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<< Previous   of   Next >> Dan Bates / The Herald  (click to enlarge) Bill Shelton mows his one-acre lawn outside his home on the Tulalip Reservation. Despite good credit, Shelton was denied a loan from KeyBank.   ADVERTISEMENT   CONTACT THE HERALD Robert Frank, City Editor frank@heraldnet.com   Published: Friday, May 29, 2009 Indians find loans hard to get Some banks shy away from loans to Indians because they can't foreclose on reservation land. By Krista J. Kapralos Herald Writer Bill Shelton's loan application was for $159,000 -- less than a third of the value of his home. His credit score hovers around 800. Shelton, a retired Boeing manager, said he's managed his money responsibly for years. He and his wife have bought and sold several homes in Western Washington over the past four decades. They assumed their application to refinance their Tulalip home would easily cut through the banking industry's red tape. Instead, Shelton, an American Indian, received a rejection letter from KeyBank that he believes is akin to the "No Indians Allowed" signs that were at one time posted at businesses in the area. "Collateral property is unsatisfactory," the letter reads. "Property located on Indian Reservation, which is not acceptable for financing in this loan program." Shelton received that letter more than a year ago, and he's still fuming. "I told them they discriminated against me," he said. "When I started using those words, they tried to back off, but there was nothing they could say to explain it." Shelton holds the deed to his home and land. The property is on the Tulalip Indian Reservation, and is held in trust by the federal government. Banks can't foreclose on Indian land unless that land has Bureau of Indian Affairs permission to be used as collateral. Some tribes, including Tulalip, have their own codes that allow banks to foreclose through tribal courts, but many banks are still unwilling to lend money to American Indians who want to build or purchase a home on trust land. For Indians, the problem of getting home loans is painfully ironic. Land that is individually owned by Indians within reservation boundaries is protected under federal trust status, just like reservation land owned by tribal governments. That designation is meant to protect Indian land. For individual landowners, it creates a barrier to development. The easiest way to get a home loan would be to remove the land from trust protection, but that would whittle away at the reservations Indians say are crucial to their cultures. The other option is to wait for tribal governments to build homes using federal HUD dollars, but most of those homes are earmarked for low-income families. "There are a number of laws in place to 'Protect the Indian,' " said John McCoy, general manager of Quil Ceda Village, the Tulalip Tribes' casino and retail complex. "We need to fix those because they're hindering development in Indian Country." Congress in 1992 created a loan guarantee program to encourage lenders to work with Indian applicants. Few banks, even those approved to lend with support from the program, do. Home loans aren't the only financial services that are often out of reach for American Indians. Investment services, college funds, and even basic checking and savings accounts aren't as common in Indian Country as they are elsewhere, said Andrea Alexander of Chinook Wind Enterprises, a Mountlake Terrace financial literacy organization. "These are families that have grown up with intergenerational poverty," Alexander said. "Their attitude about money is different." The problem is multifaceted, and emerged over a period of decades, she said. Reservations were created away from towns and the banks that served them. Deep poverty ensued. That meant little cash to buy food and household supplies, let alone make deposits to a bank account. By the time tribes began offering job-training programs and positions at casinos, the financial literacy of their members was among the lowest of any group in the nation. Today, reservations are magnets for predatory lenders. According to research by the First Nations Development Institute, Indians are more likely than any other group to be targeted for payday loans, tax-refund loans and high interest rates. Even people with a business or finance background can find themselves mired in the mess. McCoy, the Quil Ceda Village general manager, said his home loan came with a "very high" interest rate because it was built on trust land. He manages the county's largest casino, a luxury hotel and a popular shopping center. He's also a state representative and is a financial institutions committee member. "I worked hard for three years to get out of that loan and get a more reasonable loan," he said. The problem is only going to get worse, said Gavin Clarkson, a Choctaw Nation member and a professor at the University of Houston Law Center. The U.S. Supreme Court ruled last year that tribal courts have no jurisdiction over organizations that practice predatory lending in Indian Country. The decision centered on the case of a Sioux family that deeded its farm, which was on trust land, to a bank in exchange for a loan to cover operating costs. The family said the loans never materialized. The bank evicted the family and sold the land to a non-Indian at lower interest rate than the Sioux family said they were offered. "When it came to crunch time to combat predatory lending on the reservation, the banking industry was worse than silent," Clarkson said. "It was hostile. "At this point," he said, "there is no restraint on reservations for predatory lending by off-reservation banks." Tribal governments face hurdles, too. The Securities and Exchange Commission doesn't recognize them as accredited investors, so they're not able to invest in private equity funds, he said. Clarkson estimates that there is a $40 billion private equity deficit in Indian Country. Businesses there are "starving" for capital, he said. A few banks have recognized these needs. First Nations Oweesta Corporation was created to serve Indian Country through financial services and micro-lending. A handful of Indian-owned banks have opened, including Native American Bank in Denver. KeyBank is among the mainstream organizations that offer financial literacy classes and is approved for a federal program that guarantees loans the bank makes on reservation homes. Tribal economies have evolved over the past 15 years, since casinos began making money for tribes, said Mike Lettig, a Navajo who leads KeyBank's Native American Financial Services division. The financial industry is beginning to recognize that tribal enterprises have all the characteristics of good businesses, he said. "These companies aren't going away because tribes aren't going away," Lettig said. "It is a market base that has genuine interest, and a genuine commitment for the preservation of life and culture and economic stability." KeyBank's offerings havent trickled down to individual Indians, Shelton said. "When I told them they were discriminating, they said, 'We'll try to figure something out for you,' but they wanted another appraisal after I'd already spent more than $500 for the first one," he said. "It was too much," he said. "I told them, 'Why should I work with you?' " READER COMMENTS Be the first to comment. 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