Islamic Foreclosure: How Do Muslim Lenders Handle Mortgage Foreclosure

islamic foreclosure

The Islamic financial investments are radically different from the Western home buying investment companies, in terms of interest – Quranic prohibitions apply to interest and uncertainty render mortgages (riba and gharar) that are widely available in the United States of America. Having said that, before detailing how Islamic finance handles foreclosure, it is important to mention that the financial investments under the Sharia law avoid the use of interest: instead of receiving an interest as it would normally happen, the investor receives the rent directly from the property. Otherwise stated, the traditional interest is converted into leases on the property. In fact, if you had a traditional mortgage in 2008 backed by the FHA & Freddie Mac you may need to sell your home “as-is”, due to declining home values across the nation, or else foreclosure would be imminent for you and your family.

A Deeper Insight Into The Sharia-Compliant Mortgages And Foreclosure, As Handled By The Islamic Finance

Lenders are always struggling to create comfortable environments for all those who think about taking out a mortgage or any other type of credit, and accommodating both the needs and the religious beliefs of Muslim US citizens is paramount – this is why many lenders have come up with Sharia-compliant mortgages that allow Muslims to take out a mortgage while still complying with the Quranic finance-related principles. Some of the most notable US lenders who are currently offering Sharia-compliant mortgages include the Devon Bank, the Guidance Financial Group, or the LaRiba in California, all of these financial institutions being considered pioneers in the niche.

There are three main types of financing that are specifically designed for Muslims in the United States of America – the Murabaha financing, where the lender buys the property on the behalf of the homebuyer and allows the homeowner to make payments that are identical to fixed rate mortgages, the Ijarah-wal-iqtina financing which is similar to rent-to-own programs and ultimately, the Musharakah financing where both the homebuyer and the lender are co-owners of the same house.


When talking about the foreclosure of Sharia-compliant financial investments, most of them go smoothly and without the hassles, and the lender can easily foreclose on a mortgage, thus cancelling the lease as described above. Statistically speaking, there are more than 100,000 homeowners who face foreclosure on a monthly basis, in the United States alone and, in some instances, the Muslim homeowners tend to worry even more about the foreclosure. As mentioned above, the interest and uncertainty render mortgages are forbidden under Islam, which means that for most Muslims who live in the US, mortgage is not an option – be it a fixed or an adjustable-rate mortgage.

One of the most notable difference between conventional financing methods and financing under the Sharia law is that the Islamic home financing is considerably less likely to foreclose, given the lack of riba (interest). The Sharia home buying concept offers future homeowners the chance to opt for “ethical financing”, thus offering borrowers the peace of mind they so much need.

Another reason why the Islamic financial transactions are less likely to go through foreclosure is because the Islamic financing is still in its incipient stages, and the ratio to traditional financing is smaller. Generally speaking, when such a financial transaction is doomed to foreclosure, the two parties are usually able to work out a mutually beneficial deal – the lender often provides the homeowner with the necessary tools to sell the property, and this is precisely why very few cases actually reach the court.

The Islamic financing options are vetted by Sharia advisers, therefore borrowers can rest assured knowing that there are no hidden costs or predatory practices they should be worries about. Also, what truly makes the difference between the Islamic finance and the conventional finance as we all know it is the fact that the first one encourages lenders and other financial institutions to actually show forbearance (an agreement that takes place between the two parties to delay the foreclosure for loan borrowers who have a hard time making payments), and it also allows banks to count the losses that occur that way as part of their “zakat payment”, which is the Sharia version of the charitable tax.

To sum it all up, Islamic financing certainly seems to be a fast growing trend in the United States of America, and there are numerous types of structures that are designed to be Sharia-compliant, thus allowing homeowners to take out a mortgage quickly and without the hassles. These transactions are specifically created to be at least as secure as the conventional ones, both for the lender and for the borrower.

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Home Ownership the Islamic Way: Sharia-Compliant Mortgages in the U.S.

As adjustable rate mortgage rates increase, the homeowners who have these mortgages are currently wondering how they will make payments on their home; especially considering the fact that there are more than 130,000 foreclosures in the US at the present time. These rates do cause many sleepless nights, but with this said, these owners do not consider their mortgage payments to be a sin. For many in the Muslim faith, both ARM or fixed rate mortgages would fall into this category and would be considered unacceptable. So not only do believers in the Muslim faith need to be concerned with their mortgage payment, they also need to consider the role that their faith plays in the purchase of their primary residence.  Most expert house buyers across the U.S. would agree that religion should not limit and/or hinder a person’s home ownership options.

By many Muslims in the US, the religion views riba (interest) and gharar (uncertainty) forbidden in the Islam law. Many commercial lending institutions are responding to these growing Muslims creating Sharia compliant mortgages. These will satisfy the Quranic prohibitions which focus on uncertainty and interest rates. LaRiba in CA, and other pioneer lending institutions like Guidance Financial Group in Virginia offer Sharia compliant mortgages in the US. In Chicago Devon Bank offers these mortgages, as does University Bank in Ann Arbor MI.

