Bank owned foreclosed homes
Bank-owned foreclosure

This is a recent ruling by AMJA on the issue of buying foreclosed homes directly from the bank. As we know, the economic crisis has caused millions of people to lose their homes to foreclosure. These homes revert to ownership by the bank that held the loan, and are then typically offered for sale at a discount, or auctioned. These homes can represent great buying opportunities because the prices can be quite low. But is it halal?

Frankly I did not quite understanding ruling number two below. We know that dealing in ribaa is haram; buy if a buyer is paying the entire price in cash, then what does it matter who he is buying from? I’ll see if I can get someone to explain the ruling Insha’Allah.

Here is the ruling:

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The Permanent Fatwa Committee of AMJA, the Assembly of Muslim Jurists of America, has conducted an in-depth study of the subject of buying homes directly from a bank (foreclosed houses) as it occurs in the United States of America.

Several members of the committee submitted working papers for discussion and mutual exchange of viewpoints, with deliberations continuing over the course of a number of sessions.

The Permanent Fatwa

Committee also consulted AMJA’s Higher Advisory Board due to the contemporary nature of this transaction and the frequency with which Muslims have been asking about it, especially after the recession currently dominating the real estate market in the United States as well as the general fact that Muslims are increasingly expressing interest in permissible home-buying methods.

As a result, members of the committee reached a total of three differing conclusions/positions concerning the said transaction, the differences being essentially the result of differing ways of viewing the loan-contract, the bank provides to the client in order to conclude the foreclosure sale, and the extent of its validity: whether this contract is real (i.e., Islamically valid and thus capable of having Islamic Law applied to it) including the ahkam (rules) related to it being riba-based (interest-based); or whether it is an illusory contract in which actual it is considered unreal, null (or nonexistent) from an Islamic legal perspective, thus incapable of having Islamic ahkamapplied to it-even though it is considered completely legal and binding from a civil legal perspective.

POSITION ONE:

Transaction Prohibited.

Those committee members who concluded that the transaction is prohibited did so by upholding the basic principle that the said contract includes an unequivocal statement of an interest-bearing loan as a condition of the sale.

These member are:

1)   Dr. Muhammad Naeem Saei

2)   Dr. Muhammad Muwaffak Al Ghaylany

3)   Dr. Hatem Mohammad Al-Haj Aly

POSITION TWO:

Transaction Conditionally Permitted.

The committee who took the position that the transaction is permitted presumed the main objective of the said transaction was to sell the house, not to loan money. As a result, they placed a number of restrictions on it.They stipulate that:

1. Before signing the contract, the bank must be the legal owner of the house, and as such, the bank must bear full liability for the house; and, that as a result of the re-sale (of the foreclosed house) a new interestbased-loan contract must have been drawn up in conjunction with the contract of this sale, provided that the lender (the bank) must also be the seller and no third party, financially independent of the bank, may be involved in financing the sale, and that the loan t be restricted to the purchase of the foreclosed house in question such that the buyer: does not possess freedom of disposal with

regard to the loan, does not take the loan [money] into his possession, and does not bear liability for it.

If these conditions are met, then the transaction would be considered Islamically allowed.

These members are:

1)   Dr.Walid Al-Maneesi

2)   Dr. Main Khalid Al-Qudah

POSITION THREE:

Undecided Stand

There was also a third group of members who did not elect either of the two aforementioned positions, preferring not to take a stand on this current issue, pending further study and contemplation.

These members are:

1)   Dr. Salah Al-Sawy

2)   Dr.Walid Basyouni

Because of this clear difference of opinion on the matter, the Permanent Fatwa Committee would like to advise Muslims to search for other alternatives (of buying homes) in order to avoid an area of scholarly dispute (alkhurooj minal khilaf) and to be on the safe side religiously (ihtiyaat). It is certainly recommended to avoid matters

of dispute among the scholars, for “whomsoever avoids doubtful matters does protect his religious duties and his honor.”

At the same time, those who find themselves in dire need may follow the scholars who permit it; and Allah Almighty is the Most Exalted and He knows best.

The Permanent Fatwa Committee of AMJA, the Assembly of Muslim Jurists of America,

California, the United States