How An American Indian Tribe Got Into Mortgages

The Cedar Band of Paiutes is making no-money-down loans across the U.S.

Richard Ferguson considers himself the friend of struggling homebuyers everywhere. The Utah mortgage man will make families’ down payments for them. That way they can qualify for loans backed by the Federal Housing Administration. And they are—in droves, borrowing as much as $100 million a month.

Ferguson runs the Chenoa Fund, which is owned by American Indians, Utah’s Cedar Band of Paiutes. “Chenoa” is thought to be a native American word for peace, but operations like Ferguson’s are raising concerns in the industry and in Washington. That’s because he’s running a company with a dual role, not only providing the down payments for borrowers across the country but also profiting from making the loans by charging above-market rates and fees. Some members of the tribe say they’ve seen little or no benefit from the business and question where the money is going.

In the 2000s, Ferguson ran a similar program, which allowed home sellers to in essence fund buyers’ down payments. Congress later banned such operations, which ended up costing the FHA’s insurance fund $17 billion when borrowers got in trouble. “When things went south in the last downturn, those folks were riskier—they defaulted at much higher rates,” says Joe Gyourko, a real estate and finance professor at the University of Pennsylvania’s Wharton School. “Ultimately, we forget and go back and make the same errors.”