Let's stir up some more controversy

“COMING TO THE EAST SIDE: Muslims can buy home, avoid forbidden interest

December 20, 2002







BY JUDY ROSE
FREE PRESS COLUMNIST




Muslims who strictly observe their religion can miss out on the American dream of owning a home because Islam forbids paying interest.

Unless a family can pay cash for a house, its members can never have the chance to build net worth through home equity.

"In most instances, these folks have terrific credit, but they're renters all their lives because of religious restrictions," says Colette Porter at giant secondary lender Fannie Mae.

One Islamic financial leader says the United States has 50,000 households whose members "refuse utterly to participate in charging or paying interest."

"I call those the Puritans," says Yahia Abdul-Rahman.

Now Fannie Mae will offer its spotlight and $10 million to a company called American Finance House LARIBA, which helps Muslims a buy a home without paying interest.

Since 1987, LARIBA has been in the business of helping Muslims buy cars and houses and start small businesses without entering a conventional loan. Fannie Mae's financial power will be a big boost, says Abdul-Rahman, the company's founder.

"It gives us much energy to propel it much bigger, much faster."

The way this works is that the home buyer and LARIBA buy the home jointly. Like any conventional home buyer, the buyer secures his or her portion with a down payment. LARIBA owns the other part of the house and leases that part to the buyer.

From then on, the agreement is like a rent-to-own contract. Each month, the buyer pays rent for the portion of the house he doesn't yet own. Each month a little of that rent is applied to buying more of the house.

As time passes, the home buyer owns a larger and larger portion of the house. So the rent part of his monthly payment goes down, while the amount applied to buying the house goes up -- just as in a conventional mortgage.

For more information on this program, call 888-527-4221, 11 a.m.-8 p.m. weekdays or visit www.lariba.com.”

“Can someone explain to me how rent-to-own is so much different from paying interest? I'm not clear on that.”

“WTF is THIS? why can't we ALL pay our fair share? You live here, you pay the #&%!$ing interest/taxes/what ever. You want protection from our laws and constituion, become a #&%!$ing citizen. Isn't there something about a cake and eating it too?”

“I knew this would get some people going.....”

“laqtis - This is not a grant or some other give-away. Who says the Muslims in question aren't 3rd generation American citizens.”

“Personally, I'd like to get on that plan.”

“Newgirl, please don't convert.. ;-)”

“They probably pay just as much (maybe more) as they would on a regular mortgage, but because it's "rent", not "interest", it fits into their religious rules.

Sometimes it's just a matter of semantics...”

“Funny you should say that, newgirl. That program is part of a two trillion dollar push by FNMA to reach those groups whose home-ownership rates lag the general population.”

“From the press release:

"The amount of the monthly payments by homeowners under the LARIBA home financing model is made to be very comparable to a conventional, market-rate, fully amortizing mortgage."”

“If there is a long term payment arrangement with set pmnt amounts, there is an imputed interest amount. If it looks like a duck, and it quacks like a duck... its a duck.

Somebody should turn over the tables of these money lenders.”

“Limpy sure knows his ducks!”

“What about the Amish!?”

“Violin - to base who pays interest and who doesn't based upon certain beliefs is real stupid, period. Everyone should have to pay there fair share. It's a real slap in the face to me when these "programs" are set up to appease people. I work very hard for what I earn, pay taxes, house payment, car payment, etc. and it makes no sence to me that a person who believes in something that prevents them from paying there fair share doesn't have to. Looks like everyone can be on the payroll, and I'll foot the bill. I can understand a little assistance for those that need to get back on there feet, but this is just wrong.”

“You’re not being cheated on this one laqtis. Interest is paid to a lender – it’s not the same as taxes. Nobody needs to pay his or her fair share of interest. In effect, this program is set up so they pay rent to LARIBA who then pays the interest. Like bit said, its a matter of semantics.

Programs that encourage home ownership are the most effective tools to stabilize neighborhoods and whole societies. Fannie Mae was set up to promote home ownership. It has been a phenomenal success. It doesn’t cost you a penny.

I have nearly 20 years in the industry – I’m not just whistling dixie.”

“cool, let me ask you this:

from the the piece: "Now Fannie Mae will offer its spotlight and $10 million to a company called American Finance House LARIBA, which helps Muslims a buy a home without paying interest......."

where does Fannie Mae get this money from. Isn't it from the interest paid on other loans, like mine? Or is it paid from the Government, which would be my taxes. I am getting cheated because one group of people, because of thier beliefs, is not made to pay there fair share. Everyone who owns a home and has a mortgage pays interest regardless. Without paying interest, can't they build equity faster because all of the money goes to the princible? Also, they would have more income because they don't pay that extra bit on interest. If so, they should be able to pay off the "mortgage" much faster than you or I, right? Am I missing something here? This is in fact, rent to own situation, right?”

