Posted on 08/05/2005 11:39:24 AM PDT by Andy from Beaverton
McLean, VA - Freddie Mac announced today a new initiative designed to help Muslims living in Michigan become homeowners while observing traditional Islamic restrictions on paying interest on mortgages and other types of debt. Developed with Standard Federal Bank and Detroit-based United Mortgage of America, the new initiative enables prospective homeowners to enter into long-term lease-purchase arrangements that permit them to later sell the house and profit from any home price appreciation.
Freddie Mac has agreed to invest an estimated $10 million in the purchase of these new lease-purchase mortgages as part of its Summer of Homeownership campaign. Freddie Mac’s “Summer of Homeownership” is a concentrated effort to pioneer new products, initiatives, and technology that will help expand homeownership opportunities to an additional 250,000 to 400,000 prospective homeowners a year.
“Today’s announcement again demonstrates Freddie Mac’s commitment to help America’s newest communities realize the traditional benefits of the American dream of homeownership,” said Saber Salam, vice president of customer strategies and offerings at Freddie Mac. “By working together with United Mortgage and Standard Federal, Freddie Mac is realizing its promise to foster homeownership opportunities in new and exciting ways.”
Under the initiative, prospective homeowners will work with United Mortgage, which will create a limited liability company (LLC) to purchase homes on behalf of the family. The LLC will purchase the property through a conventional 30-year fixed rate mortgage from Standard Federal Bank. Freddie Mac has agreed to purchase the mortgage.
The prospective homeowner is required to put down 20 percent of the home purchase price and enter into a 10-year lease with an option to buy with the LLC. The prospective homeowner’s monthly rental payments will cover the LLC’s mortgage, tax and insurance payments on the property.
The homeowner may buy the home during the lease term. At the end of the 10-year lease term, the homeowner may extend the lease and purchase option for an additional seven years. The lease allows the prospective homeowner to benefit from price appreciation at any time by exercising the purchase option and then selling the property to a new homebuyer.
“Working with Freddie Mac will enable Standard Federal Bank to serve the growing demand for home financing among Michigan’s observant Muslims,” said Mary M. Fowlie, Group Senior Vice President, Standard Federal Bank. “Today’s announcement underscores our commitment to provide our customers with the opportunity to become homeowners.”
According to Scott Elia of United Mortgage, members of the Michigan Muslim community have been asking for the opportunity to finance homeownership while maintaining their religious convictions. “We have been carefully developing a residential lease and purchase option program and have consulted with the respected scholar, Dr. Muhammad Imran Usmani, our Shariah Advisor, as well as outside legal counsel to develop the model documents and specifications for this program, and to ensure that it satisfies both Islamic principals and secular laws,” added Elia.
Freddie Mac’s agreement to invest in the mortgages underscores its commitment to expand homeownership opportunities for all of America’s households, including the nation’s estimated 2.5 million Muslim households. In March 2001, Freddie Mac became the first major U.S. mortgage investor to back Islamic homeownership when it agreed to buy housing contracts from the Pasadena, Calif.-based American Finance House -- LARIBA. Freddie Mac is also working with other lenders to meet the need for Islamic home financing in America.
Persons interested in learning more about this program are invited to attend an informational meeting on Saturday, August 11, 2001, at the Novi Hilton Hotel between 11a.m. and 2 p.m. The Novi Hilton Hotel is located at 21111 Haggerty Road, Novi, Michigan, north of Eight Mile Road, and west of I-275.
Standard Federal Bank is headquartered in Troy, Michigan and operates 180 Banking Centers, 13 Home Lending Centers and 950 ATMs throughout Michigan, Indiana and Ohio. As of December 31, 2000, the Bank had assets of $20.5 billion and deposits of $12.3 billion. Standard Federal is a wholly owned subsidiary of ABN AMRO North America, Inc.
United Mortgage of America is an assumed name of E & S Financial Group, Inc., a licensed mortgage broker and lender owned by Edward and Scott Elia. United Mortgage is a HUD approved mortgagee located in Farmington Hills, Michigan, offering mortgage loans in Michigan since 1997.
