Seattle Moves To Make Available “Sharia Mortgages” To Conform Mortgages To Islamic Law

262px-Flag_of_Seattle.svgIn a controversial move, Seattle is pushing to establish new financing packages that conform with Sharia law to allow greater homeownership among Muslims. Islam prohibits the payment of interest and some Muslims are therefore unable to buy homes under standard mortgage agreements. The most for more inclusive options has led to a backlash by critics who charge that it could be a new avenue for terrorist financing or constitute special treatment for one religion.

This is not the first time that this controversy has arisen. In 2008, Rep. Frank Wolf, R-Va., and then-Rep. Sue Myrick, R-N.C., sent AIG then-Chairman Edward Liddy a letter condemning the company’s move to offer Sharia-compliant insurance programs:

“You may defend your decision to offer Sharia products and will probably state that they have no real ties to Sharia law, and therefore pose no threat. You are wrong. Like Britain, the way to America’s legal code is through its wallet, and if Sharia law gains a strong footing in the United States, it will be through Sharia finance and Sharia products.”

There was even a lawsuit brought by The Thomas More Law Center against then-Treasury Secretary Henry Paulson and the Federal Reserve in 2008 over AIG’s actions. It was an extremely weak lawsuit that predictably failed.

I fail to see the serious threat of terrorist financing or operations due to the availability of Sharia-compliant mortgages. Indeed, I am surprised that the market did not already move to accommodate such demands from customers. Likewise, I would expect to see different types of packages offered as an accommodation for different religious values.

What I find fascinating is the rather artificial way of avoiding the Sharia prohibition that seems entirely acceptable by the Islamic community. All the banks do is take the interest and add that figure to the cost of the loan as “profit.” Thus the bank holds the property until payment of an agreed-upon price that includes “profit.” The sale price is made in installments with the monthly rate set . . . you guessed it . . . on the projected interest rates. Despite the transparent use of interest under another name, that seems to satisfy Sharia law.

As always, my inclination is to leave such matters to the market. So long as there is no discrimination or favoritism given on rates or “profits”, I fail to see the basis for governmental intervention to stop it.

What do you think?

111 thoughts on “Seattle Moves To Make Available “Sharia Mortgages” To Conform Mortgages To Islamic Law”

  1. Tony:

    “Karen S there are also methods like Credit Unions, Coops, etc, that provide financial services in a largely (but not necessarily fully) sharia-compatible way.”

    That’s interesting. How do CUs and Coops get around interest payments? Federal law requires TIL and amortization schedules to specifically list principal and interest payments, and the APR also spells out the cost of the loan.

    I assume that WA is somehow altering the requirements of loan docs, so they are no longer required to spell out “interest” but instead list it as “profit.”

    I am at a loss as to how a bank would be able to not list interest but still comply with federal regulations.

    I also assume that anyone could apply for one of these “Sharia compliant” loans. If they required a specific religion, then it is discriminatory. Also, and this is a sticky point, if a bank creates a financial product specifically for one religion, and not to others that also have limitations on how they may use credit, then that is discriminatory. If they make allowances for one, they should do so for all.

    Are the banks behind this push, or is this legislators telling banks what they must do to accommodate Muslims (vs other faiths)? If it is bank driven, then they have come up with a product that they think there is a demand for. Whenever legislators come up with a “great idea” for companies to sell, it’s typically a disaster.


    “In an effort to appease followers of Islamic Sharia law, Seattle Mayor Ed Murray is searching for ways to help them buy houses. According to Sharia law, muslims are forbidden to pay interest on loans, thus making it impossible for most of them to buy a house. Mayor Murray wants to meet with lenders to solve this “problem”, and possibly put the rest of the public on the hook for the debt.

    Earlier this month, Luxembourg issued a $254 million, five-year Islamic bond, known as sukuk. Meanwhile, Hong Kong last month completed its first sale of Islamic debt raising $1 billion. That came after Britain in June became the first Western nation to issue sukuk, an Arabic word that roughly translates as “certificates.”

    Sukuk act much like traditional bonds, delivering payments to investors until maturity.To comply with Sharia, the bonds have to be tied to some sort of physical asset. Instead of interest, investors are being rewarded with a share of the profit derived from the asset.

