VA makes major change to America’s most underutilized mortgage program

The U.S. Department of Veterans Affairs (VA) announced on Wednesday that it will lower the VA Native American Direct Loan (NADL) program interest rate from 6% to 2.5% in an effort to make housing loans more affordable for Native American military veterans.

The program provides direct loans to Native American veterans and veterans who are married to Native American non-veterans to help with the purchase, construction or renovation of a home on trust land. It also allows qualifying veterans to get into the housing market with no down payments, limited closing costs, and no monthly mortgage insurance costs.

The program is separate from the broader VA loan program that is available to all veterans. The new rate will apply to NADL loans closed on or after March 13, which will lock in the 2.5% interest rate for the life of the loan. NADL borrowers who currently have an interest rate of 3.5% or higher can refinance at the lower rate, according to the VA.

“Native American veterans are now able to more affordably buy, build and improve homes on trust land,” said John Bell III, executive director of the VA Loan Guaranty Service in a statement. “We at VA are laser-focused on serving Native American veterans as well as they’ve served our country, and that’s what this decreased interest rate is all about.”

The 2.5% interest rate will be available for a maximum of 24 months after it went into effect, the VA said.

“This rate reduction is a part of VA’s comprehensive efforts to deliver valuable benefits to Native American veterans,” the agency said in a statement about the rate change. “VA also continues to work toward publication of a final rule in the Federal Register that would waive certain copayments for eligible American Indian and Alaska Native veterans.”

A 2022 report found that the NADL program was severely underutilized, with just 89 loans originated in the continental U.S. from 2012 to 2021. That translates to about 1% of the estimated 70,000 eligible beneficiaries. According to the report, a lack of sufficient staff at the VA and ineffective communication efforts with relevant communities attributed to the low rates.

The program was more successful outside the continental U.S., with 91 loans originated in the program in Hawaii alone during the same period. Across the country, 180 loan program originations took place between 2012 and 2021.

Native Americans often face difficulty when accessing credit on tribal lands. According to a 2021 report, tribal lands can be “credit deserts” that lack access to capital that could allow more Native Americans to become homeowners.

This can be further complicated by the fact that much of the land in tribal areas is held in a trust, which can make it difficult for traditional mortgages to be secured on both the home itself and the land it sits on, according to the report.

Native American veterans interested in the NADL program and the new interest rate can send an email to NADL@va.gov or call 888-349-7541.

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