1. Highly Fractionated Indian Land (HFIL) Loan Program
March 23-25, 2016

2. HFIL Loan Program What is Highly Fractionated Indian Land?
Reservation land with undivided ownership interests held by four or more individuals.
General Allotment Act of 1887 (aka Dawes Act) divided and allotted reservation land to individual tribal members.
As individuals passed away, title ownership further divided amongst heirs.
Fractionated ownership grows exponentially with each passing generation.
Over 245,000 owners of 3 million fractionated land interests spanning 150 Indian reservations.

3. HFIL Loan Program
What does this mean for owners of allotted Indian land?
The ability of the owners to use land decreases as fractionation increases.
Locating owners for the use of the property becomes difficult.
Coordinating the use of the property nearly impossible.

4. HFIL Loan Program Initial Consideration
HFIL Loan Program was initially authorized by the Farm Bill.
Required the program to operate as a direct loan program (loans made directly to ultimate recipients).

5. HFIL Loan Program Initial Consideration (Cont’d) Tribal Consultation
14 sessions were held across the country to identify issues and address concerns.
Determined that a regulation would not result in a successful program.
Provision that directly tied the HFIL Loan Program to Bureau of Indian Affairs' (BIA) procedures was cited as the main issue; BIA title clearance process very complex.

6. HFIL Loan Program Initial Consideration (Cont’d)
Recommendations from Tribal Consultation
Should be a relending program instead.
Should be limited to purchasing land to continue agricultural use for the term of the loan.
Lenders must have knowledge and experience working with Indian Country and BIA.
# of lenders limited to no more than 2 lenders per year based upon limited available funds.

7. HFIL Loan Program New Authority
HFIL Loan Program is now authorized by the 2014 Farm Bill.
Final rule was published on December 1, 2015.
$10 million is authorized for FY2016.

8. HFIL Loan Program New Authority (Cont’d)
Program will provide revolving funds to eligible intermediary lenders.
Intermediary lenders will provide funds to Native American tribes, tribal entities, or member of either, to consolidate highly fractionated Indian land.

9. HFIL Loan Program New Authority (Cont’d)
Intermediary lenders and BIA are responsible for determining the processes and procedures needed to resolve the undivided interests in the land.
FSA provides oversight of the intermediary lender’s loan process and procedure, but will not provide oversight for the ultimate recipients.

10. HFIL Loan Program New Authority (Cont’d) Lender Eligibility
May be a bank, credit union, or other financial institution approved by USDA.
Must have the knowledge and experience of working with Indian Country and BIA.
Must have the legal authority for carrying out the proposed loan purposes, obtaining security, and repaying the proposed loan.
Must have adequate assurance of repayment of the loan based on fiscal and managerial capabilities.

11. HFIL Loan Program New Authority (Cont’d) Lender Requirements/Terms
Lender will complete a relending agreement (agreement will specify the plan for relending loan funds, proposed fees and charges to the ultimate recipient, and will provide maximum flexibility for the lender to work with its ultimate recipient).
Funds must be deposited into a revolving fund account.
Rate will be fixed and determined by the administrator.

12. HFIL Loan Program New Authority (Cont’d)
Ultimate Recipient Eligibility
Is a Native American tribe, tribal entity, or member of either that receives a loan from an intermediary lender’s revolving fund.
Must agree to use the land for agricultural purposes during the term of the loan.
Must comply with the requirements of the intermediary lender.
Must be able to purchase fractionated interests resulting in at least 51%.

13. HFIL Loan Program New Authority (Cont’d)
Ultimate Recipient Requirements/Terms
Use of funds very specific; purchase of HFIL and related expenses only.
Eligibility of the ultimate recipient is based on the lending agreement.
Rate charged by lender to ultimate recipient will be negotiated between the lender and recipient and should be the lowest rate sufficient to cover debt service and administrative costs.
Determined by lender; max 30 years.

14. Any Questions? Connie Holman 202-690-0756 Connie.Holman@wdc.usda.gov
1400 Independence Ave., SW
Stop 0522
Washington, D.C