Since the day Bank of North Dakota opened its doors, home ownership has been recognized as a critical component of a healthy economy. When approving farm loans in its early days, the Bank was more likely to approve a loan if the land had a home for the family, a barn and a pasture to graze at least enough dairy and beef cattle to support the family’s needs and pay the mortgage.
During the Great Depression, families who lived on the farm were not evicted even if they couldn’t make payments. The agreement was they would continue to work the land and be in contact to repay when possible.
On May 23, 1935, BND was certified by the Federal Housing Administration to act as an approved mortgagee. This allowed the Bank to begin its Mortgage Loan Purchase program and they ended the year with nearly $78,000 in that portfolio.
The Bank expanded the Mortgage Loan Purchase program in 1948 when it became an approved lender for the Veterans Administration. By the end of 1949, BND had $263,301 of GI loans and $905,449 in FHA housing loans in its portfolio.
The Federal Housing Administration (FHA) established the Section 235 loan in the 1960s to help low- and moderate-income families purchase, build, or rehabilitate housing. FHA Section 235 loans used a federal interest rate subsidy to buy down the interest rate. BND agreed to purchase and service these loans from North Dakota financial institutions to relieve them of the significant burden of the servicing requirements associated with the subsidy while still allowing them to help their customers acquire a home with affordable payments.
In November 1975, BND instituted its own Interest Supplement Program and by the end of 1976 made $353,650 in loans at below market rates as low as 6%. For perspective, the decade of the 70s began with an interest rate of 7.50% and ended with an interest rate of 11.5% and in the early 1980’s, market interest rates for home mortgages ranged from 11.5% to over 18%.
BND also worked with the Farmers Home Administration (FmHA) to assist North Dakota residents through the FmHA 502 Guaranteed Residential Housing Program. FmHA, now known as USDA Rural Development, guaranteed 90 percent of the loan and BND provided a much-needed secondary market for the originating lender.
Starting in the mid-1990s, the Bank focused on providing long term fixed rate financing for home mortgages. BND provided an aggressive secondary market for FHA-insured and VA-guaranteed loans to make long term fixed rate home mortgage financing readily available in towns and rural areas of North Dakota. BND also purchased conventional home mortgage loans and sold them to secondary markets while retaining the loan servicing with BND. This provided financial institutions and their customers with the benefit of greater access to home loan financing along with in-state servicing.
In 2010, rural ND banks approached BND and expressed concern that when originating residential real estate loans, they would not have the ability and expertise needed to meet the additional regulatory burden associated with the implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act signed into federal law in July 2010. They asked to BND to originate residential real estate loans for them and their customers. Legislators, bankers and BND worked together to successfully develop and implement the BND Rural Mortgage Loan Origination Program authorized in the 2011 Legislative Session allowing BND to originate residential real estate loans. It was the first time BND had been in the home mortgage loan origination business since the 1970s.
As BND celebrates its 100th anniversary, lenders can refer their customers to BND to originate a home mortgage or they can choose to originate a home mortgage and sell the loan to BND as their secondary market option, always without fear of BND soliciting their customers for additional bank services.