“FNMA is a federally chartered, but entirely private company. They buy mortgages from banks, enabling the banks to lend that money over and over. Fannie Mae then packages the loans in large groups and sells mortgage backed securities in the secondary market.

All they have done in the above situation is commit to buying $10 million worth of those loans. Again, it doesn't cost you a dime and helps others who couldn't otherwise buy a home. They are paying the same as you would; just calling it rent in line with their religious beliefs. Really it is a very creative solution and is hard to criticize on any grounds.”

“i din't know you were a house sellin dude violinsky.


this all very fascinating, reall it is, but i have to go waer the Christmas tree....”

“Tricks for Relgion? Reminds me of the Amish or whoever who won't use electricity. But they manufacture furniture, trailer homes, etc. The entreprenure figured out he can make a modern factory with gas lights, and a diesel powered air compressor to run pneumatic power tools. So what is accomplished?”

“So this is like buying a pig farm, renaming it, "The Other White Meat" Farms, then getting the US Postal Service - another federally chartered, but entirely private company - to offer its spotlight and $10 million to a company called Good Ole American Tricksters (GOAT) who buys pig meat from "The Other White Meat Farms" and sells it mailorder to Muslims under the tradename GOATmeat.

You can't get more American than that.”

“I don't see why our zero ethic bankers don't seize upon the opportunities to have a zero interest muslim mortgage,....... just 100 points!”

“The is no way on God's green earth that a bank will not charge interest. They do what they always do, hide the charges behind funky bookwork and semantics.

"Honest, it's not interest. It's a user fee. Yeah, that's the ticket, a user fee."

I'm sure they are paying the same as everyone else. Most folks pay the pricipal plus interest. With this plan all they are really doing is taking the total cost of the home plus the interest over the lifespan of a typical loan adding those together and calling the total the selling price. Ta-da, an "interst free" loan.

If the numbers were to be examined and compared to a competitive mortgage you would probably find out that these folks are paying about the same or more for the same items.

Anyone got any insider knowledge to confirm or deny this idea? From my experience with Citicards I find it highly likely to be the case.”

“I haven't been in the industry for 20 years like 'ol Violin, afterall, that'd mean I got in when I was 3 and I'm pretty smart, but I wasn't one of them genius kids . . . . anyhow, I think he's right. I think home ownership promotes pride in your neighborhood and your community as a whole. It's that "vested (is that the right kind of vested) interested" thing. I think the program is good.”

“You've got it HPM.

From the link to the press release I posted above: "Under the LARIBA model, an agreement is made between American Finance House LARIBA and the prospective homeowner that establishes jointly negotiated maximum monthly payments based on the property's sale price and fair rental value that serves as marking the property to the market. Using that agreed upon payment, LARIBA calculates the "implied interest rate" which represents the rate of return on the transaction."

I don't know why people are so reluctant to follow my links.”

“lol, violin, i don't know why people are afraid of your links, either. :)

so, back to my original question, how is rent-to-own differnet than paying interest. doesn't sound like it is, its just a matter of how you package it. whatever.”

“The amish have sects....each sect works together to buy parcels of land, in cash. They work together when someone needs a farm, and most of the time, (at least the MI amish), the kids live with the folks and inherit their property. The amish in Clare, MI use elctricity, to a certain extent. They are allowed 40 watt bulbs only, as they produce the same amount of light as a keresene lamp would. They also use truck engines to run their sawmills.”

“One benefit that they don't get (and why you shouldn't really be too envious of this program) is the deduction from their income taxes of their mortgage interest, because they're not paying any. Now, if they've tooled this up such that they are getting to deduct the "interest" from one of these loans off their taxes, that would be a different story.”

“is there any other deduction that goes along with this deal to even it off, Violin? Along the line of what bit is askin'...”

“I'm no bean counter!”

“How many beans would you say that is... ?”

“.'I don't know why people are so reluctant to follow my links.'
Violin

Ho, ho, ho! I'm always afraid the link might lead to Marvin.
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The above situation is so simple. They are simply calling interest by a different name. It's too bad they lose the possible tax savings. But, perhaps, they don't believe in that, either.”