Various financing mechanisms are used to create these Sharia compliant mortgages for those in the Muslim faith. Murabaha financing allows a lender to buy on behalf of the buyer and sells it to this buyer in addition to a pre-defined profit margin. The defined margin gets rid of the uncertainty involved in mortgages, and the fixed payments gets rid of the interest rates which is illegal with the traditional mortgage. Murabaha allows the buyer to make fixed payments under a fixed rate mortgage.

Another option is the Ijarah-wal-iqtina financing method, similar to rent to own contracts. With these the lender will buy on the home buyer’s behalf who will then buy the property at cost. This will be simultaneously paid with monthly rental payments. Upon full payments of the fixed term the buyer will then be the sole owner of the property which they are financing through this method. Devon Bank in Chicago views this method as being similar to an adjustable rate mortgage which is given to the traditional buyer.

Most Realtors explain to their Muslim clients that they can help you get more money for your house, and quicker, by opening up the pool of potential buyers, by showing potential Muslim buyers, alternative financing options that they may not have known about before.

With Musharaka financing is a rent to own situation but here the lender and buyer are going to become co-owners at the end of all payment terms.  A part of the principle and rent is paid by the buyer and the lender’s share will diminish with each payment being made by the buyer.   A profit and loss system is also built in to this rent to own option, and sanctioning must be secured by Muslim scholars (generally the Sharia supervisory board of America). Other prominent scholars like Sheikh Yusuf Qaradawi can also be used to secure the financing for these mortgages.

With these “Islamic mortgages,” this helps to eliminate the gap between US home owners and Muslim home owners, as over the years has been far fewer than US owners due to the regulations in Muslim law. In states like MI, where there is nearly a 10% population of Muslims, there is still a huge gap, or about 7%, less home owners being part of the Muslim population due to the laws which are in place against traditional mortgages.

Devon Bank and LaRiba’s ability to partner up with enterprises like Freddie Mac which are government sponsored, expands the liquidity of the institutions in question. This allows more mortgages to be offered and more opportunities for Muslims to buy homes. These new options available to Muslims offers a guilt free way of becoming home owners. It allows them to forego putting away hundreds of thousands of dollars prior to being able to buy, and it allows those who were previously purchasing homes and feeling guilty, to avoid this situation with the new mortgage options which are presented to them through a number of lenders in the US.

With this new found sense of peace, and new mortgage options available to Muslims, this is a guarantee that there will be a continually growing market for these mortgage options for Muslim Americans living in the US, who would like to become home owners, rather than continue to rent a property they live in. So, even while the US home owners suffer sleepless nights, the Muslim Americans can now purchase a home, and feel guilt free in doing so.

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Apostates Still Facing Persecution from Muslim Housing Community

Apostasy is commonly defined as the abandonment of Islam by a Muslim willingly either by the word of the mouth or through their actions. An apostate is a person who has abandoned the Islamic religion to join another religion or stay religion-less, questioned the fundamental principles of the Islamic religion, worshiped more than one idols or who have mocked Allah.


The crime of apostasy is one controversial issue, though Islamic scholars may suggest different forms of punishment, the most evident and widespread is the death penalty. The apostate however is given some time to convert back to Islam after if he or she does not is punished by a death penalty usually by be-heading.

In most countries across the United States, where Islam is a major religion, those who convert from other religions to Islam can publicly and happily announce their new religion; however, those who convert from Muslim to other religion live in constant fear.  This has caused many former Muslims who are new home owners in the United States in many cases to need to sell their properties in a rush and move to a safer location where apostates are in more abundance…in order to escape possible death and imminent persecution.

Recently in Somalia, four apostates were beheaded by the radical Al-Shabab citing “Fitna”. Fitna is the act of creating religious discords and those who do these should be killed according to the Koran. The radical Sunni Islamist intends to make the Islamic religion the dominant religion in the world by killing all minorities in the states where Islam is the dominant religion. Their methods of beheading people and burning people alive are very brutal and they violate the basic human rights of freedom.

christina-apostate-2 In the UK, Christians who convert to Islam are celebrated on the other hand; those who denounce Islam are greeted with violence abuse and in extreme cases murder. One out of three young Islamist believes that apostates should be killed. In 2008, it was reported in the London evening that a daughter of a UK imam was living under police protection after receiving dead threats from her father. The situation of apostasy is that serious, what could you say of a father who is hunting down her daughter to kill her because she has denounced Islam?

Back in 2011, two apostates when had just converted from Islam to Christianity were sent back to Afghanistan amid their profuse fears that their family would execute them if the Taliban did not. It is clearly evident that these Apostasy killings are still widespread across the world even in the modern day. The discrimination mindset of apostates is very rampant and yet, very little is said or done and therefore we continue losing innocent lives to the so called apostasy.

Muslims who convert to Christianity, believe that Jesus is the Son of God and that only faith through Him and Him alone, can give a person everlasting and eternal life.  Christianity is the faith of Love & true Peace.

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