Washington Post Article on Islamic Mortgage Lending in the USA
The Washington Post recently did an interesting piece on the growth of Islamic mortgage lending in the United States.
Some excerpts from the article:
The mortgage industry may be in meltdown, but at least one class of lender appears to be flourishing: Islamic finance companies that offer Muslim home buyers alternative arrangements such as lease-to-own deals so they can avoid making the sort of interest payments that many believe their religion forbids.
Officials at Guidance Residential, a Reston company that has financed more than 5,000 home purchases since it began in 2002, said the company is having its best year yet, with business up 7 percent in the first quarter of 2008 from the first quarter of 2007.
At University Islamic Financial, which began in Ann Arbor, Mich., and expanded its operations to Maryland, Virginia and five other states last year, officials said the number of home-financing applications quadrupled from last March to this March.
The article goes on to profile a number of Muslim individuals and families who have applied for or have utilized these Islamic lending products. Customers include both men and women, immigrants and USA-born Muslims.
Amr Mohamed, a representative of Guidance Residential, points out that if a customer is late on payments, Guidance charges him or her a flat administrative fee to cover processing costs but none of the percentage-based penalties and additional fees that conventional mortgage companies can pile on. This is an important selling point in these times of foreclosure fears and fall real estate valuations.
Lenders are also displaying a sudden surge of interest in Islamic products, perhaps because, as the article points out, Islamic products “got a major boost in 2001 when Freddie Mac agreed to begin buying them on the secondary market, ultimately including not just Guidance and University Islamic, but also Devon Bank in Chicago and American Finance House Lariba of Pasadena, Calif. Last year, Freddie Mac bought more than $250 million in Islamic home loans… according to spokesman Brad German.”
The article concludes with a comment that summarizes the attitude of many American Muslims:
Rizwan Jaka, 35, president of the All Dulles Area Muslim Society and one of the first to buy a home with Islamic financing in the Washington area, said the emergence of such arrangements constitutes an important milestone in the integration of Muslims in the American mainstream.
“It definitely marks a coming of age for us. . . . It’s part of the whole process of being a part of this country while being able to have our faith accommodated,” he said. “The American dream is to purchase a house, and the American Muslim dream is to be able to do so in an Islamic manner.”