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. This is absolutely wrong as they came here for a better life that thy could not get in their own country!!
    THE REASON IT IS SO AS WE THINGS IN A MANNER THAT BENEFITS EVERYONE1 The fact that their faith prohibits them from obeying our rules and laws is wrong permission to move here they swore an oath to obey the laws when granted permission to become US CITIZENS.
    Now , if I wished to move to one of their countries, not being believer I would be refused admission and if I went any way and refusd to convert I would be denied citizenship and be thrown in jail for as long as they wish to keep me there!!!! And if a radical group got a hold of me I would be beheaded…so you are telling me that Our Country will have to change and live like the countries they fled from???????


  2. So, in a Muslim-safe mortgage, the bank agrees to buy the home outright and hold title to it. The bank adds to the total price of the home an amount of profit, which is equal to the interest they would charge in a normal mortgage, then divides the total price by the number of payments to arrive at a payment amount. The Muslim buyer and mortgagee makes the same number of payments and pays the same total price for the house as the buyer who uses a traditional mortgage would get. What’s wrong with that?

    It may seem equal and fair, but it might be really stupid for some buyers to accept a Muslim-safe type of mortgage. Why? Interest paid on a home mortgage potentially can be a deductible expense for income tax purposes. A No-Interest mortgage would provide no interest deduction from income, resulting in higher taxes to pay. Is paying higher taxes because of a religious belief really worth it? Would it even be legal to allow a deduction for some and not for others based upon their religious choices? They would be free to choose a Muslim-safe mortgage or elect to go with a traditional mortgage, the same as other choices that may have an effect on taxes. As long as having a particular religion wasn’t a requirement for getting a loan, it might be a perfectly legal, though not a wise, financial choice.

    Removing that deduction for mortgage interest from the tax laws would be the only way to level-out that inequity, and there probably are too many home-owning tax payers with traditional mortgages who would protest loudly for that to ever happen.

  3. Nick – so true. I learn so much from DBQ’s posts. I’m so glad she contributes here.

  4. I wonder how widespread the Old Country following of the Sharia Law ban on paying interest is among American Muslims. I have known a LOT of Muslims, and I have never yet met a single one who wouldn’t buy a house or finance a car. But all the Muslims I’ve hung out with were Westernized and moderate.

    This kind of reminds me of all the ways that the Amish quite successfully navigate the modern world while using loopholes. They are prohibited from driving, so they hire “English” drivers. They do not put a phone in their homes, but in some areas they install a phone booth outside their home with a party line style service.

    Since my family is involved with draft horses, we know some Amish families. One of my friends drove them somewhere and played a practical joke on his Amish friends. He dropped the men off with their families, but as they opened the van door, he opened a bag of empty beer cans he’d been hiding underneath the seat. As the Amish men jumped out, all those empty beer cans came rolling out . . . coming to rest at the feet of some pretty disapproving looking women.

  5. You can’t sue for a religious exemption to force a bank to lend you money for free, or force a company to create a product for you. You can call it interest or profit or anything you want, but the lender makes its living off of lending money.

    Companies will come up with products customers want. That’s why some fast food restaurants offer halal choices in Dearborn. That’s supply and demand. Government meddling forces companies to sell products outside of supply and demand.

    Is the state of WA allowing banks to sell a product they want to try or requiring banks to do so?

  6. DBQ makes SO MUCH sense and is the star of this thread. It’s good to have knowledgeable women like DBQ, Karen, bam, and others here who aren’t just vapid trolls squawking lame talking points over and over and over again. I am heartened to see most have marginalized the middle school intellect troll by simply ignoring the boilerplate Huffington Post drivel.

  7. Muslims flock to Quicken Loans. The words go by so quick that they do not hear the word “interest”.


    In the case of Mr. Khan, his loan wound up being covered by a bond which then was held against the future profits of the slaughterhouse. In that way, the investors fronting the money got their margin on the back end by collecting a percentage of Khan’s profits.

    “But going back to Seattle for a moment, how are they going to structure a home loan in that fashion? Homes don’t generate direct cash like a business does. Would a bond be issued which allowed the investors to own a piece of the home’s value when it’s sold? The article doesn’t say. But even if that’s how they structured the plan, the housing market is pretty sketchy in the best of times these days. There’s little assurance that real estate (particularly in Seattle) is going to increase in value. And even if it does, people often live in homes for a very long time, if not their whole life. When do the bond holders get their money back?”

