HeritageOne® Feeds a Hunger to Finance Affordable Housing in Cherokee Nation
“There’s a hunger in the mortgage industry to support underserved communities.” says May Landon, VP of Mortgage Operations, TTCU Federal Credit Union (TTCU). “But when it comes to those discussions, we’ve found that Native American communities are not as well represented.”
That’s why TTCU’s real estate leadership team was eager to learn more about HeritageOne®, a conventional, fixed-rate mortgage offering from Freddie Mac. It was designed to provide greater access to financing for members of federally recognized Native American tribes living in tribal areas.
“This Community is in Our Backyard.”
At the outset of 2024, TTCU’s strategic goals included identifying new loan products that could serve underserved populations and expand lending opportunities.
“We first became acquainted with HeritageOne through Freddie Mac Single-Family’s marketing outreach,” says May. “We immediately recognized an alignment between our goals and HeritageOne’s scope.”
May notes that the offering’s innovative approach and potential to positively impact the Native American community captured TTCU’s attention. “After all, this community is in our backyard,” she says.
HeritageOne can be used to finance multiple residential property types, including condominiums and manufactured homes, and various types of land ownership interests, including tribal trust land, allotted trust and unrestricted or restricted fee simple land.
Federally recognized Native American tribes included in the U.S. Department of Housing and Urban Development’s (HUD) most recent Section 184 Participating Tribes List are eligible under the HeritageOne offering. (Other tribes may become eligible if they enter into a memorandum of understanding with Freddie Mac. TTCU serves the Cherokee Nation tribe, which is on the HUD Section 184 Participating Tribes list.)
TTCU’s proximity to tribal lands in Cherokee County made them the ideal candidate to be an early adopter of HeritageOne. Oklahoma’s tribal land is fee simple, which made it relatively easy for TTCU to adopt and use HeritageOne. (Using HeritageOne to finance homes on trust land may require an individual tribe to customize their mortgage forms.)
With HeritageOne, there are no income limits on eligible borrowers and funds for the down payment, as well as for reserves and closing costs may come from a variety of sources. The down payment can be as low as 3% of the home’s sale price.
“Lots of tribes in Tulsa get down payment assistance, so that really helps low-income borrowers,” says Kaelen Smith, Mortgage Loan Officer at TTCU. “But HeritageOne isn’t only for low-income borrowers; it’s also suited to moderate-income borrowers as well as high wage earners. I have some borrowers who have excellent credit and can put down as much as 20%.”
With no income restrictions – and reduced mortgage insurance – HeritageOne is available to borrowers who may not qualify for very low-income assistance, yet still don't make enough to make a larger down payment.
Appraisals tend to cost more than in tribal areas because qualified appraisers may need to travel long distances to the properties. However, HeritageOne offers a credit to offset appraisal costs. “When we met with the Cherokee Nation tribe and told them about the credit, they were stunned,” says May. “They said: ‘Can you repeat that again?’”
Another potential challenge: There may not be enough comparable sales in a rural tribal area for an appraiser to develop an opinion of market value using the sales comparison approach. For that reason, HeritageOne permits appraisers to use the more accommodating cost approach to develop their opinion of market value (under certain conditions).
“We're Going to Own This.”
The intention behind Freddie Mac’s development of HeritageOne was to fill a gap in the housing market and expand accessibility to affordable home financing for Native Americans. The smooth integration of HeritageOne into TTCU’s offerings is a testament to its strong design and the collaborative efforts of the TTCU and Freddie Mac teams.
“By the time I started working with the TTCU team, they were already versed in HeritageOne,” says Kim Carr, Affordable Lending Manager in Freddie Mac’s Single-Family Division. “I helped them gain a deeper understanding of it, but they really took HeritageOne by the horns and said, ‘We're going to own this.’”
May notes the collaborative spirit behind adoption. “We had extensive conversations with the Freddie Mac team to minimize risks and capitalize on opportunities, whether modifications to our systems or the way we underwrite,” she says. “If I had a question, I could reach out to Freddie Mac and get an immediate answer.”
It took 75 days from the point when TTCU inquired about HeritageOne to process their first loan via Loan Product Advisor® (LPASM), Freddie Mac’s automated underwriting system (AUS). “Any time you're implementing a new offering and have the confidence that comes with utilizing an AUS, it's a beautiful thing,” says Sommer Kowalski, Mortgage Underwriting Manager at TTCU.
“One of the Best Opportunities We’ve Ever Had.”
“I loved that we had the opportunity to be one of the first to use HeritageOne and help pave the way for other lenders,” says Sommer. “It forced us out of our comfort zone a little bit. But we couldn’t wait to get it going.”
May adds, however, that it’s not just about being first. “HeritageOne is one of the best opportunities we’ve ever had to continue growing within Native American tribes. It absolutely aligns with the philosophy of the credit union industry, which is ‘people helping people.’”
TTCU is committed to bringing to the members of the Cherokee Nation tribe the best option available to benefit them and their families. “But adopting HeritageOne also sends the message to the community that we see them, we hear them and we're here for them in their homeownership journey,” Sommer says.
To date, TTCU has received overwhelmingly positive feedback from both borrowers and Native American advocates. “I feel like we’re just scratching the surface,” says May. “We want to do everything we can to increase our productivity with HeritageOne. We’re a huge advocate of this offering.”
TTCU’s plan is to close a few more loans before they start meeting with influential individuals in tribes across Cherokee County. “We have big plans,” she adds, “and Freddie Mac is coming with us.”