Native American Financial Services Organization Act of 1995 : hearing before the Committee on Indian Affairs, United States Senate, One Hundred Fourth Congress, first session, on H.R. S. 436 ... June 1, 8, 1995, Honolulu, HI, Washington, DC online

S. HrG. 104-180

' ^ NATIVE AMERICAN HNANCIAL SERVICES

ORGANIZATIO N ACT OF 1995

Y 4. IN 2/11: S. HRG. 104-180

Hative ftnerican Financial Services...

HEARING

BEFORE THE

COMMITTEE ON INDIAN AFFAIRS
UNITED STATES SENATE

ONE HUNDRED FOURTH CONGRESS

FIRST SESSION

ON

S. 436

TO EVIPROVE THE ECONOMIC CONDITIONS AND SUPPLY OF HOUSING
IN NATIVE AMERICAN COMMUNITIES BY CREATING THE NATIVE
AMERICAN FINANCIAL SERVICES ORGANIZATION



JUNE 1, 8, 1995
HONOLULU, HI



WASHINGTON, DC / ^^%,




^^1995



U.S. GOVERNMENT PRINTING OFFICE
92-728 CC WASHINGTON : 1995

For sale by the U.S. Government Printing Office
Superintendent of Documents, Congressional Sales Office, Washington, DC 20402
ISBN 0-16-047718-2




S. HRG. 104-180



NATIVE AMERICAN HNANCIAL SERVICES
ORGANIZATION ACT OF 1995



Y 4. IN 2/1 1;B. HRG. 104-180



Kative ftnerican Financial Services...

HEARING

BEFORE THE

COMMITTEE ON INDIAN AFFAIRS
UNITED STATES SENATE

ONE HUNDRED FOURTH CONGRESS

FIRST SESSION

ON

S. 436

TO IMPROVE THE ECONOMIC CONDITIONS AND SUPPLY OF HOUSING
IN NATIVE AMERICAN COMMUNITIES BY CREATING THE NATIVE
AMERICAN FINANCIAL SERVICES ORGANIZATION



JUNE 1, 8, 1995
HONOLULU, HI



WASHINGTON, DC / ^^^/?/,










'^i»



U.S. GOVERNMENT PRINTING OFFICE
92-728 CC WASHINGTON : 1995

For sale by the U.S. Government Printing Office
Superintendent of Documents, Congressional Sales Office, Washington, DC 20402
ISBN 0-16-047718-2



COMMITTEE ON INDIAN AFFAIRS

JOHN McCain, Arizona, Chairman
DANIEL K. INOUYE, Hawaii, VUx Chairman
FRANK MURKOWSKI, Alaska KENT CONRAD, North Dakota

SLADE GORTON, Washington HARRY REID, Nevada

PETE V. DOMENICI, New Mexico PAUL SIMON, Illinois

NANCY LANDON KASSEBAUM, Kansas DANIEL K. AKAKA, Hawaii

DON NICKLES, Oklahoma PAUL WELLSTONE, Minnesota

BEN NIGHTHORSE CAMPBELL, Colorado BYRON L. DORGAN, North Dakota
CRAIG THOMAS, Wyoming
ORRIN G. HATCH, UUh

Steven J.W. Heeley Majority Sto/f Director /Chief Counsel
Patricia M. Zell, Minority Staff Director /Chief Counsel



CONTENTS



Page

S. 436, text of 5

Statements:

Campbell, Hon. Ben Nighthorse, U.S. Senator from Colorado 65

Gapero, Kawika, Legislative Chairman, Hui Ka Koo Aina Hoo Pula F\ila . 62

Gauthier, Robert, Chairman, National Conmussion on American Indian,
Alaska Native, and Native Hawaiian Housing, and Executive Director,
Salish-Kootenai Housing Authority, Pablo, MT 84

Inouye, Hon. Daniel K., U.S. Senator from Hawaii, Vice Chairman, Com-
mittee on Indian Affairs 1, 66

