’ membership in order to avoid double counting of tribes for the 

purposes of this report.



[9] Data was not available to determine how the distribution of 

borrowers among groups compares with the distribution of veterans among 

the groups.



[10] No loans under this program have been made to Alaska Natives. VA 

officials explained that Alaska Natives have not responded to their 

outreach efforts and are utilizing other loan programs.



[11] Of the loans completed in these Pacific Islands, 29 have been in 

American Samoa, 16 in the Northern Marianas, and 1 in Guam.



[12] Lands held in trust for individuals are those most affected by 

fractionation, because these are the lands where ownership can be 

inherited and passed down through succeeding generations. About 10 

million out of the total 55 million acres on the mainland are held in 

trust for individuals rather than tribes.



[13] Indian Programs: Profile of Land Ownership at 12 Reservations 

(GAO/RCED-92-96BR, Feb 10, 1992).



[14] GAO/RCED-98-49.



[15] See appendix I for details on other Native American homeownership 

assistance programs and their loan limits. 



[16] One-Stop Mortgage Center Initiative in Indian Country, the 

Department of Housing and Urban Development and the Department of the 

Treasury, October 2000; The Report of the Native American Lending 

Study, Community Development Financial Institutions Fund, the 

Department of the Treasury, November 2001.



[17] An Executive Memorandum established the One-Stop Mortgage Center 

Initiative in 1998. It directed HUD and the Department of Treasury to 

develop recommendations to streamline mortgage lending on trust lands.



[18] HUD also provides housing assistance to Native Americans on the 

mainland through a block grant, enacted by the Native American Housing 

Assistance and Self-Determination Act of 1996. In fiscal year 2002, HUD 

provided about $649 million in block grants to tribal entities to use 

for housing. 



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