HUD raises upfront fee on Section 184 home loans for Native borrowers starting Oct. 1

Native American and Alaska Native families who buy or refinance a home through the federal Section 184 loan program will pay a bigger upfront fee starting Thursday, Oct. 1.

The U.S. Department of Housing and Urban Development is raising the program's upfront loan guarantee fee from 1% to 1.5% of the loan, or $1,500 more on a $300,000 loan. HUD lender materials say borrowers can pay the fee in cash at closing or roll it into the loan. The increase applies to loans HUD commits to guarantee on or after Oct. 1, including refinances. Existing loans aren't affected, and there's still no annual fee.

Section 184 guarantees private mortgages for Native borrowers, including on tribal trust land and in Alaska Native areas, where conventional financing can be hard to get.

In a notice set for publication Monday in the Federal Register, HUD said the program's low default rate means a "modest fee increase" can replace the money Congress sets aside for it each year. HUD's 2027 budget request projects needing no such subsidy because of the higher fee, down from $1 million this year.

The 1.5% fee isn't new. HUD raised the upfront fee to that level in 2014 and later added an annual fee. In 2023, it cut the upfront fee back to 1% and dropped the annual fee, citing the program's low default rate, strong lending practices and tribal housing counseling. HUD estimated then that the cuts would save an average family almost $5,700 over the life of a loan. The new notice cites the same three strengths.

HUD puts the program's lifetime default rate at about 3.5%. Federal rules let the agency charge an upfront fee of up to 3% and an annual fee of up to 1%, and it made this change by notice, without a public comment period.

A related program, the Section 184 Skilled Workers Demonstration Program, will charge an upfront fee for the first time, 1%, also starting Oct. 1.

HUD doesn't publish how many Section 184 loans are made in Alaska. In a 2024 rulemaking, the agency said it would explore releasing program performance data and that tribes can request it in the meantime.