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They probably mean "native" because it allows him to add someone to the list of enemies, preventing morale from dropping. And by the way, isn't the Warlock's penalty -2? In that case, he should take Skilled Leadership to avoid this, IMO. This tactic works well, for example, when you have a Knight hero, but you give him the Fallen Knight skill for some reason, so he can wield powerful Dark magic.
In the Elven capital, there's a bonus for those in defense: +2 luck and morale. With a Knight hero and the Fallen Knight skill, he will still have +1 morale with his native army.