The issue of purchasing a house through Islamic financing has been written about in detail by experts and intellectuals for the past decade or so. However, it appears that majority of American-Muslims are either in doubt or are misinformed about the validity of the actual practice (buying homes through ‘halal mortgages’ or loans). Many prospective home owners dismiss all Islamic home loans as problematic or interest based loans candy coated in Islamic terminology.
This led the Assembly of Muslim Jurists of America (AMJA) to invite a group of 230 Imams from all over the United States to its annual Imams’ Conference in Dallas, Texas in February 2014 to discuss current Islamic finance companies and their contracts from theoretical and practical perspectives (read about the conference here).
After discussing and debating various clauses of the contracts, AMJA announced that it will take a few months to further discuss their concerns with the named companies and then issue a final verdict with regards to their contracts. This declaration was released yesterday.
What is AMJA
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AMJA stands for the Assembly of Muslim Jurists of America. It’s a nonprofit established in 2002 with the goal of conducting research about contemporary issues facing Muslims in the West and issuing Islamic verdicts with the findings. This research is conducted and supervised by the Resident Fatwa committee (RFC), which comprises of scholars with Doctorates of Philosophy in various Islamic Sciences.
Their website finds a long list of publications and research papers (mainly in Arabic) covering various subjects including interfaith, youth, food and nutrition, careers and arbitration. Over the years this organization has built a reputation of scholarly work and has shown dedication to tradition and authenticity through their research. You can find more about their published research papers here.
The Findings
AMJA requested and received copies of the contracts of various Islamic home finance companies and studied them. Their conclusion was divided into two main categories: (a) three classes of Islamic home finance companies and (b) ruling on individual companies. I have included both below:
The Three Classes:
(1) Companies that use interest-based loans: AMJA’s description of such companies is that they are using contracts that are an offshoot of traditional interest-based loans. AMJA’s ruling with regards to these companies is that it is not allowed to deal with them.
(2) Companies whose contracts are in agreement with Islamic law. Generally speaking, these companies are of very little reach and are not supported by government-sponsored enterprises (such as Freddie Mac etc.). This means that they do not receive funds from such enterprises, which permits them the freedom to control their contracts without any restrictions or regulations from the government (loosely speaking- obviously there are government regulations but they are nowhere close to those imposed by Freddie Mac, for example). The downside of such companies is that they don’t have enough funds to sustain a large operation when compared to those who have the support of government-sponsored enterprises.
(3) Companies that use contracts that avoid explicit Riba in their contracts, however their contracts contain some components that are forbidden from an Islamic prespective. The contracts offered by such companies usually utilize one of the following three modes of finance: Ijarah (Lease-to-purchase), Musharakah (Declining Balance co-Ownership) or Murabah (Cost plus profit). Within these contracts there might be some clauses that are in violation of the essence of Islamic rule, according to AMJA.
Some of the clauses that you might want to pay attention to include, but are not limited to, what happens when one defaults or is late in making their payments? Is the arrangement of paying taxes, maintenance and other costs considered fair (since the majority shareholder in any company is expected to pay according to their shares, the loaning company in a Musharakah contract should participate in such costs and not only the minority shareholder)? What happens in the case of eminent domain? Other examples of the components indicated above include invalid clauses, inequity, undue risk, unknown quantities and the like. For more information about the fiqhi debate as why such components are forbidden in Islam, please consult with your local Imam or contact AMJA directly. It is highly encouraged that you request a copy of the contract before signing, read it and inquire about any unclear or ambiguous aspects of it. It’s also highly recommended that you speak to your local Imam/scholar or reach out to AMJA for more clarification.
The concept of “Need” and “Dire Need”
Although there are some violations in the aforementioned contracts, AMJA views owning houses to be a general need of the Muslim population in America. AMJA defines need as:
that which is desired by an individual or society to make things easier on them and remove constraints. If one is lacking what is determined to be a “need,” then the individuals or the society face hardships and difficulties that go above and beyond the customary efforts required of individuals by the Islamic Law. People may differ in estimating those hardships.
As for determining the level of need for specific individuals, this would depend on the availability of a substitute in the form of being able to rent without being caused harm.
What I found interesting about this definition is that although AMJA believes that there is a general need for Muslims to own a house, it leaves the determination of such need to the individual(s) interested in buying the house. This indicates that even though there is a general need that allows for using imperfect contracts, the individuals’ situation is still a critical factor to decide the actual level of need.
Another interesting aspect of this definition is following statement:
…this would depend on the availability of a substitute in the form of being able to rent without being caused harm.
