Wells Fargo builds upon work with Native Americans

Regan, Shawn

[community lending]

Wells Fargo & Co. is targeting lower-income markets for its mortgage products because, while the customers' income may be low, the segment is large and its potential high.

"The [mortgage] industry is starting to understand that the low-to-moderate income sector is a viable market," says Rob Skjonsberg, assistant vice president, community development manager for the Dakotas and Montana in Wells Fargo's Pierre, S.D. office. "In South Dakota, 48 percent of the population has an annual household income of less than $35,000. If you don't pay attention to those demographics, you're not going to grow your business. The opportunity is huge."

Wells Fargo launched its Community Homeowner Affordable Mortgage Program (CHAMP) last August and expects to have it up and running in all of its 16 states in the third quarter of this year. Targeted households are those with less than 80 percent of the median income that the U.S. Department of Housing and Urban Development (HUD) has designated for a given area. Several affordable, home financing solutions are available - including the bank's Emerging Markets program.

Flexible financing guides include: oneyear continuous employment; one-year rental and credit history, with credit established by alternative sources like retailers and utilities; a 42 percent PITY gross income, with non-taxable income increased 20 percent.

Additionally, borrowers are not required to have any of their funds in the transaction. Down payments can come from gifted funds and assistance programs, and the seller can cover closing costs. Also, borrowers are not required to have an excess pool of cash available. However, participants must take a home-buyer education program offered by one of the bank's local, nonprofit partners.

Wells Fargo brings lots of lower-income-- sector experience to this effort, as the bank has been working for years to make capital available to Native Americans. "Diversity is more than doing the right thing," says Jon Campbell, Wells Fargo's Minnesota president and former regional president in Phoenix, home to the bank's Native American Banking Services program. "Diversity also opens doors to markets that can generate new business for a company. Additionally, learning about and experiencing different cultures is exciting, worthwhile and very satisfying."

Linda Szabo recently got some satisfaction of her own when she obtained a business loan from Wells Fargo to complete a 1,600-square-foot expansion of Soldier Woman Gallery, a two-employee retailer of northern plains artwork that she started in 1997 in Mission, S.D. She also has her personal and business checking accounts and, with her husband, a home mortgage with the bank.

While the home and business are within the Rosebud Indian Reservation, they are on land privately owned by Szabo and her husband. "I'm very satisfied with the way I've been treated at the bank," she says. "The mortgage and business loan went real smooth, with the loan for the expansion closing within one month."

Since 1996 Wells Fargo has made $25 million in mortgage loans via HUD's Section 184 program, which benefits Native Americans and tribally designated housing entities. This makes Wells Fargo the program's leading lender. The bank has relationships with 150 tribes in 10 states, facilities on reservations in seven states, and is the only bank on reservations in four states.

Two years ago, Wells Fargo started offering conventional loan agreements to Indian tribes. Once the reservation executes the agreement, then all the bank's loan products - personal, mortgage, commercial and agricultural - become available to the tribe and all its members. Through the first half of 2002, the bank has executed loan agreements with seven tribes.

"This is something that hasn't ever been available to Indian country," says Juel Burnette, home mortgage consultant, Indian country initiatives, also at Wells Fargo's Pierre office. "We knew it wasn't going to be easy because it's brand new, and we make the agreements as tribe-specific as possible. And there's the trust-land issue that has scared lenders away from the reservations."

Because reservation land is taken off county tax rolls and put in trust in the tribe's name with the federal government, banks must follow an entirely different process to make loans to persons or businesses on these trust lands.

"A lot of lenders haven't taken the time to learn the process," Burnette says. "What other loan program takes three approvals - the Bureau of Indian Affairs (BIA), the Office of Native American Programs within HUD, and Wells Fargo - before we can get a deal done?"

Skjonsberg adds, "You can't apply your normal business concept for transactions governed by these land statutes because there are so many people involved in the process. You need to mesh capitalism and culture. This is a two-way educational process. You need to learn to listen first and talk second.

"Efficiency is a challenge when you're dealing with sovereign nations - the tribal and federal governments - tribal members and those in the private sector, like investors and title and mortgage insurance companies," Skjonsberg says. "There have been ridiculous horror stories of transactions taking 12 to 24 months to get done."

"The bank may be working with the BIA, the U.S. Small Business Administration or a Rural Development program [within the U.S. Department of Agriculture]," Skjonsberg says. "But the customer's perception is that the loan application is sitting with the bank."

To make sure the horror stories are kept to a minimum, Skjonsberg and Burnette advise banks to:

*Learn the trust-land process;

* Build solid relationships with the tribes in the bank's market;

* Form partnerships with all of the organizations involved so you are more likely to get key people to produce;

* Go to the source of the problem to get inefficiencies resolved;

* Find out if there are broker or participation procedures available if you don't have the capacity to do it on your own.

"We're willing to take a look at acting as a broker," Burnette says. "We'll do the deals however we can."

Copyright NFR Communications Inc Aug 1-Aug 14, 2002
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