Skip to comments.New Islamic mortgages now available in Minnesota
Posted on 03/02/2009 9:00:20 PM PST by Wife of D
For many Minnesota Muslims, it's been virtually impossible to buy a home, because Islamic law forbids the paying or charging of interest. To help close the home ownership gap among Muslim immigrants, the state's housing agency is launching a new program offering Islamic mortgages.
Minneapolis, Minn. Islamic law does make exceptions to the ban on interest, if one's family is at stake. But the exceptions are open to interpretation and for many observant Muslims, conventional mortgages are strictly taboo.
Nawawi Sheikh is one of them. The Somali-American says he and his wife just couldn't go against their beliefs, even if it meant giving up their dream of owning a home. Still, he grew tired of moving from one rented apartment to another.
"One thing I hated was moving. I don't like to move all the time," he says.
He has no plans to move again anytime soon. Sheikh is the first home buyer to get a loan through the state's New Markets Mortgage Program. That's because, program manager Nimo Farah says, he has all the makings of a successful homeowner.
"I had lots of applications, but he's the first one, because really, he was ready. He has been working at the same job for quite a while; he took care of his credit; he had the right size family, and he had all his documents together," she said. "He was basically ready to go."
The program is targeted at low-to-moderate income families. Qualified applicants have to complete first-time home buyer education classes. The goal is to help Muslim home buyers build wealth and reap the benefits of home ownership.
Here's how the mortgage, known as Murabaha financing or "cost plus sale," works:
The state buys a home and resells it to the buyer at a higher price. The down payment and monthly installments are agreed to up front at current mortgage rates.
The deal is identical to a thirty-year fixed-rate loan, except there's no additional interest, because the higher up front price factors in payments that would have been made over the life of a traditional mortgage.
A handful of private banks and lending institutions offer Islamic mortgages in the U.S., but Minnesota Housing is the first state agency to offer such a product. The program is the brainchild of Hussein Samatar, director of the African Development Center in Minneapolis.
"The process is different, but the outcome will look the same," Samatar says. "We wanted to be as conventional as possible, while respecting the tenets of Islam."
Samatar, who used to work for Wells Fargo, tried for years to launch Islamic financing. He says the fact that Minnesota Housing has agreed to participate is a nod to the Muslim community's growing economic power.
Chicago-based Devon Bank is underwriting the loans for the New Markets program. Devon is one of the largest Islamic lenders in the country. Corporate Counsel David Loundy says he expects the demand for Islamic financing to grow as more Muslims make their home in the U.S. Loundy says Muslims tend to be good risks.
"If they worked so hard to get to this country, they don't want to screw it up now that they are here, so they tend to pay their debts pretty promptly," said Loundy. "In addition, you have a population that is religiously and culturally predisposed against having debt, so they want to pay down their debts as quickly as they can."
The numbers back this up. In its five and a half years offering Islamic lending, Loundy says Devon Bank hasn't lost a penny, though he admits the recession could make that record difficult to sustain as more borrowers face job loss.
But the bad economy is also offering opportunity. With housing prices at rock bottom, officials say the timing couldn't be better to match first time Muslim buyers with foreclosures that need new owners.
Nawawi Sheikh's new three-bedroom South Minneapolis home is a former foreclosure. The African Development Center's Hussein Samatar says there are thousands more potential buyers like Sheikh out there. He says the New Markets Mortgage Program will help the Minnesota Muslims community put down strong roots.
"It is great news for the country, and it really sends a great signal that the United States is our country," he said, "and we would love to make it better."
Samatar says he has 10 more qualified buyers already lined up. He plans to close on two or three more homes with Islamic financing over the next few months.
Broadcast Dates Morning Edition, 03/02/2009, 6:50 a.m.
God help us, God bless us.
It is also against the Bible to charge usury on any loan and that every seven years a loan is forgiven. I wonder if I can get a Christian Loan?
So now we have to be politically correct about offering Islamic mortgages that technically don’t charge interest. The additional charges they talk about are probably comparable to interest.
This guy needs to be audited by the IRS to make sure he isn’t trying to claim the mortgage interest deduction, since he’s not technically paying interest.
No, you can’t get a Christian loan because Christianity is not an officially recognized minority of any kind.
Half sarcastic and half serious here -— we keep hearing that the foreclosure problems are worst for minorities, lower income, yadda, yadda, yadda. Why doesn’t the Rev. Al Sharpton and his boys come up with something like an Islamic mortgage to re-finance everybody? They would be doing something productive in the minority community that allegedly is discriminated against, and help people retain ownership of homes. Al Sharpton and Jesse Jackson could buy up these bad mortages and refinance them.
Islamic Mortgage: After six months, decapitate your lender and keep the house.
I’ll convert to Islam to get an interest-free mortgage.
The state buying houses for this. Coming soon to your neighborhood.
Interesting that they didn’t mention whether or not non-Muslims could participated. I’m sure that’s the first question on PBS lips if this benefited Christians or Jews.
to be non-discriminatory, everyone whether Muslim or not should be eligible.
..."The process is different, but the outcome will look the same," Samatar says.
Then why bother observing the rule in the first place? Do they really think Allah is concerned with the mathematics of how they purchase a home?
Why not just market regular mortgages, but re-label the interest as the "religious fee"? See, then there's no "interest" involved!
The "religious fee" will be just slightly higher than the market "interest rate" , of course, but only to make it perfectly clear that the extra money being paid is quite distinct from that dirty, impermissible "interest".
“It is also against the Bible to charge usury on any loan and that every seven years a loan is forgiven. I wonder if I can get a Christian Loan?”
But then in the Year of Jubilee, you’d have to give the house back.
Leviticus 25:13 (New International Version)
13 “ ‘In this Year of Jubilee everyone is to return to his own property.
“Nawawi Sheikh’s new three-bedroom South Minneapolis home is a former foreclosure. The African Development Center’s Hussein Samatar says there are thousands more potential buyers like Sheikh out there. He says the New Markets Mortgage Program will help the Minnesota Muslims community put down strong roots.”
As long as they chase the gangbangers from Chicago away, they’re welcome in South Minneapolis. All kidding aside, this is a violation of the separation of church and state. If you don’t want a mortgage with interest, just go buy a house outright or save up for one. It’s not that hard.
he had the right size family,
what the heck does THAT mean?????
Just to make sure I’m on the right page here... The man has a valid case now that he now has one of the most upside down loans on his home in the US, and now qualifies for Obama’s program to help said homeowners? I mean, that is where this scam eventually leads, isn’t it?
christianity had the same prohibition but changed.
islam should change.
ROFLMAO!!! Hey Ken, thanks for the biggest laugh I've had today!
islam should change.
In the middle ages there was a period when people jumped through all sorts of hoops to avoid paying "interest". Many times people wrote contracts where one currency was transferred from a banker to a "not-borrower" who would then at a later date give the banker a certain amount of another currency, so it looked like it was just a currency exchange contract. Funny thing is that both currencies were defined as a certain amount of gold and the "not-borrower" ended up giving the bank more gold than he received. Finally they just gave up and said it was a loan with interest.
Hopefully all these Islamic mortgages are the last gasp before they just give up on their financial method. Otherwise they are just counting on Allah being as easily fooled by tricky bookkeeping as Bernie Madoff's accountant was.
OK, By most state real estate laws, this would be considered “flipping” and is semi illegal.
Now the state itself is doing the flipping? Isnt this how our real estate and mortgage industries got inot trouble?
By the way, if you buy a house and sell it to a Muslim buyer at a higher price, your are in effect creating “higher valued” comparable sales and thereby screwing regular lenders when they order appraisals for regular mortgages.
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