Thread: State Money for Islamic Immigrants?

New Islamic Mortgages Now available in Minnesota (Muslims dont like to pay interest)

Posted on Tuesday, March 03, 2009 3:12:47 PM by TheRedSoxWinThePennant, FreeRepublic

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

The African Development Center, with support from the state's housing agency, is now offering Islamic mortgages as a way to help close the home ownership gap among Muslim immigrants.

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.

Unless the state makes this program available to everyone, this is in direct violation of the separation of church and state, is it not?

To whom do we voice our objections?

Originally Posted by melena29

Unless the state makes this program available to everyone, this is in direct violation of the separation of church and state, is it not?

To whom do we voice our objections?

Noone. That's the tragedy of the US right now.

This is what happens when the average American spends more time watching TV than networking with people in the community.

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.

Paying interest on a mortgage is taboo! You have got to be kidding me! These people will absolutely say and or do anything and simply claim it's their religious freedom to do so! Just another group invading this country that will never assimilate and will use their religion as the vehicle!

Hello, separation of mosque and state?
we are being mocked!

I may be the only one, but I don't see a problem with this. He is paying a higher up front cost, and not being forced to choose between his religion and a home of his own. His only other option would be to pay the full price in cash, which most people can't do. He's not saving money in the long run, because of the higher down payment. This religious belief doesn't hurt anyone. If immigrants were allowed to practice any belief, such as thinking they have the right to beat or kill a woman/girl who embarrasses the family, that's going too far, but who does this hurt? As someone who is here legally, I think it's great he could buy a home and have some stability.

Originally Posted by Steph

I may be the only one... I think it's great he could buy a home and have some stability.

Steph- I know your heart is in the right place but have you had any contact with these people? They are polar opposite to most of us in this country. We are Balkanizing the US at a rapid rate. We have turned a blind eye to the crime and misbehavior of these Africans and have made them another special interest. And yes call this a racial issue if you must but I for one do not need anymore multiculturalism in my life. As it is, I am forced to spend thousands of dollars a year in private education so that my children will learn God and the right way of living. In Minnesota they have their Muslim education paid for by the state and we are not even allowed to review what they are teaching their children. God help us for our politicians are out to bury us.

Steph- I know your heart is in the right place but have you had any contact with these people?

No, I haven't. I'm in Tucson, and I've seen a lot of people from Somalia (sp?) but haven't met anyone. Actually, now that you mention it, when I think of Somalia, what's burned in my memory is a picture I saw years ago of an American serviceman being carried through a crowd (in Somalia) naked, high in the air, and dead, while the animals cheered. I should take my comment back, because I do think there is too much (legal and illegal) immigration, and these people lived a life and where raised in a way that makes them think acts like the above are normal, and I wonder if they can ever truly assimilate, just by moving to a "better" country, or if they will always think dragging dead corpses through the street is fun and a reason to celebrate. I also think the US gov't thinks that we "owe" people from countries with less. We should continue sending money to Mexico, and other places, and allowing people with no or very little education, to come here until we're "even". We as a country will continue feeling responsible until we have as little as they do, just to make it "fair". I now agree with you. Thanks for making me think it through. I was originally thinking more along the lines of "Freedom of Religion" but now realize that putting so many people with so many different beliefs and so many different languages and so many different needs and demands does NOT make this country stronger or better, it's going to break us in the long run.

To me this is really irrational. First of all if a Muslim buys something in a store aren't they indirectly paying some of the interest the store owner had to pay to borrow the money and to start the business? That's because the store owner had to pass at least some of the cost of that interest onto his customers in the prices he charges. And likewise if somebody pays a higher price for a house to reflect the interest that could have been collected than they are really paying interest no matter what they call it. Except they are paying it indirectly.

Muslims do not use interest mortages, do they?