Jaure, Ruth, Executive Director, National American Indian Housing
Council, Washington, DC 81

Johnson, Jacqueline, Chairperson, National American Indian Housing
Council, and Executive Director, Tlingit and Haida Indian Housing
Authority, AK 81

Kanahele, Kamaki, Chairman, State Council of Hawaiian Homestead
Associations 55

Mail, Michael, Vice President, Quinault Indian Nation, Taholah, WA 77

McCain, Hon. John, U.S. Senator from Arizona, Chairman, Committee

on Indian Affairs 71

Minchew, Mary, Vice Chairman, Hawaiian Home Lands Action Network . 59

Morse, Steve, Housing Officer, Office of Hawaiian Affairs, Honolulu, HI ... 57

Nessi, Dom, Director, Office of Native American Programs, Department
of Housing and Urban Development 66

Shay, Claudia, Executive Director, Self-Help Housing Corporation of Ha-
waii 60

Shuldiner, Joseph, Assistant Secretaiy for Public and Indian Housing,

Department of Housing and Urban Development, Washington, DC 67

Simon, Hon. Paul, U.S. Senator from Illinois 84

Stegman, Michael, Assistant Secretary for Policy Development and Re-
search, Department of Housing and Urban Development, Washington,
DC 69

Sunchild, John, Chairman, Chippewa Cree Business Committee, Box
Elder, MT 75

Thompson, Joel, Executive Director, Cherokee Nation Housing Authority,
Tahlequah, OK 86

Watson, Kali, Chairman, Hawaiian Homes Commission, Hawaii 52

Appendix

Prepared statements:

Campbell, Hon. Ben Nighthorse, U.S. Senator from Colorado 93

Gapero, Kawika 161

Gauthier, Robert 146

Johnson, Jactjueline 99

Kalamau, Lei, President, Aboriginal Native Hawaiian Association (with

attachments) 177

Kanahele, Kamaki (with resolution) 164

Mail, Michael 96

Minchew, Mary 157

Morse, Steve 170

Oshiro, Roy S., Acting Executive Director, Housing Finance and Develop-
ment Corporation 163

Shay, Claudia 159

Shuldiner, Joseph 94

Stegman, Michael (with attachments) 105

(III)



IV

PacB

Prepared statements — Continued

Sunchild, John (with attachment) 139

Thompson, Joel 103

Trask, Mililani, Executive Director, The Gibson Foundation 173

Watson, Kali 148



NATIVE AMERICAN FINANCIAL SERVICES
ORGANIZATION ACT OF 1995



THURSDAY, JUNE 1, 1995

U.S. Senate,
Committee on Indian Affairs,

Honolulu, HI.
The committee met, pursuant to other business, at 11 a.m. at
Aha Kauhke, U.S. District Court Room, 4th Floor, U.S. Court
House Building, 300 Ala Moana Boulevard, Honolulu, HI, Hon.
Daniel K Inouye (vice chairman of the committee) presiding.
Present: Senators Inouye and Akaka.

STATEMENT OF HON. DANIEL K. INOUYE, U.S. SENATOR FROM
HAWAII, VICE CHAIRMAN, COMMITTEE ON INDIAN AFFAIRS

Senator Inouye. S. 436 is a bill to improve the economic condi-
tions and supply of housing in Native American communities by
creating the Native American Financial Services Organization.

There have been two recent studies of the housing conditions
that the Native people of America must confront on a daily basis.
The first such study was authorized by the United States Congress
and conducted by the National Commission on American Indian,
Alaska Native and Native Hawaiian Housing. The second study
was commissioned by the Department of Housing and Urban De-
velopment and performed under a contract with the Urban Insti-
tute. Both studies found that the conditions of housing in Native
America are deplorable at best.

Both studies documented the lack of private capital for the devel-
opment of housing on lands which are held in trust, and the reluc-
tance of lenders to make loans for the construction of housing on
land which cannot be mortgaged, encumbered or alienated.