  9. So quite a bit of “ink” over the Sharia aspect of this, is the restriction specifically in Sharia law, or Islam in general? If the latter, then the whole issue seems deliberately inflammatory.

    But I digress…. If a bank decides to come up with a new financial product or service that meets the needs of a segment of the market, what’s the problem? It’s only if that same product/service is restricted to Muslims that there’s a problem. There are literally thousands of products that are tailored to individual segments of the market, some larger than others. There are lots of women who “cross-dress” in mens clothing and quite a few men who like to wear women’s clothing. Stores are selling the goods in either direction.

    1. wonderer – if a bank thinks there is profit in a profit they will put it in place.

  10. Seattle is a place that needs to think seceding from the United States. We could build a wall around it. “Mister Gorbachov! Build up that Wall !.”

  11. Olly
    And then, when they refuse to do business with “infidels” we can be assured lawsuits will be coming.

    There are already Muslim owned businesses who offer Sharia loans. When do you suppose gay married activists will start applying for their loans in the hopes a denial can be leveraged into their martyrdom moment?

  12. “To demonstrate hypocrisy you’d have to show conservatives support the government forcing a business to change it’s product because Christians prefer it be different.”

    Given the fact Christians can be found all along the political spectrum, it would be more accurate to replace “conservatives” with “progressives” to reflect the constituency inclined to use the force of government.

  13. Rick,
    Yes, accommodation would be the more accurate word, on that we can agree.

  14. I. Annie

    And to explain the religious exemption aspect, when these banks don’t offer a Sharia based loan,not its Muslim customers, the door is open for Muslim customers to sue for a religious exemption to current banking laws.

    What would suing prove about conservatives supposed hypocrisy?

    What you describe is not a religious exemption, but a mandated religious accommodation. Sharia loans don’t inherently violate banking laws so an exemption isn’t even in question.

    To demonstrate hypocrisy you’d have to show conservatives support the government forcing a business to change it’s product because Christians prefer it be different.

  15. Annie,
    Did Hobby Lobby refuse to sell products and services to people based on their religious beliefs? NO. Banks aren’t turning away clients based on religious beliefs, they simply don’t offer a product or service that the customer wants to purchase that meets their needs. If there is a market for Sharia products and services then I have no doubt the free market will find a way to profit from it. If it turns out to be better than traditional lending options then I expect demand will not be limited to Muslims. And then, when they refuse to do business with “infidels” we can be assured lawsuits will be coming.

  16. This thread has filled with rather more right wing paranoia and contrarianism than I’m used to. I don’t know, because I rarely hang out in the comment threads, whether this is something to do with the topic or simply par for the course on what is probably a slightly centre-left blog by US standards.

    The bottom line: you can easily check and see that a full range of sharia-compatible financial services are available in every or nearly every OECD country, and that they operate with a minimum of controversy. They do not constitute a religious accommodation, nor are Muslims obliged to use those services to the exclusion of others. They are simply a class of financial services that Muslims often find more consistent with Islamic principles. Presumably they could be provided by secular community banks with a mix of private and public funding, or by private banks.

    The raving about terrorism really doesn’t deserve a response.

  17. *And to explain the religious exemption aspect, when these banks don’t offer a Sharia based loan, to its Muslim customers…*

    Keep religious beliefs and business separate. Keep government and religious belief separate.

  18. And to explain the religious exemption aspect, when these banks don’t offer a Sharia based loan,not its Muslim customers, the door is open for Muslim customers to sue for a religious exemption to current banking laws. They conceivably will seek a way forward in which ALL banks must offer such loans, based on religious belief. This is the can of worms. Be careful of what you wish for.

  19. You know what teaches banks to handle money wisely? Not bailing them out and not requiring them to make risky loans. Make a bad loan, lose money. That’s what leads to banks requiring A paper. Once they start lowering requirements, such as sub prime loans, then foreclosures go skyrocketing up. Mortgage investment instruments plummet. The economy suffers.

    If all mortgages went away, homes would not cost as much if people had to save up to buy them. Then the property would be passed on to heirs. Everyone else would rent. But the cost of homeownership would come way down, theoretically. The same has been said to be true of health insurance. If we’d never come up with health insurance, hospital stays would not cost hundreds of thousands of dollars. Of course, a lot of money has also been funneled into research which would not otherwise.

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