Are non-Muslims eligible for these interest-free loans? "Koran-Friendly Lenders," from Business Week, with thanks to Jerry Gordon:
Who wouldn't want an interest-free loan? If you happen to be a devout Muslim, it's the only option. Paying interest -- riba -- is forbidden. That puts would-be homeowners who are Muslim-American in a bind. Saving to pay for a home in full when housing prices are skyrocketing is nearly impossible.Now Koran-compatible "Islamic banking" is coming to the U.S. Leading the way is Devon Bank, a small community bank in Chicago owned by the Loundy family, who are Jewish. In January, Freddie Mac (FRE ) agreed to buy Devon's Islamic home financing products, freeing up capital for a national expansion. Devon also is working with Fannie Mae (FNM ) to develop Koran-compatible home mortgage products. Other banks are starting to offer Islamic services in the U.S., including the University Bank in Ann Arbor and HSBC in New York.
Devon, on Chicago's North Side, anchors a neighborhood that has shifted from Eastern European Jews to Indian, Pakistani, and Middle Eastern Muslims. To meet customers' needs, the bank, which has $261 million in assets, spent two years developing financial products that could conform to Islamic laws and pass the financial scrutiny of U.S. regulators.
Under Murabaha, or installment financing, Devon buys a property chosen by a customer, then turns around and sells it for a price that includes projected interest costs. There is no principal and thus, technically, no interest. Islamic financing is nearly half of Devon's mortgage portfolio.
Can someone help me out here? Does this mean that the Muslim homebuyers buy the houses at rates that include the projected interest costs? Or that Devon absorbs the interest costs?
The bank also offers Koran-friendly financing for commercial real estate, business equipment, and letters of credit. "We are a community bank helping a community that's being underserved," says David Loundy, the bank's legal counsel. "In this case it's the Muslim community." Given an estimated 6 million Muslims in the U.S., that's bound to change.
Note that the bank seems to have accepted the inflated Muslim population figures put forward by American advocacy groups.
Brilliant little piece on Islamic banking in UK's HSBC bank, by Charles Moore.
When you look a little further into the question of Islamic banking, you find that it is not, in fact, required by Islam. Al-Azhar University, in Cairo, the main and ancient home of Sunni religious learning, teaches that "riba" means extortionate interest, not any interest at all, and that moderate interest should be permitted. Most Egyptian banks charge and pay interest. Even Muslims who reject this interpretation say that the doctrine of "extreme necessity" permits Muslims in non-Muslim countries to pay interest.
So what is being proposed with Islamic banking is actually a hardening of the religion, not an accommodation of its existing custom. It is rather as if Catholics, arriving in large numbers in a Muslim country, insisted that they must eat fish rather than meat on a Friday, a rule which has been dropped by the Church in modern times. And when you look at HSBC's Sharia Board you find that a couple of its members have links with the Deoband, the long-standing ultra-conservative group whose schools in Pakistan educated many of the Taliban.
http://www.telegraph.co.uk/opinion/main.jhtml?xml=/opinion/2004/08/21/do2101.xml
Find it hilarious that Bank is owned by a 'Jewish'
family. Are pious Muslims allowed to do 'Koranic'
business with the sons and daughters of Apes etc?
Reckon whole thing is a load of HOGWASH!
In small increments the Muslim system is taking over. Historical and contemporary patterns demonstrate how they do it.
Eventually Muslim oil-producing countries will demand that the U.S. and other countries deal with them only through Muslim banks that have been set up in the host countries... or suffer the consequences.
It is unlikely that Western banking interests have any idea what they are up against.
I hope that a good financial reporter will go undercover and take a in-depth, hard look at the Devon Bank and their Islamic financing. This whole process brings lots of questions to mind...Will non-Muslim patrons of Devon Bank make up the money lost in "Islamic loans" by shifting extra fees to non-Muslim customers? Is this a way "red-line" certain neighborhoods in the Devon area? Muslims will always and only sell to Muslims, making whole city blocks for Muslims only. How involved will relators be involved in this scheme? How will bankrupties be treated with Muslim customers who hold "Islamic loans?" Will they be treated as non-Muslims who don't or can't live up to their financial obligations or will the bank step in for extra help with these specialized loans? If these loans prove to be a better financial deal for customers, can non-Muslims apply for them too? The whole system smacks of non-Muslim discrimination to me. Oh yes, and how about the special deals that will be demanded by cash strapped Muslim customers (after polgamy is an approved form of marriage in the US...it's coming) when the men demand special real estate deals to accomodate their two or three families....
If people, and more imortantly corporate clients of these banks are concerned (and it seems they should be) they should :
1. Make the bank aware of their concern and unwillingness to finance muslim clients in any way
2. Threaten to take your business elsewhere (hey threats are something muslims will understand at least)
3. If you are still suspicious and unsatisfied, make good on the threat and open an account at a muslim UNfriendly bank.
A bank is looking for the same thing all other businesses are looking for....a profit (and not mohammad either) if the bottom line is muslim business or ALL other business it seems the decision would be a no brainer.
Who is their right mind would go for this?
If I understand correctly, all the interest, say, on a 30 year fixed load, is added on to the price of the home and purchased by the bank. Then, I presume, the bank provides a loan to the buyer in installments, lets say over 30 years, of the entire amount. Technically, the buyer pays no interest, since the buyer pays only on the principal of the loan, i.e. normal purchase price plus Islamic 'surcharges', which are equal to interest in the regular mortgage market.