How can rent be without causing harm? Financially, obviously those who choose to rent are not worried about property taxes or devalue of the property and more importantly aren’t responsible for any major maintenance or insurance. However, renters do not take advantage of any equity or tax incentives. Moreover from a social perspective, owning a house may encourage home-owners to sustain long term relations with their neighbors, the Muslim community around them, and even the grocery stores in the area. Children in the family increase the chances of having the same friends, attend the same schools and masjids which helps in cultivating a stable childhood.
AMJA also used the terms “need” and “dire need” in what appears to be an attempt to create a distinction between the contracts below with regards to how islamic their contracts are. There was no definition as to what a “dire need” constitutes. The natural consequence of such distinction is the advantage it lends to certain companies over others. This might be a way (a good way) of placing pressure on companies whose contracts have more violations than others. This also will decrease the competition between companies (given that people actually follow AMJA’s recommendations), which might backfire with regards to consumer protection. Only time will tell.
Rulings with regards to the Individual Companies:
Disclaimer: It should be noted here that the opinion below is that of AMJA and that neither MuslimMatters.org nor the author of this article have an opinion on this matter. The AMJA declaration can be found on their website here. It also should be noted that Guidance Residential advertises with MuslimsMatters, however they were not consulted with about the actual content of this article.
Before listing the rulings per each company and their contracts, AMJA highlighted the following two very important points:
– The current verdicts apply only to the version of the contracts that were presented at the time of issuance of the verdict as well as the manner of execution of the contract. This makes sense as such contacts are often edited and updated.
– AMJA requested more clarification from some of the below mentioned companies with regards to their relationship with federal financing institutions such as Freddie Mac and others. However a detailed clarification was not received.
They are based on a diminishing partnership with rent to own ending in ownership model in their relationship to the purchaser. Their contract is sound in general. However, it contains some Shari’ah violations with respect to maintenance, taxes and insurance, as these expenses are not distributed in a just manner according to percentage of ownership.
The ruling of the RFC Committee concerning Guidance Residential is that it is permissible to deal with them in the face of need. The representatives of this company are advised to review those defective portions of their contract.
They are based on a diminishing partnership with rent to own ending in ownership model in their relationship to the purchaser. Their contracts are not sold to the federal institutions [such as Freddie Mac]. They also avoid explicit interest in their transactions. However, their contract does contain some Shariah objections glitches, such as unfairness in the percentage that they discount in the rent to take care of basic maintenance, expenses that be more or less than that discounted amount. Additionally, they have just introduced a late payment fee [which is another violation of Shariah principles].
The ruling of the RFC Committee is that there is no harm in dealing with this company in case of need, although one should do one’s best to make one’s payments on time in order to avoid the late payment fee. The Committee also encourages the company to abstain from those aspects pointed out by the Committee.
This company has two types of Islamic contracts:
The first contract is Murabahah a cost-plus purchase. This contract is surrounded by doubts concerning whether the bank truly owns the property before it is readied for sale. In addition, this contract also contains some defective or problematic conditions or aspects of great unfairness, such as with respect to (a) the bank having exclusive benefits from insurance payouts while requiring the purchaser to pay for the insurance, (b) the bank’s right to freeze the purchaser’s account simply on the suspicion that he will not be able to make his payments, (c) the bank’s right to declare the purchaser in default if he does not use the property as a residence or due to his death although heirs have the right to continue the contract after his death, in fact the cost-plus purchase contract states that the heirs are bound by the contract.
The ruling of the Committee is that there is no harm in dealing with this [Murabahah contract of] this company in the presence of dire need. Whoever remains away from it has kept himself safe and has protected his faith and honor. The Committee advises the Bank to correct these aspects and to affirm the ownership of the property before selling it and to avoid the other invalid conditions as much as possible.
The second contract is a rent to own contract. This also contains a number of Shariah violations and invalid conditions, including having two different contracts (sale and lease) at one time, about one item during one time period. Various Fiqh councils have ruled that this model is not permissible as the legal effects of the two types of contracts are contradictory. This may be corrected by separating the two contracts by making them independent of each other time-wise, such that the sale contract is done after the lease contract, which must be a true lease and not something meant to simply hide the sale. Or, they [may replace the sale] with a promise of handing over ownership at the end of the lease.
From among the defective or void stipulations that this contract embodies are the fact that the bank can evict the lessee upon default but the bank still holds him responsible for the rent until they can find a new renter, the fact that the bank does not pay for the basic maintenance of the property and the fact that the lessee is required to pay insurance while the bank retains the right of any payments from the insurance, allowing the bank to benefit while the lessee bears the cost.
The ruling of the Committee is that there is no harm in dealing with this [rent to own contract of this] company when one is in a state of dire need. Whoever remains away from it has kept himself safe and has protected his faith and honor. The Committee emphasizes its recommendation to the bank to rectify the current model by separating between the two contracts and avoiding the defective or void stipulations as much as possible.
