Mortgages Test Muslims’ Faith
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Most people leave their finances in the hands of brokers, bankers and planners, but Muslims often turn to their religious leaders.
For strict Muslims, financial decisions must adhere to Sharia, or Islamic law, as written in the Koran. Interest is forbidden, making Muslims’ path to home ownership difficult.
“If you buy a house with interest, hey, it’s for your family,” said [imam Soulemaine] Konate, who emigrated from the Ivory Coast. “You’re not going to let them live on the street.” But some disagree.
“Only in a case of absolute necessity may you pay interest or receive interest,” said Imam Omar Abu-Namous of New York’s Islamic Cultural Center.
There are lenders that work to comply with Islamic law, though they have achieved varying degrees of success in the United States.
Guidance Financial of Reston, Va., was founded in 2002 and has financed more than $1 billion in Sharia-compliant home purchases. However, in April, HSBC scuttled a similar program in New York City, citing lack of volume.
Approved Muslim lenders typically set up Sharia compliance boards, with input from scholars and clerics, to guide their policies, and devised variations on acceptable loans.
Under the plan of Guidance Financial, for example, a home buyer enrolls in a co-ownership program with Guidance. The lender buys the house, then sells it to the homeowner in increments over the next 15 to 30 years.
“Some people would say, ‘That sounds like the same thing as a mortgage,’” said Guidance spokesman Hassam Qutub. “The difference is, the risk is shared in the event of a foreclosure. The lender assumes more risk than a conventional bank.”
(Posted on August 27, 2007)