Both studies found that existing Federal housing programs do
not meet the needs for housing in Native communities. Based upon
these findings, the Administration proposed the introduction of a
bill to establish a Native American Financial Services Organiza-
tion.

If enacted into law, this bill would create a congressionally-char-
tered corporation to help serve the mortgage, economic develop-
ment, and other lending needs of Native Americans by assisting in
the establishment and organization of Native American community
lending institutions that would be called Native American Finan-
cial Institutions.

Native American Financial Institutions could be any type of fi-
nancial institution, including community banks, credit unions and

(1)



savings banks, and thus, these institutions could provide a wide
range of services.

The Native American Financial Services Organization would de-
velop and provide financial expertise and tecnnical assistance to
the Native American financial institutions, including assistance on
how to overcome barriers to lending on Native American lands, and
the past and present impact of discrimination.

This organization will promote access to mortgage and economic
development credit throughout Native American communities by
increasing the liquidity of such financing and improving the dis-
tribution of investment capital available for such financing, pri-
marily through the Native American financial institutions.

Working primarily through the institutions, the Native American
Financial Services Organization would direct sources of public and
private capital into housing and economic development for Native
American individuals and families. The organization would provide
ongoing assistance to secondary markets for residential mortgages
and economic development loans for individuals and families; fi-
nancial institutions and other borrowers by increasing the liquidity
of such investments, and improving the distribution of investment
capital available for such financing.

The organization would be authorized to issue two classes of
stock. As presently drafted, S. 436 would provide authority for the
Native American Financial Services Organization to issue Class A
stocks to American Indian Tribes on the basis of their tribal popu-
lation. Class A stock would be vested with voting rights, with each
share being nontransferable and entitled to one vote.

The second class of stock that the organization would be author-
ized to issue would be class B stock, which would be issued in ex-
change for capital contributions. When authorized to be issued by
the board of directors of the Native American Financial Services
Organization, the class B stock would also be voting stock and divi-
dends could be declared.

The Organization would also be authorized to impose charges or
fees with the objective that the organization would be fiilly self-
supporting in terms of the costs and expenses associated with the
Organization's operation. The Organization would be authorized to
borrow money, provide security, pay interest, or other return, and
to issue notes, debentures, bonds and other obligations upon the
approval of the Secretary of the Treasury.

A $20 million aggregate limitation is placed upon the total assets
and liabilities of the Organization. Initially, the Organization
would be a congressionally-chartered organization, with a board of
directors, corporate powers and other general corporate governance
matters.

Approximately 10 years after the date of enactment of the act,
the congressional charter for the organization would terminate and
the board of directors would be charged with the formation of a
new private corporation to carry on tne business of the organiza-
tion following the approval of a plan for the merger of the Organi-
zation with the newly-founded corporation. Upon approval of the
merger plan by the Secretary of Housing and Urban Development,
all assets of the organization would be transferred to the new cor-
poration.



The board of directors of the Native American Financial Services
Organization would consist of nine persons, three of whom would
be appointed by the President, six elected by the class A stockhold-
ers. If the Board elects to issue class B stock, the board would con-
sist of 13 persons, with the four additional members elected by
class B stockholders.

In addition, this bill authorizes the establishment of an advisory
council. Members of the advisory council would be appointed by the
board of directors with at least nine members being Native Amer-
ican.

Before we hear from the witnesses today, I think it is important
that the record show why this committee is so concerned about
housing opportunities for Native Hawaiians. The most recent study
that I referred to earlier is one which was conducted by the Urban
Institute for the Department of Housing and Urban Development
[HUD]. That study found.

Native Hawaiians experience greater affordabUity, overcrowding, and structural
inadequacy problems than non^ative Hawaiians in all housing environments
throughout the State.

Overall, the study found that in 1990, Native Hawaiians were
more likely to experience one or more housing problems than non-
Native Hawaiians with low-income Hawaiians experiencing the
highest incident of housing problems. While the study found that
all households in Hawaii face extremely high housing costs. Native
Hawaiians are disproportionately impacted because of their lower
earnings. Confronted with high costs of housing. Native Hawaiians
are more likely than non-Native Hawaiians to live with
subfamilies, have multiple wage earners, and live in smaller units
of generally poorer quality.

