It always has been difficult to get a mortgage in Indian country. The federal government is remedying that situation, with modest results.

Demand exists for mortgages on Native American lands, usually referred to as Indian country. According to one study, 38,000 households on reservations and other Indian land have sufficient income to qualify for conventional mortgages. But the number of mortgages in Indian country is a fraction of that -- a consequence of the special legal status of much Indian land.

As a result, many Native Americans on reservations just have to make do. Many build their homes bit by bit, adding onto the structure as they can afford to, says Gary Gordon, executive director of the National American Indian Housing Council.

Other people resort to more desperate measures. Overcrowded housing is rife in Native American communities. For a report that the housing council issued in February 2002, researchers found as many as 25 and 30 people living in three-bedroom houses. Some homes lacked sufficient heat and plumbing.

With a desperate need for housing in Indian country, and with thousands of families who could qualify for mortgages, you would think that lenders would line up to underwrite home loans on Indian lands. But they haven't, for two reasons.

First, much land on Indian reservations and tribal areas is owned by the federal government and held in trust for the tribe. A mortgage borrower on tribal trust land doesn't own the parcel that the home sits on. The borrower has a long-term lease. This limits the amount of money the lender can recover in case of foreclosure because the lender can't sell the house and the land it's on.

Another reason for the scarcity of mortgages in Indian country is that many tribal lands fall under the jurisdiction of tribal courts, which have their own laws and procedures governing foreclosure and eviction. When an off-the-reservation lender wants to foreclose on a delinquent mortgage borrower, it has to pursue the matter through a civil tribal court. Some lenders have been reluctant to trust tribal courts to carry out the eviction and foreclosure process without favoring tribal members over the outside lenders.

The U.S. Department of Housing and Urban Development has several programs to increase homeownership on Indian reservations and other Native American lands. The most important is called the Section 184 loan guarantee. Under this program, if a borrower defaults and the lender has to foreclose, the government pays the lender for any financial loss.

Before a Section 184 loan goes through, it has to be approved by HUD and the Bureau of Indian Affairs. The borrower has to obtain a long-term lease from the tribe. That's on top of the loan paperwork. With all the red tape, Gordon says the Section 184 program hasn't attracted many lenders, "and I think part of it is the bureaucracy that's involved with that. It takes a long time to approve and process these mortgages."

The Section 184 program has existed for 10 years. As of March 31, some 916 of these loans were outstanding nationwide, for a total of $89 million borrowed. With less than 1,000 mortgages in 10 years, it would take quite some time to satisfy that demand for 38,000 mortgages. To be fair, it took years for the Section 184 program to gain traction, and most of those loans have been originated since 1999.

A mortgage through the Section 184 program isn't necessarily an ideal loan. Native Americans have long complained that high-interest, subprime mortgages are too common in Indian country.

"More tribes are trying to establish and develop financial literacy courses for tribal members so they can become more aware of predatory lending," Gordon says.