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.
Here's another storie from Freddie Mac on the same program. DEVON BANK, FREDDIE MAC ANNOUNCE EXPANDED FINANCING OPPORTUNITIES FOR MUSLIM HOMEBUYERS
WWWWWWWhhhhhaaaatttttt!!!!! Discrimination with our taxpayer dollars. Sh*t!
The U.S. Dep't of Defense should provide a program that provides interest-free loans of weaponry to jihadists living in this country. We can never be too sensitive to the needs and wants of those who follow a death cult based on a man who molested little girls. /sarcasm
This is available to everyone right?
I assume then, that there will no tax deducton for interest, because it's not charged?
Or is this just another example of discrimination?
The single most racistt entity in our society is the fedral government.
I just changed my name to Ashmil! time to refi
What gimmick is this? Islam forbids taking interest on money LENT by Muslims, not paying interest on money BORROWED from others, as far as I know.
Nice, evil way for Muslims to be preferentially treated over others who have to pay interest to keep the banks working. Don't worry, the money lost to the Muslims will be pinched from the pockets of the "infidels".
I'm sure that it's not really a no-interest loan, but a bookkeeping trick that pushes all the costs up front and preserves the fiction of zero-interest without incurring losses to the lender. That's why they set up an LLC.
This is racketeering.
Misleading headline.
"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 zealots still pay the interest. It's just disguised.
FM is merely late getting into this game. Commercial
banks have been issuing these symbolically non-loans
for some time. And they aren't in the charity business.
These home buyers probably pay MORE than a non-Muslim
would, and they presumably forego the tax benefits.
I don't see any real problem.
Read it again. An independent corporation buys the house on behalf of the Muslims using a 30-year fixed-rate mortgage, and then leases it to them for 10 years. Their lease payments cover the cost of the interest on the mortgage, but they can tell themselves it's a rent-to-own situation.
Good God, there's no free lunch here. It's all spelled out in the article. Why do people believe that it would be any different? If Muslims decided their religion didn't let them pay taxes, the IRS would be on them like white on rice.
Um, how is this racketeering?
Exactly. They aren't going to be losing money over this.
I'm sure they'll let you in on it too. If you want to pay more for your home so that you can pretend not to pay interest, feel free.
While I don't approve of the goverment involving itself in schemes tailored to meet the needs of a particular religious group, this financing arrangement is definitely not cheaper than the regular interest-bearing loans the rest of us buy houses with. In fact it's almost certainly a bit more expensive, due the extra transactions built in. It avoids the Muslim prohibition on paying "interest", but this is only semantic. The interest is getting paid, but by an intermediary, from whom the Muslim enters into a "lease with option to buy". You can be sure the intermediary is making a few bucks on each deal.
If this arrangement saved a penny, everybody would be taking advantage of it, since it is most certainly not actually restricted to Muslims. Anybody can do it; it's just that the rest of us don't want to.
CALLING MARK LEVIN! We need you and Landmark to raise some noise about this!
Hey, what about financing a cave in Tora Bora?
Can they eat pork of they set up an LLC which relabels the pork as "beef"?
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