FHA Single Family Housing Policy Handbook 4000.1, Part II — a. Section 248 Indian Land Program (09/14/2015)

FHA Single Family Housing Policy Handbook 4000.1, Part II — a. Section 248 Indian Land Program (09/14/2015)

a. Section 248 Indian Land Program (09/14/2015) i. Property Rights to be Appraised The Appraiser must identify the interest to be appraised based on the type of ownership. (A) Fee Simple Unrestricted Fee Simple Unrestricted ownership refers to ownership in Real Property that may be bought, sold and transferred between Native American and non-Native American purchasers without review by the tribe or the Bureau of Indian Affairs (BIA). (B) Tribal Trust Lands, Restricted Trust Land (1) Standard The FHA Section 248 program insures Mortgages on houses that are located on Indian tribal trust land or Restricted Trust Lands. For these Properties, leased ownership of the underlying land remains with the tribe and will be subject to a long-term, 50-year ground lease (or a 25-year lease with a 25-year renewable term). (2) Required Analysis and Reporting The Appraiser must determine the value for the Leasehold Estate using the analysis and reporting guidance on Leasehold in this Handbook 4000.1. ii. Access to Property Tribally owned and maintained streets and utilities are considered publicly owned. The Appraiser must report Easements and maintenance agreements for nonpublic, common ownership interests that affect the access and utility of the Property. iii. Approaches to Value The Appraiser must be familiar with the applicable ownership and use restrictions and develop a credible value for the Property. The supply of comparable sales and rental transactions varies by site and by tribe. Until sufficient sales exist on a reservation or within the specific Indian area to provide a reasonable sales comparison approach for determining the value of tribal trust Leaseholds or allotted land sales, the Appraiser must rely on other value indicators. The appraisal process must be documented more thoroughly than a typical market appraisal. USPAP Standards 1 and 2 are effective in allowing the Appraiser to “correctly employ those recognized methods and techniques that are necessary to produce a credible appraisal.” In addition, “in reporting the results of a Real Property appraisal an appraiser must communicate each analysis, opinion and II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT D. Appraiser and Property Requirements for Title II Forward and Reverse Mortgages 11. Programs and Products Handbook 4000.1 865 Last Revised: 11/26/2025 conclusion in a manner that is not misleading.” An appraisal on trust land may rely more on the cost approach or data developed from other tribes. HUD will accept the report if the Appraiser has documented the research, information developed and conclusions clearly for the intended users to understand. iv. Cost Approach to Value The cost approach is often the primary indication of value based on the unique nature of land rights in the reservation. The value of the site as vacant will depend on the property rights held by an individual. If the Appraiser’s analysis indicates that the value of the site may be zero or a small Leasehold value, the Appraiser must enter this information in the “Cost Approach” section of the form and enter the statement “subject is on Tribal Trust Land with annual rent not capitalized” in the “Comments” section. If a market exists and an interest in the land was purchased, the value is estimated via traditional cost approach methods described in this Handbook 4000.1. (A) Cost Approach for New Construction The following are instructions specific to New Construction on tribal lands. In addition to including the cost of water, septic, and any other onsite costs in the cost approach, for lands within the reservation the Appraiser may provide an allowance for off-site development costs. The lesser of actual pro-rated costs or up to 15 percent of the cost of the construction of the subject house may be added for off-site infrastructure associated with development of the subject lot. This policy applies principally to New Construction where such charges are assessed by tribally approved entities, such as housing entities or housing authorities, or agreements with other federal or local government bodies for providing power, utilities, sewer, water or road construction. The costs to bring utilities, including public water, sewer, electricity and telephone, to sites represent significant development costs. The traditional tract development of residential houses may not be a part of the local culture. Therefore, the utility costs to hook up to any form of a public system in a more rural area can exceed local standards. In remote areas, the construction costs in construction cost manuals may have to be adjusted for transportation, labor or other costs not included in the basic estimate. Architect fees are not typically reflected in the base building costs. Due to special circumstances, the normal allocation for this fee may not automatically reflect the above actual cost. The Appraiser must provide a supporting explanation for the adjustments to the construction costs. (B) Cost Approach for Existing Construction Where market sales are limited, FHA requires the cost approach to be completed on all tribal trust appraisals, including a credible estimate of depreciation. In addition to developing the cost approach described in this Handbook 4000.1 the Appraiser must report the following: II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT D. Appraiser and Property Requirements for Title II Forward and Reverse Mortgages 11. Programs and Products Handbook 4000.1 866 Last Revised: 11/26/2025 • the name of the cost service; • the source and date, if electronic version. Upload as an exhibit into the report when available; • the page numbers of cost tables or factors, if paper version. The reviewer or reader must be able to replicate; • all current multipliers applicable to locale and time as updated and published by the cost service used; and • depreciation due to normal aging, which may be derived from the tables in the cost service book. A computer-generated cost analysis is acceptable in place of the above as long as the printout contains sufficient information to verify that all significant property features have been properly addressed in the cost analysis. v. Sales Comparison Approach to Value The Appraiser must follow the Sales Comparison Approach instructions outlined in this Handbook 4000.1. In addition to the typical data sources the Appraiser must obtain sales information from the local tribal or BIA realty office if available. The Appraiser may consider sales from other reservations within the region if appropriate. The order of selection preferences for sales depends upon the type of interest in the land being appraised: • tribal trust Leasehold sales (market sales between tribal members); • sales of allotted land trust between tribal members; • Fee Simple within the reservation (residual value of the improvements by adjusting out the land contribution); or • Fee Simple proximate to the reservation. The Appraiser must report the property rights in the “Ownership” line of the SCA Grid and apply an appropriate adjustment (if any). In addition, the Appraiser must explain the differences in ownership rights of the comparable properties as compared to the subject, and the basis for any adjustment. vi. Income Approach to Value If the Appraiser determines that this approach can be credibly completed, refer to the income approach section in this Handbook 4000.1. If the Property includes a rental unit(s), the Appraiser must provide an estimate of monthly rent for each unit and note if the rent is limited to the tribal sub-market. vii. Final Reconciliation of Value The Appraiser must follow the final reconciliation of value instructions outlined in this Handbook 4000.1. Where market information is limited and the support for the sales II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT D. Appraiser and Property Requirements for Title II Forward and Reverse Mortgages 11. Programs and Products Handbook 4000.1 867 Last Revised: 11/26/2025 comparison analysis is weaker, the Appraiser may need to place greater consideration on the cost approach.

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