Freddie Mac is a stockholder-owned corporation established by Congress in 1970 to support homeownership and rental housing. Freddie Mac purchases single-family and multifamily residential mortgages and mortgage-related securities, which it finances primarily by issuing mortgage pass through securities and debt instruments in the capital markets. Over the years, Freddie Mac has opened doors for one in six homebuyers and more than two million renters in America.
No one would invest in a bad deal on purpose.
The owners of Freddie Mac are investors.
These types of loans probably make more money for the investors.
So if I go get some Muslim garb, and go apply with Freddy Mac, I'll get a no interest loan?! Where do I sign up? How do they verify that I'm not a Christian? Can we sue them for religious discrimination?!
Again, we're talking about the government.....the same geniuses who gave you Social Security and federal flood insurance. Think about it for a moment.
I've represented lenders who have given these "no-interest" mortgages to Muslims investment groups. Lenders love these transactions because once you run the numbers you realize that the bank makes more money off of this than they do off of a regular mortgage.
This IS a government bunch we're talking about here
Not really. Freddie Mac is run like a regular business, more or less. It is not a government agency. It's interested in turning a profit, and these Sharia-compliant deals are big money-makers.
you are correct.
The system is sure to be gamed, however.
I know about how these loans work.
The lender profits, trust me.
Basically. There are imams in the Gulf States that make a good living off of "blessing" these types of deals. For a fee, of course.
Why don't they just waive the credit and residency check, and give away everything to these "religious of peace".
These loans are open to anyone stupid enough to take them.
I don't care. We have a government/business alliance practicing special targeted treatment of a religious group. This is no different that all of the other social engineering conducted in the form of targeted taxes, targeted tax cuts & targeted laws.
Where is the ACLU and their usual church/state whining??
And this is the type of civilization the Islamists are trying to foist on the rest of the world - a world where there is no profit, no technology (not in the Koran, ya know) better than a camel's back, and no individual liberty.
By participating, isn't Freddie Mac approving of such a world? Isn't this directly contrary to what we're trying to do in Iraq? Develop a pluralistic society where none existed before?
I wonder sometimes what these people are using for a brain. It certainly isn't something capable of logic.
This is just a different type of lending instrument.
It has nothing to do with social engineering.
I am certain that this type of borrowing option is available to you.
And, Freddie Mac is NOT a Government agency, it's a private corporation.
Yup, Islamic Banking 101 ... needing to find Allah approved ways around the concept of the riba - which encompasses both usury and interest, makes for some interesting financial products :). The basic idea of Islamic banking is to spread cost / profit / loss around in a shared manner.
Although definitely not a very efficient instrument from classical capitalist POV :)
Anyone can take these loans, if they want. Most people have no interest in doing so as there are several disadvantages to structuring a mortgage this way (you don't get interest deductions on your taxes and the actual interest rate is higher than on a regular mortgage)
Where is the ACLU and their usual church/state whining??
This has nothing to do with the 1st Amendment nor the separation of church and state.
Correction: If Muslims decided that Allah or Mohammad didn't want them paying taxes, the ACLU would be all over the IRS.
"The act of engaging in criminal activity as a structured group is referred to in the U.S. as racketeering." = Wikipedia. Engaging in favoritistic kick backs of benefits based on membership in a class (in this case, Islam) is a crime. Replace "Islam" with "The Mafia" and you'll see what I am getting at. And of coure, Fannie Mae is in no way immune to prosecution if they are determined to be doing this, which appears to be the case.
"... the Muslim enters into a "lease with option to buy". You can be sure the intermediary is making a few bucks on each deal."
Yup. You'd have to be crazy to enter into a Rent-to-Own contract. Sort of like buying one of those tv's or Washer/Dryer units for people who can't get a credit card.
Someone who can't qualify for a mortgage or get a loan...can they get this, I wonder?
The US Government usually creates things that fall into The Law Of Unintended Consequences.
I believe it to be illegal.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.