Bank Lending to Native American Applicants: An Investigation of Mortgage Flows and Government Guarantee Programs on Native American Lands

Posted: 6 Aug 2004

See all articles by Ken B. Cyree

Ken B. Cyree

University of Mississippi - School of Business Administration

Keith D. Harvey

Boise State University - College of Business and Economics

Michael R. Melton

Roger Williams University - Gabelli School of Business

Abstract

We investigate the efficacy of government guarantee programs for mortgage loans made on tribal lands by comparing lending outcomes for White applicants and Native Americans (NAs) living on- and off-reservation lands. Simultaneous equations models with the loan-to-income ratio endogenous indicate both on- and off-reservation NA applicants experience higher conditional denial rates compared with otherwise similar White applicants. NAs living on-reservation are equally as likely to be approved for mortgage loans as off-reservation NAs. On-reservation applicants self-select lower loan-to-income ratios, and are held to a higher standard for this credit variable, likely because lower housing values and other economic variables challenge on-reservation applicants. Our findings suggest lack of financial resources, lack of applicant education about and experience with the mortgage process, low creditworthiness, and lender reluctance to confront burdensome bureaucracy limit on-reservation guarantee program success.

Keywords: Lending discrimination, loan guarantee programs, Native American lending

Suggested Citation

Cyree, Ken B. and Harvey, Keith D. and Melton, Michael R., Bank Lending to Native American Applicants: An Investigation of Mortgage Flows and Government Guarantee Programs on Native American Lands. Available at SSRN: https://ssrn.com/abstract=572571

Ken B. Cyree (Contact Author)

University of Mississippi - School of Business Administration ( email )

PO Box 3986
Oxford, MS 38677
United States

Keith D. Harvey

Boise State University - College of Business and Economics ( email )

1910 University Drive
Boise, ID 83725
United States

Michael R. Melton

Roger Williams University - Gabelli School of Business ( email )

SB 311
One Old Ferry Road
Bristol, RI 02809

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