The same comments concerning their cost-plus model and lease-to-own models as were stated concerning Devon Bank can be repeated here. Thus, their models have the same rulings and the Committee offers them the same advice. There is an exemption to deal with this company only if one is in a state of dire need. Whoever remains away from it has kept himself safe and has protected his faith and honor.
This company starts by directing the purchaser to get a standard interest-based [mortgage] loan and then creates a trust with the purchaser a partner in the trust, in order to borrow from the bank and then get ownership of the property. After that, the trust will sell the house to the purchaser with a rent-to-own contract. The purchaser is alone in getting the interest-based loan at the beginning and then shares in it at the end.
The ruling of the Committee is that it is not allowed to deal with this company as their model contains clear and explicit interest. We advise those in charge of this company to review and correct their model and to fulfill the trust that has been put in them by those who wish to avoid interest in their financial dealings.
The contract of this company does not differ from a traditional mortgage that interest-based banks provide. This is the overriding contract between this company and the purchaser and what they present as an Islamic form to it actually has no existence in reality and has no legal authority in case of dispute.
The ruling of the Committee is that it is not allowed to deal with this company as their model contains clear and explicit interest. We advise those in charge of this company to review and correct their model and to fulfill the trust that has been put in them by those who wish to avoid interest in their financial dealings.
In Conclusion
As one of the fortunate individuals who witnessed this journey of how this resolution transpired, I have come to appreciate the amount of work it takes to build these contracts. It was inspiring for me to see that even though our scholars disagree with each other, they show respect and honor to each other. Observing scholars debate over some of the most detailed aspects of these contracts assured me that our Muslim faith is in good hands. It assured me that Allah has blessed us with scholars who differ in opinion but are united in their quest for the truth. I ask Allah to have mercy on our scholars, to cover and forgive their sins, and to make them amongst the people of paradise.
Ameen.
Announcements2 weeks ago
abdul
October 15, 2014 at 2:02 PM
SubanAllah after reading this I am not sure what to do since I have guidance financial. Now the question comes is do we take any loan from this companies since all of them in one way or another unfair to the Muslim customers. Can’t even imagine living in Northeast to buy a house with full money down, any advise from anyone inshaAllah.
Adam Taufique (@adamtaufique)
October 15, 2014 at 2:11 PM
I thought they said that 1) housing in the US is a need and 2) you can use Guidance in the case of a need. Wouldn’t Guidance be permissible in that situation?
Guess I’m unsure where your doubts are.
Zeeshan Mohammed
May 19, 2016 at 7:13 PM
That’s correct. The resolution from AMJA states that they believe buying a house in the US is a need, and you can use Guidance for this need.
Tamer
October 15, 2014 at 2:11 PM
I think the takeaway from this resolution by the AMJA scholars is that if you have a need to buy a house, then using Guidance or Ameen Housing is OK.
Zeeshan Mohammed
May 19, 2016 at 7:16 PM
Agreed. That’s exactly what the resolution is saying, and it goes as far as considering buying a house a general need of the Muslim’s in the US.
Mohammad Ali
October 26, 2014 at 6:04 AM
So it is not OK to finance your home through explicit riba but it is OK to do so if the “contract” is written in this way or that?
Mahmoud El Gamal quotes classic Shari’a scholar Ibn Qayyum, in the following words: “It is impossible for the Law of the Wisest of the wise [God] that He would forbid a harmful dealing [riba, or usury], curse its perpetrators and warn them of a war from God and his Messenger, and then to allow a ruse to result in the same effect with the same harm and added transaction costs in constructing the ruse to deceive God and his Messenger.”
I say: If you believe you have a dire need, take the home financing that suits you best, don’t try to fool yourself with contract mechanics, apply your common sense for God’s sake!
Mohamed Hussein
October 27, 2014 at 10:34 AM
There are many aspects of our religion that are governed by guidelines and technicalities. The essence of worship is to obey divine law. With that said, within Islamic finance, there are different mechanics and types of contracts. To equate them all is simply to be ignorant of them. What Dr. El-Gamal is referring to are contracts that simply mimic promissory notes. They certainly aren’t the perfect solutions to the problem, but are efforts to find a solution.
Shahab
October 15, 2014 at 2:15 PM
Jazakallah khair for this eye opening article. Then perhaps the first order of business for Muslim Matters is to remove the advertisement banner for Guidance Financial that is on this site. this is the first thing to do in order to avoid putting muslims into sin.
Tamer
October 15, 2014 at 2:50 PM
I think you might be stepping your boundaries by calling out MuslimMatters as a promotor of sin! I believe the article (and the actual text of the resolution itself) are clear with regards to Guidance and others. They fall under the category of those who avoid Riba but they have constrains due to their relationship with fannie mae freddie mac. Those constrains are overlooked in the case of need (as defined above) in the case of Ameen and Guidance and in the case of dire need in the case of others who fall under that category.
