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Home Front: Culture Wars
Minn. state agency offers Islamic mortgages
2009-03-09
MINNEAPOLIS (AP) - 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 has launched a new program offering Islamic mortgages.
The problem here, as I see it, is we don't live by Islamic Law here. We don't live by any religious law, but if some lending agency doesn't want to make a proffit I could care less, as long as us Taxpayers don't have to pick up the bill when the Lendee defaults.
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 said 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.
Life is tough when when you follow a Barbaric Cult.
"One thing I hated was moving. I don't like to move all the time," he said.

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 said, 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.
Can I get in on this? I'm not a Muslim but I thought descrimination on the basis of religion was Un-Constitutional.
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.
So it's basically a scheme to charge interest but not actually call it that. What I don't like is the State buying the home. That's Taxpayer money. Here is the State Government getting into the mortage business. That can't be legal.
If it's such a good deal why can't banks offer it? Perhaps they could offer them even without verifying income and assets! Why, they could bundle those mortgages into securities! And Freddie Mac could guarantee them! And pension funds could buy them! And AIG could sell credit-default swaps and insure them!

Oh ...
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 said. "We wanted to be as conventional as possible, while respecting the tenets of Islam."
What business is it for the state to 'respect the tenets of Islam'? If the state tried to 'respect the tenets of Christianity' I rather suspect the ACLU would be all over them.
Samatar, who used to work for Wells Fargo, tried for years to launch Islamic financing. He said the fact that Minnesota Housing has agreed to participate is a nod to the Muslim community's growing economic power.
If they really had 'growing economic power' a private bank would be willing to write the loans without government interference ...
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 said he expects the demand for Islamic financing to grow as more Muslims make their home in the U.S. Loundy said 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 said 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 said there are thousands more potential buyers like Sheikh out there. He said 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.
Posted by:Deacon Blues

#13  after some thought, Islamic banking only has to NOT charge interest, so call it something else,and do it.
Posted by: Redneck Jim   2009-03-09 18:26  

#12  Icerigger, that's why the State buys the house first.
Posted by: Deacon Blues   2009-03-09 15:49  

#11  This process would never stand up to an appraisal.
Posted by: Icerigger   2009-03-09 15:44  

#10  For many Minnesota Muslims, it's been virtually impossible to buy a home, because Islamic law forbids the paying or charging of interest.

I would have thought this was a feature and not a bug but I guess that's just me.
Posted by: Ebbang Uluque6305   2009-03-09 14:43  

#9  Thanks for the clarification, Al.
Posted by: Deacon Blues   2009-03-09 12:09  

#8  Can I get in on this? I'm not a Muslim but I thought descrimination on the basis of religion was Un-Constitutional.

Yes you can. I know the program manager that put this together and making it "Sharia but not Sharia" was the most difficult part of creating the product. And yes, constitutional issues were a major part of creating this thing.

As for Taxpayer risk, Minnesota Housing Finance Agency is self financing and makes a profit. Which makes it relatively red tape free, and one of the better state agencies to work for. Of course, if enough of these guys walk away from their homes, the taxpayer will be stuck holding the bill. But that's also true of Citibank.

Al
Posted by: Frozen Al   2009-03-09 11:58  

#7  So it's basically a scheme to charge interest but not actually call it that.
Exactly. Allah doesn't like interest, but he approves of overcharging. Interest rates were too difficult to calculate in the 7th century.
Posted by: Darrell   2009-03-09 10:33  

#6  Ah, a summer house on the beach in Somalia. It's the "Somalian Dream"...
Posted by: tu3031   2009-03-09 10:13  

#5  I'm not faulting the Banks.This particular program was set up by the Minnesota Government expressly for a "religious" group. If Banks want to do it, fine by me but State and Federal Governments have no business catering to ANY religion.
Posted by: Deacon Blues   2009-03-09 08:47  

#4  How do you think they became owners of all the Stop'n Robs? (nobody listens to Joe Biden, bloody nobody) This is just another business development venue for the banks. In any case, why fault the banks? Our universities and colleges have been courting these murdering wonks for decades. Great Britistan here we come!
Posted by: Besoeker    2009-03-09 08:39  

#3  "It is great news for the country, and it really sends a great signal that the United States is our country,"

Well, no, not really. If you refuse to take out a normal mortgage to buy a house you've not really become a part of this country.
Posted by: Parabellum   2009-03-09 08:37  

#2  I ment to add this as well. My thoughts;
government distorts the lending market again. Is it a legitimate function of American government, at the state or federal level, to set itself up as a lender just to help a religious sect get around its own set of beliefs?
Posted by: Deacon Blues   2009-03-09 08:35  

#1  I assume this means they don't get to deduct mortgage interest on their 1040.
Posted by: Spot   2009-03-09 08:32  

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