A recent study by SMS Research concluded that on any given
day, over 20 percent of all homeless persons in the State of Hawaii
are Native Hawaiians. Coupled with the unemployment rate
amongst Native Hawaiians, which is twice as high as the unem-
ployment rate for non-Native Hawaiians around the State, and
family income which is less than 50 percent of the regional county
median, it is perhaps not surprising that overcrowding in Native
Hawaiian homes is double that of non-Native Hawaiian homes.

The Urban Institute study found that home ownership opportuni-
ties for Native Hawaiians nave always been limited and have de-
creased due to rapid increases in housing costs. The study found
that the estimated probability of a Native Hawaiian household, not
living on the homelands — with income less than 80 percent of the
regional median income — owning a home in 1990 was only 29 per-
cent. The study concludes that housing for Native Hawaiians will
continue to be in short supply due to expected population growth
and current housing production trends.

It is projected that Native Hawaiian households will increase by
30 percent over the 10 year period from 1990 to the year 2000,
with the result that the demand for housing will far outstrip the
supply.

With these statistics in mind, I am personally disappointed that
S. 436 does not reflect the recommendations of the National Com-
mission on American Indian, Alaska Native and Native Hawaiian
Housing, namely, that Native Hawaiians should be amongs^ those



whose foreclosure from housing opportunities this bill is designed
to address. Accordingly, the committee meets today to receive testi-
mony on the justification for expanding the scope of S. 436 to ad-
dress the housing conditions on Native Hawaiian lands and the
housing needs of Native Hawaiian communities.

I would like to start that again. The bill that we are considering
does not include Native Hawaiians and I intend to present to the
committee an amendment which will address this problem. What
I wish to receive from the community will be testimony this morn-
ing that will support this amendment.

[Text of S. 436 follows:]



n



104th congress
1st Session



S.436



To improve the economic conditions and supply of housing in Native American
communities by creating the Native American Financial Services Organi-
zation, and for other purposes.



IN THE SENATE OF THE UNITED STATES

February 16 (legislative day, January 30), 1995

Mr. Campbell (for himself, Mr. Ixom-E, Mr. McCain, and Mr. Daschle)
introduced the following bill; which was read twee and referred to the
Committee on Indian Affairs



A BILL

To improve the economic conditions and supply of housing
in Native American communities by creating the Native
American Financial Services Organization, and for other
purposes.

1 Be it enacted by the Senate and House of Representa-

2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE.

4 (a) Short Title. — This Act may be cited as the

5 "Native American Financial Services Organization Act of

6 1995".

7 (b) Table of Contents. — The table of contents for

8 this Act is as follows:



2

Sec. 1. Short title.

TITLE I— STATEMENT OF POLICY; DEFINITIONS

Sec. 101. Policy.

Sec. 102. Statement of purposes.

Sec. 103. Definitions.

TITLE II— NATIVE AMERICAN FINANCIAL SERVICES
ORGANIZATION

Sec. 201. Establishment of the organization.

Sec. 202. Authorized assistance and service functions.

Sec. 203. Native American lending services grant.

Sec. 204. Audits.

Sec. 205. Annual housing and economic development reports.

Sec. 206. Advisory Council.

TITLE III— CAPITALIZATION OF ORGANIZATION

Sec. 301. Capitalization of the organization.

Sec. 302. Obligations and securities of the organization.

Sec. 303. Limit on total assets and liabilities.

TITLE IV— REGULATION, EXAMINATION, AND REPORTS

Sec. 401. Regulation, examination, and reports.

Sec. 402. Authority of the Secretary of Housing and Urban Development.

TITLE V— FORMATION OF NEW CORPORATION

Sec. 501. Formation of new corporation.

Sec. 502. Adoption and approval of merger plan.

Sec. 503. Consummation of merger.

