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13.6 LOANS ON NATIVE AMERICAN RESTRICTED LAND
A. Definition
Native American restricted lands are lands in which title is held by the United States in trust for an Indian tribe or which is held by an Indian tribe or individual subject to a restriction by the United States against sale, transfer, or encumbrance.
B. Requirements
Trust or restricted land must remain in trust or restricted status. The mortgage, deed of trust, leasehold interest, or other security interest must be approved by the Secretary of the Interior. For loans to Native Americans on restricted or trust land, the lender must obtain:
x Evidence that the tribe has enacted legally binding and effective foreclosure
procedures and will enforce those procedures upon notice of default from a lender. x Evidence that the tribe has enacted legally binding and effective eviction
procedures and will enforce those procedures upon notice of default from a lender. x Evidence that the tribe has adopted procedures ensuring that the guaranteed loan
will always have first lien priority (if applicable) and will be satisfied before all other property debts (with the exception of tribal taxes) or has adopted legislation requiring the tribe to follow state or local priority of lien procedures. x A copy of the tribe's lease for use on residential land.
x The lender will adhere to the tribe's mortgage, foreclosure, and eviction
procedures. x The mortgage must cover both property improvements and the leasehold interest
in the land.
x The leasehold estate must constitute real property, be subject to the mortgage lien,
and be insured by a title policy.
x The leasehold estate must be assignable or transferable.
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x The lease cannot be terminated except for nonpayment of lease rents.
The lease must: x Have an unexpired term at least equal to the term of the loan. Leases for a period
of 25 years, renewable for a second 25 years are permissible. x Provide for lender notification of any default by the borrower and the option to
cure the default.
x Provide that the borrower will pay taxes, insurance, and association dues (as
applicable) on the land and retain voting rights in the association.
x Provide that the leasehold can be transferred, mortgaged, and sublet without
restriction.
x State rental increases in exact dollar amounts.
x Be recorded and constitute an interest in real estate.
x Permit mortgaging of the leasehold.
x Provide for written notice of default.
x Provide renewal options for the leasehold mortgagee.