    Goldman Sachs and HSBC are among western financial service behemoths that have introduced sukuk in recent years. And in the U.S. for the last decade, a number of banks have been arranging for mortgages and auto loans for their Muslim clients that are permissible under Islamic law.

    The aforementioned USA Today story points out that many of the existing plans involve the public taking on the debt, and it should be no surprise that Goldman Sachs is in on the scheme.

  3. DBQ – as far as the HUD goes, it appears that they learned nothing from the “homeownership is a right” mortgage meltdown fiasco.

    Commuter communities will have less poor people living there, because who can afford the gas to go to work? So they would automatically fall under the “statistical racism” definition.

    This is one of the most stupid pieces of legislation I have ever seen. We have laws on the books to protect against racism. Going after areas with statistically low levels of minorities as racist, absent any proof that they actually are, is contrary to our justice system. Are we going to go after basketball teams now as racist because they have so few white players? Why stop at homeownership? Let’s go all in a la Fahrenheit 451, and create quotas for every classroom, employer, restaurant, neighborhood, everything. If 2% of the population is gay, then by golly, we should require that 2% of homeowners in every single neighborhood identify as gay. Otherwise, it clearly means discrimination, right? Someone should tell the Armenians in Glendale to disburse so that they can meet quotas for other neighborhoods. The same for Little Italy and China Town. No one should be allowed to live where they want anymore. The government knows better. Sure we have laws that prevent discrimination, but that’s not enough. Someone might feel like it’s discrimination when they look at the numbers, even if it is not. We have to think about their feelings more than actually justice.

  4. I. Annie

    Are you serious Rick? Ask DBQ, she spelled it out nicely.

    It’s your assertion so naturally I’m asking you.

  5. I. Annie

    LOL, Rick. Are you going to try to tell the folks here that it wasn’t conservatives who brought forth the case and conservatives that were not in favor of HB and Conestoga getting the religious exemption?

    To recap: when the left gets 98% of what it wants the resulting circumstance is the fault of conservatives. If granting an exemption to the religious is so offensive the solution was to allow it to everyone exactly as conservatives desired.

    I. Annie

    Again, it’s hilarious how some conservatives don’t like religious exemptions when the religion is Islam.

    What religious exemption are Muslims seeking? Do you just see a thread about Islam and assert that there must be hypocrisy?

  6. And Olly, perhaps you misunderstood me. I do NOT approve of such religious exemptions to the banking/ loan industry or any other business.

  7. Olly, think “religious exemption” to business and laws that regulate said businesses. I’m sure you can figure it out.

  8. Speaking of the great political divide, Democrats oppose “Kate’s Law” and Obama’s administration has threatened to veto it:

    “Kate’s Law” would strip sanctuary cities of federal funding if they refuse to follow federal immigration laws. San Francisco is one such city. It refused to comply with an ICE order to hand over a violent illegal alien felon which it had in custody. He was released onto the Liberal wonderland of SF where he shot and killed a young lady walking with her father. If he had been handed over to ICE, which had already deported him 5 times, this young woman would still be alive, and she would have had a lovely walk with her Dad. If we had a secure border, ICE would not have had to deport him 5 times already, and he would not have been able to keep breaking our laws and victimizing innocent people.

    But some Democrats like Pelosi, and Obama, have taken the stand that it is racist and unfair to deport a violent felon illegal alien. This law would force cities to comply with federal laws and hand over rapists, murderers, and other violent felons to ICE. You would think this law would not be controversial. Why would Pelosi want rapist illegal aliens to remain here against our federal law? Why would Democrats support cities blatantly breaking federal law? Why would Obama threaten to veto a bill that would force them to follow federal law?

    In a nutshell, it encapsulates the lawlessness of this regime, and how politicians are quite open in their belief that the law does not apply equally to everyone.

    1. Karen – although I am against the concept of sanctuary cities, I do realize they are all Democratic strongholds, and deserve what they get.

  9. Annie,
    How is the Hobby Lobby case similar to the issue of Sharia compliant mortgage lending? And, how exactly does a bank comply with federal and state lending laws by offering mortgage loans that discriminate based on religion?

