Native Hawaiians are denied loans that other applicants get

Can the federal government underwrite mortgages for homes in Hawaii on a spot where there may be buried bombs from World War II?

The answer depends on which federal program insures the loans. When it comes to the one for Native Hawaiians, the answer has been an emphatic no. But when it comes to more traditional mortgages for the general public, a different federal program has been saying yes.

The Honolulu Star-Advertiser and ProPublica reported in November how the U.S. Department of Housing and Urban Development in late 2014 restricted some mortgage lending in a region of Hawaii’s Big Island known as the Waikoloa Maneuver Area, concerned that buried bombs still posed a danger to thousands of residents. Funds would flow again, officials said, once the military removed any unexploded devices and once the state deemed the land safe.

That policy effectively froze lending for many Native Hawaiians, who relied on HUD-backed loans to develop homesteads within a historic land trust, parts of which were in an area with a potential for unexploded ordnance, known as the UXO zone.

But new documents and interviews show that the Federal Housing Administration, which is part of HUD, has insured loans for people seeking to buy homes on land outside of that trust but still within the UXO zone — long before officials declared any parcels there safe from unexploded ordnance.

The new revelations raise questions about federal policy and whether the HUD restrictions unfairly targeted Native Hawaiians — or put others at risk.

“I don’t understand why they would allow it for some properties but not for others,” said Eric Brundage, a former Army explosive ordnance disposal expert who has helped with recovery and detonation of UXO in the Waikoloa area. “That just doesn’t make sense to me.”

According to federal data, between 2015 and 2018, FHA insured 19 loans in a ZIP code with land in the heart of the UXO zone. That area contains no trust land. The ZIP code’s largest residential community, Waikoloa Village, is in a sector considered at higher risk for UXO danger than some of the Native parcels. As recently as 2018, workers were still finding evidence of possible explosives, unearthing nearly 370 pounds of munition debris — some on land that had been checked before. The state Health Department, which oversees remediation work, did not approve any parcels within this sector for residential use until 2019.

On paper the FHA lending seemed to be at odds with HUD’s regulations for department investments at the time, which required all property for use in its programs to be free of contamination of all sorts. In a document on the Waikoloa Maneuver Area policy, the department said that “the unmitigated presence of unexploded ordnance presents an unacceptable risk to the health and safety of occupants and conflicts with residential property use.”

In practice, though, HUD told the Star-Advertiser and ProPublica that its policy did not apply to the FHA loans. In an email to the news organizations, the department did not explain why, only noting that federal backing flows from two separate programs. FHA insures single-family mortgages offered to the general public, while HUD runs a separate lending program for Native Hawaiians seeking to live on trust land. The latter entails “a different and more direct role” for the department because it has a “trustlike relationship” with Native Hawaiians, a department spokesperson said.

U.S. Sen. Brian Schatz, D-Hawaii, said in a statement to the news organizations that he is concerned about the impact of the HUD policy on the state Department of Hawaiian Home Lands, which oversees the Native trust. That department, he said, is now subject to “more onerous restrictions on building and financing than any other landowner in the state.” Schatz said he was working with federal and state agencies “to find a path forward to make it easier to finance and develop on Hawaiian Home Lands while continuing to keep people safe.”

HUD officials in Washington did not make anyone available to be interviewed for this story. Instead, they provided a written statement.

“HUD is committed to providing access to mortgage financing for our Native American and Native Hawaiian communities,” wrote Jason Pu, administrator of the department’s western region, which includes Hawaii. “HUD is working with our partners in the federal government and the State of Hawaii to examine state and federal regulations and to ensure that further developments in the Waikoloa Maneuver Area are appropriate and safe.”

It’s unclear from federal data, which does not identify the exact location of the loans, whether any Native Hawaiians seeking to live on trust land benefited from FHA lending. When asked whether FHA insured any such loans, HUD did not answer directly, only saying that FHA “never ceased making available” insurance for mortgages on properties located on trust lands in the UXO zone, provided the loans complied with all “applicable requirements.” It did not specify those requirements, though it noted that lenders have the responsibility to “ensure compliance with state and local laws governing the subject property and the associated mortgage financing.”

Native beneficiaries and mortgage brokers told the Star-Advertiser and ProPublica that they had witnessed some cases in which FHA loans were unavailable to people on trust lands in the UXO zone. Shirley Gambill-De Rego, a Big Island mortgage manager, recalled one case in 2015 in which an FHA loan for a client was denied when the lender learned the property was in the Waikoloa Maneuver Area. The lender believed the UXO risk to be too great, she said.

As the Star-Advertiser and ProPublica reported in November, the cleanup effort on trust lands is years behind schedule, with hundreds of Native Hawaiians waiting to develop ancestral lands. The trust, created by Congress more than a century ago, was intended to return Native people — especially impoverished ones — to their ancestral lands, a kind of reparations for the harms of colonization. Anyone at least 50% Hawaiian can apply for a residential lease to buy or build on trust land. The responsibility for the delay rests, in part, with the U.S. Army Corps of Engineers, which has been plagued by shoddy work and multiple regulatory disputes. The corps previously said that it is “committed to getting the remediation done right to ensure these areas are safe,” and that every acre that goes through the process “is a success toward restoration of lands.”

But some members of Hawaii’s congressional delegation are losing patience.

In January, U.S. Sen. Mazie Hirono, a Hawaii Democrat, wrote to leaders of four federal and state agencies, including HUD, saying the problems highlighted by the Star-Advertiser/ProPublica reporting have made clear that implementing an interagency approach will be critical to ensuring lands become safely available for residential construction. Specifically, she called for a working group made up of HUD, the corps, the state Department of Health and the state Department of Hawaiian Home Lands. That group, she said, should determine the necessary steps to clear and secure the land “as quickly as possible” to ensure the state and federal governments meet their obligation to provide safe, affordable housing options to beneficiaries of the Native Hawaiian land trust.

“Today, there are more than 6,000 beneficiaries on Hawaii Island who are waiting for land, and for many of them, HUD financing will be the best or only option for building an affordable home,” Hirono wrote in her Jan. 11 letter.

Native Hawaiian leaders note that, so far, relatively few munitions have been found in Puukapu, the largest trust parcel in the UXO zone. Yet beneficiaries are still waiting on the corps and state regulators to officially clear the area. Many have leases that flag their land as being in a UXO zone.

Gambill-De Rego, the mortgage broker and a Puukapu beneficiary, said she has helped some beneficiaries whose older leases did not contain that flag but has had to tell many others that they can’t get mortgages until the UXO issue is resolved. “This is not fair at all,” she said.

Ian Lee Loy, a former member of the state commission that oversees the trust lands, noted that many Native Hawaiians have already waited years — and sometimes dec­ades — for the opportunity to establish homesteads on the Big Island. “Everything you’ve uncovered is shameful,” he said.

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Agnel Philip of ProPublica contributed data analysis.