Sec. 504. Transition.

Sec. 505. Effect of merger.

TITLE M— AUTHORIZATIONS OF APPROPRIATIONS

Sec. 601. Authorization of appropriations for Native American Financial Insti-
tutions.
Sec. 602. Authorization of appropriations for organization.

1 TITLE I— STATEMENT OF

2 POLICY; DEFINITIONS

3 SEC. 101. POLICY.

4 (a) In General. — Based upon the findings and ree-

5 ommendations of the Commission on American Indian,

6 Alaska Native and Native Hawaiian Housing estabhshed



•8 436 IS



3

1 by the Department of Housing and Urban Development

2 Reform Act of 1989, the Congress has determined that —

3 (1) housing shortages and deplorable living con-

4 ditions are at crisis proportions in Native American

5 communities throughout the United States; and

6 (2) the lack of private capital to finance hous-

7 ing and economic development for Native Americans

8 and Native American communities seriously exacer-

9 , bates these housing shortages and poor living condi-

10 tions.

11 (b) Policy of the United States To Address

12 Natrte American Housing Shortage. — It is the pohcy

13 of the United States to improve the economic conditions

14 and supply of housing in Native American communities

15 throughout the United States by creating the Native

16 American Financial Services Organization to address the

17 housing shortages and poor living conditions described in

18 subsection (a).

19 SEC. 102. STATEMENT OF PURPOSES.

20 The purposes of this Act are —

21 (1) to help serve the mortgage and other lend-

22 ing needs of Native Americans by assisting in the es-

23 tablishment and organization of Native American

24 Financial Institutions, developing and providing fi-

25 nancial expertise and technical assistance to Native

•S 436 IS



8



4

1 American Financial Institutions, including assist-

2 ance concerning overcoming —

3 (A) barriers to lending with respect to Na-

4 tive American lands; and

5 (B) the past and present impact of dis-

6 crimination;

7 (2) to promote access to mortgage credit in Na-

8 tive American communities in the United States by

9 increasing the liquidity of financing for housing and

10 improving the distribution of investment capital

11 available for such financing, primarily through Na-

12 tive American Financial Institutions;

13 (3) to promote the infusion of public capital

14 into Native American communities throughout the

15 United States and to direct sources of public and

16 private capital into housing and economic develop-

17 ment for Native American individuals and families,

18 primarily through Native American Financial Insti-

19 tutions; and

20 (4) to provide ongoing assistance to the second-

21 ary market for residential mortgages and economic

22 development loans for Native American individuals

23 and families, Native American Financial Institu-

24 tions, and other borrowers by increasing the liquidity



•S 436 IS



5

1 of such investments and improving the distribution

2 of investment capital available for such financing.

3 SEC. 103. DEFINrriONS.

4 For purposes of this Act, the following definitions

5 shall apply:

6 (1) Alaska native. — The term "Alaska Na-

7 tive" has the meaning given the term "Native" by

8 section 3(b) of the Alaska Native Claims Settlement

9 , Act.

10 (2) Board. — The term "Board" means the

11 Board of Directors of the Organization established

12 under section 201(a)(2).

13 (3) Chairperson. — The term "Chairperson"

14 means the chairperson of the Board.

15 (4) Council. — The term "Council" means the

16 Advison' Council established under section 206.

17 (5) Designated merger date. — The term

18 "designated merger date" means the specific cal-

19 endar date and time of day designated by the Board

20 under section 502(b).

21 (6) Director. — The term "Director" means

22 the Director of the Office of Federal Housing Enter-

23 prise Oversight of the Department of Housing and

24 Urban Development.



•S 436 IS



10



6

1 (7) Fund. — The term "Fund" means the Com-

2 munity Development Financial Institutions Fund es-

3 tablished under section 104 of the Riegle Commu-

4 nity Development and Regulatory Improvement Act

5 of 1994.