  10. It’s just a reality that Muslim terrorism is a serious global threat. Terrorism has actually been pretty successful that way. Russia is also a threat to the region. So is North Korea. It’s not discriminatory to shudder if Putin visits your country, smiles, and says, “That’s a nice country you have there. Great resources. Not too strong a military, though.” So, yes, they monitor financial channels, and Sharia-“compliant” loans would also come under scrutiny if they were utilized by anyone with ties to terrorism. And, no, the loans are not really compliant with Sharia law by merely changing a word. The definition is the same. “Profit” = “interest”

    As for the Obamacare false hare, I am not against Muslims, Baptists, Catholics, or Amish having a choice of medical insurance policies that meet their faith. Just like the banks, the insurers come up with products that their customers want. I think that employers should get out of the insurance business. It should all be individuals buying their own policies. Employers can perhaps create a medical flexible spending account to pay the premiums, or create some new method of helping employees access medical benefits without actually buying the policies themselves. Then it’s none of the employer’s beeswax what policy their employees buy.

    Before, there was this broad range of policies available. You had a budget and a list of requirements, and you chose what you wanted. Now the government decided what you needed, and policies have cut formulary and provider networks, and jacked up premiums and deductibles. Sure, there are no more $10,000 catastrophic deductibles. But now all deductibles got astronomically raised to almost the level of catastrophic deductibles, while premiums were raised to almost as high as cadillac policies.

    I haven’t gone into what my latest problem is with Obamacare, because it is not resolved yet. But it’s pretty bad. Anyone who thinks Obamacare helps people is misinformed, and dangerous because they can do serious harm to their neighbors by inflicting Obamacare on them.

  11. Again, it’s hilarious how some conservatives don’t like religious exemptions when the religion is Islam.

  12. LOL, Rick. Are you going to try to tell the folks here that it wasn’t conservatives who brought forth the case and conservatives that were not in favor of HB and Conestoga getting the religious exemption? Such hypocrisy. In that vein of thinking, Was it also the Supreme Court alone that said it was unconstitutional to prohibit marriage to homosexuals, liberals had nothing to do with it, lol. Oh too much twisting of pretzels.

  13. Multiculturalism is a failure. When I go to someone else’s country I respect their laws and customs. I expect others to do the same in this country. When I go to other countries, I go there to see how other people live, not to change their way of life.

  14. Tony Sidaway

    There’s a lot of idiotic raving about disparate impact in this thread. It appears to be another name for indirect discrimination.

    No, it’s a description for the circumstance that sometimes cultural differences show up in statistics.

    Such legal principles are applied routinely in employment law and the like in many countries. They don’t have the crazy effects predicted here.

    They do. The “crazy effect” is that anything advocates don’t like can be ruled discrimination, a circumstance widely seen in many countries including ours.

  15. You ahead to be making some obscure objection to a perfectly serviceable class of financial instrument which, to the best of my knowledge, is in daily operation in practically every country in the world.

    And it is available in the United States. This issue is that for a Bank to make ONE type of loan based on religion and other for those who do not follow the religion is a disparate treatment.

    Shall we have Baptist loans? Special loans for Asians? Different rules for Whites? Can I get a Sharia Loan as a Catholic? I thought this type of unequal treatment was supposed to be forbidden.

    Not that I would want a Sharia loan, because as I indicated you are better off to take a normal loan and pay down the loan quicker. But whatever.

  16. Karen S there are also methods like Credit Unions, Coops, etc, that provide financial services in a largely (but not necessarily fully) sharia-compatible way.

  17. I. Annie

    The “can of worms” was opened with Hobby Lobby and Conestoga. Businesses that can circumvent laws by claiming a religious exception for themselves or their customers, well that’s what was you conservatives wanted,

    Back on the hobby horse I see, with blinders. Conservatives wanted everyone to be able to manage their own contractual relationships, while the left wants the government to define what is acceptable to everyone. The Supreme Court decided the religious exception, not conservatives.

  18. The scope for terrorist financing would be in the freeing up of capital while skirting around the interest prohibition.

    But the main problem with terrorist financing is unfortunately via twisting the call for charity, or zakat. Similar to the Catholic tithe, there is a strong duty of Muslims to donate to charity. Sadly, many charities in Muslim countries turn out to be terrorist fronts funding violence. I believe these terrorist fronts take advantage of Muslims who believe they are merely giving to widows and orphans.

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