Well, the monthly payment of the Islamic loan would be roughly equal to the principal and interest on a normal mortgage, but 1) there would be no homeowner mortgage deduction on interest because there is no interest and 2) the sales price of the loan would be enormously inflated and this would have to be recorded with the local county. How could it not if the extra cost is built into the cost of the home? In that case property taxes would also be enormously inflated.
I can see the next argument here: the interest deduction for homeowners and the property tax laws discriminate against Muslims who cannot practice their religion without state bias. Here it comes. I bet ya...
In the late fourteenth when Giovanni Bicci laid the foundations for the great banking family of the Medicis in Florence, the Church forbade the use of interest too. However, the then banking system maneuvered around the ethical problem by lebeling the fees by some other name.
It was baloney then and it's baloney now. Or is it hypocrisy?
Il Toscano
And there would be other apparent problems as well: because the original price of the home would be inflated above market values it is unlikely that Muslim buyer would see appreciation in the value of their home because they would have to sell into a market where almost everybody else, who is sane and not Muslim, would want to pay market value and get a regular mortgage. So, it is unlikely that Muslims would avail of the tax exclusion on on gains on a primary residence, which is one of the only ways normal American acquire any serious money.
Sounds like a religious discrimination case to me. Regulators better think long term; what will attorneys be arguing if there are tens of millions of people who demand these kinds of financial products?
I appreciate JFT's insightful remarks. Somehow, crying discrimination, the Muslims will make the system operate to their advantage. It will work out so that there are Muslim real estate enclaves in cities where these banking systems are set up to accomodate Muslims. This is, of course, another goal is American Muslims. They can have dar el-Islam in pockets of American cities, consolidate their financial and legal powers and move to expand their borders accordingly.
To revisit with more clarity: first, since the loan does not include interest how can there be any interest mortgage deduction for the homeowner? And, if there is no deduction, how can this be considered 'fair'. Regulators should say 'no'. Second, if there is no interest then the additional 'charges' must be included either in the sales price of the home (the price the bank sells the house for) or in 'surcharges' or 'fees'. In the latter case, one would be charging interest and just not be calling it interest. It looks like the bank must sell the property itself at an inflated price to the buyer to avoid the prohibition on interest. But, then, one will have the aforementioned issues with inflated property taxes and diminished benefits from tax exclusion on capital gains.
In any case this looks like a potential quagmire: future court costs, legislative headaches, regulatory headaches, potential claims of discrimination. More public money down the drain because of Islam, as if the billions and billions for the Department of Domestic Anti-Jihad (Homeland Security) were not enough.
Regulators should tell the Islamic Bank to charge interest, strictly follow the rules, or take a hike.
"Under Murabaha, or installment financing, Devon buys a property chosen by a customer, then turns around and sells it for a price that includes projected interest costs. There is no principal and thus, technically, no interest. Islamic financing is nearly half of Devon's mortgage portfolio."
What projected interest? Five years? Ten? The life of the loan? Realistically, it could only be for the life of the loan, and what happens to the balance of the "interest" if they sell? Does the bank give it back?
Great question. Call the attorney. Federal law needs to be written and special regulations adopted to keep banks from exploiting good Muslims in Murabaha financing.
Maybe the buyer gets 'rebates' in the event of prepayment. Imagine the 'rebate' schedule, federal disclosure laws, all the new definitions, all the necessary paperwork that requires initialing, of course.
What a crock.
Good way to rip off Muslims!
This just shows what a bunch of nonsense the Quran's ban on interest is. It's like Enron type planning around Islamic law.
The people who are probably getting ripped off here are the Muslims who use these expensive financing tools because Islamic law will not allow them to get a mortgage. For income tax purposes, they are probably viewed as not paying home mortgage interest and real estate taxes. In the event of bankruptcy, they wouldn't be allowed to keep equity in their so-called lease in the home. So they are paying more and getting less.
Both the Torah and Jesus disapprove of interest. Also from the viewpoint of economists, there are legitimate concerns about interest.
The problem isn't this. The problem is legitimization of the inhuman and fiendish Sunnah and Shari'ah as it happens now in Canada, the terror unleashed on dissident Muslims, ex-Muslims and critical non-Muslims by the fundamentalists, the financing of hate-mongering mosquest by Saudi-Arabia and the like.
And: indeed, this bank is not a philantropical institution. They will find a way to make this scheme yield more profit than the general interest-based scheme. Again: the problem is social terror and the shari'ah.
So how do interest free loans work? Exactly how does the bank make a living without interest? Merely buying the property and then selling it to the customer at a price that includes the interest does not mean they have rid themselves of interest. A rose by any other name. Another example of Muslim irrationality.
Basically the system works as follows:
* the bank buys the property
* every month the 'borrower' pays rent (for the part the bank owns) and gradually buys the bank out.
I think it is quite an elegant system, because the house owner is not evicted when he cannot pay the interest any more.
This system should be available for non-Muslims as well, as bankrupcies due to exorbitant loans are quite common.
Lending and borrowing is the source of overconsumption and enslavement.
For the rest of the shari'ah: I agree, fight this evil system to the death.
How a "Muslim loan" works, as I understand it, is this:
A Muslim chooses a house, with a purchase price of $100,000. On a 30-year loan, under normal interest & principal payments, a borrower would pay (just making up a number here) $180,000 over the 30-years, paynig $80,000 in interest (again, a wild guess number).
In a "Muslim loan", the bank buys the house for $100,000, then sells the house to the Muslim for $180,000, with monthly payments over 30 years.
In the end, the bank makes $80,000 either way. It's just a trick that lets Muslims get around the "no interest" thing. If I was Allah and was serious about interest being a sin, I wouldn't be amused. It's like getting married in Vegas, having sex, then getting divorced the next day so as not to be guilty of extra-martial sex.