6 (8) Indian tribe. — The term "Indian tribe"

7 means any Indian tribe, band, nation, or other orga-

8 nized group or community, including any Alaska Na-

9 tive village or regional or village corporation as de-

10 fined in or established pursuant to the Alaska Na-

1 1 tive Claims Settlement Act that is recognized as eli-

12 gible for the special programs and services provided

13 by the Federal Government to Indians because of

14 their status as Indians.

15 (9) Merger pi^an. — The term "merger plan"

16 means the plan of merger adopted by the Board

17 under section 502(a).

18 (10) Natr^ aimerican. — The term "Native

19 American" means any member of an Indian tribe.

20 (11) NaTR^ AMERICAN FINANCIAL INSTITU-

21 TION. — The term "Native American Financial Insti-

22 tution" means a person (other than an individual)

23 that—

24 (A) qualifies as a community development

25 financial institution under section 103 of the

•S 436 IS



11



7

1 Riegle Community Development and Regulatory

2 Improvement Act of 1994;

3 (B) satisfies the requirements established

4 by the Riegle Community Development and

5 Regulatory Improvement Act of 1994 and the

6 Fund for applicants for assistance from the

7 Fund;

8 (C) demonstrates a special interest and ex-

9 pertise in serving the primary economic develop-

10 ment and mortgage lending needs of the Native

1 1 American community; and

12 (D) demonstrates that the person has the

13 endorsement of the Native American commu-

14 nity that the person intends to serve.

15 (12) Native a:merican lender. — The term

16 "Native American lender" means a Native American

17 governing body, Native American housing authority,

18 or other Native American Financial Institution that

19 acts as a primary mortgage or economic develop-

20 ment lender in a Native American community.

21 (13) New corporation. — The term "new cor-

22 poration" means the corporation formed in accord-

23 ance ^v^th title V.

24 (14) NONQUALIKiaNG MORTGAGE LOAN. — The

25 term "nonqualif>ing mortgage loan" means a mort-

/

•S 436 IS



12



8

1 gage loan that is determined by the Organization, on

2 the basis of the quality, type, class, or principal

3 amount of the loan, to fail to meet the purchase

4 standards of the Federal National Mortgage Asso-

5 ciation or the Federal Home Loan Mortgage Cor-

6 poration in effect on September 30, 1994.

7 (15) Organization. — The term "Organiza-

8 tion" means the Native American Financial Services

9 Organization established under section 201.

10 (16) Qualifying mortgage loan. — The term

11 "qualifving mortgage loan" means a mortgage loan

12 that is determined by the Organization, on the basis

13 of the quality, type, class or principal amount of the

14 loan, to meet the purchase standards of the Federal

15 National Mortgage Association or the Federal Home

16 Loan Mortgage Corporation in effect on September

17 30, 1994.

18 (17) Transition period. — The term "transi-

19 tion period" means the period beginning on the date

20 on which the merger plan is approved by both the

21 Secretary of Housing and Urban Development and

22 the Secretary of the Treasury and ending on the

23 designated merger date.



•S 4M IS



13

9

1 TITLE II— NATIVE AMERICAN FI-

2 NANCIAL SERVICES ORGANI-

3 ZATION

4 SEC. 201. ESTABLISHMENT OF THE ORGANIZATION.

5 (a) Creation; Board of Directors; Policies;

6 Principal Office; MEMBERsmp; Vacancies. —

7 (1) Creation. —

8 (A) In general. — There is established

9. and chartered a corporation to be kno^\^l as the

\

"^ 10 Native American Financial Services Organiza-

11 tion.

12 (B) Period of time. — The Organization

13 shall be a congressionally chartered body cor-

14 porate until the earlier of —

15 (i) the designated merger date; or

16 (ii) the date on which the charter is

17 surrendered by the Organization.

18 (C) Changes to charter. — The right to

19 revise, amend, or modify the Organization char-

20 ter is specifically and exclusively reserved to the

21 Congress.

22 (2) Board of directors; principal of-

23 FICE. —

24 (A) Board. — The powers of the Organiza-

25 tion shall be vested in a Board of Directors.