Habib D.
October 16, 2014 at 12:42 AM
Have a look at this hadeeth:
Abdullah ibn Mas’ud reported: The Prophet, peace and blessings be upon him, said, “Allah has cursed the one who consumes usury, its client, its witness, and its recorder.”
Fahad M.
October 15, 2014 at 2:31 PM
I think even Muslims have fallen into the mind trap of
thinking that owning a home is better than renting.
but today, experts are telling us that the math is not adding up.
The math tells us that owning a home does not make sense
in today’s world
Yes….its much better to own your own home, but not through
financial institutions. They are designed to keep you locked in
and imprisoned to a house for 30 years.
Every person who I know who has tried to sell his home
before completing the 30 year mortgage has incurred a loss.
Also…owning a home is expensive. Here are a few things
to think about:
1) Property taxes (they keep going up every year)
2) Maintenance (even in a newly built house, things will break and need fixing)
3) More maintenance (you may have to pay for garbage removal, snow plowing, etc)
Have a look here at the video by Khan Academy that will show you
why the math just doesn’t add up.
https://www.youtube.com/watch?v=JNL6f1xkie4
Habib D.
October 15, 2014 at 2:35 PM
Read these 3 articles on why owning a home is financial suicide:
http://www.jamesaltucher.com/2011/03/why-i-am-never-going-to-own-a-home-again/
http://www.jamesaltucher.com/2011/05/why-i-would-rather-shoot-myself-in-the-head-than-own-a-home/
http://www.jamesaltucher.com/2013/08/five-things-you-need-to-know-before-buying-a-house/
Siraaj
October 15, 2014 at 9:31 PM
What I love is that people in the comments read the entire fatwa, not just the “general need” paragraph out of context. The contracts remain defective and one should only engage I’m them if the need crosses a threshold. They say it so many times, and even right after the general need speak about specific need varying on individual based on ability to rent. That also needs more clarity, but I’m happy this fatwa isn’t a blanket endorsement.
Shoeb Sharieff
October 16, 2014 at 6:32 PM
Kindly note that :
1) Customers apply to IjaraUSA directly
2) Ownership goes to a Trust which is on title to the property for 100 % throughout the whole transaction – the trust does not sell the property to the customer, but leases it out (ijara concept)
3) The transaction structure has been formally approved by Mufti Muneer Akhoon, Sh. Mufit Umer Esmail, and Imam Yahya.
4) we are working with AMJA to clear up this confusion as one of their scholars is already our customer and another used our services to finance their Masjid in Katy and yet another to finance Islamic American University.
Khalid
October 17, 2014 at 1:31 AM
The mentioned scholars are not renowned at all for their IF expertise.
Just because the scholars dealt with you in the past does not mean they have not changed their view now about your company. After detailed discussions with other scholars, they probably changed their opinion now. You might be approached by them to cancel their loans becuase they are unIslamic according to AMJA.
Tamer
October 16, 2014 at 7:12 PM
Two things:
Are you allowed to publicly announce that one of 7 people financed their home with your company? Also, the only one in Katy TX is Dr. Main AlQudah, are you saying that he is okay with your contract? Also do you have permission to announce that they’ve financed through your company?
Secondly, when you participated with them in the conference, did you get a chance to present your contract? If so, what is/was your comapany’s response to the specified violations?
:) im just curious
nur
October 16, 2014 at 7:29 PM
we went through lariba bank to get our mortgage and they use a rent to own contract like Devon bank but it didn’t state that in the article. I am confused so did lariba lie to us, please if anyone has info regarding lariba please comment, JAK
Khalid
October 16, 2014 at 9:31 PM
It’s interesting how the company is called LaRiba but out of all of the mentioned companies, they are the most involved in Riba! Once again Muslims hoodwinking other Muslims for worldly gain.
Tamer
October 16, 2014 at 9:34 PM
Why do we always presume the worst of each other? I’m sure those who are running LaRiba truly believe that their contracts are legit. I don’t believe that they knowingly are deceiving Muslims.
Khalid
October 17, 2014 at 1:02 AM
Scholars have been telling LaRiba for years that they are directly dealing with Riba, but the Asian scholars were ignored. We’ll see now if they listen to Arabic scholars.
Tamer
October 17, 2014 at 1:22 PM
Why Do you have to being race into this bro? Lol
And just for the record, AMJA has also issued fatawa opposing LaRiba’s contract for the past 8 or so years ago.
DustonB
October 21, 2014 at 8:55 AM
Tamer, Khalid’s point is valid. He is bringing race into it because many groups of people purposefully ignore scholars of one ethnicity or another. “Oh, he’s a Pakistani Alim, his fatwa doesn’t apply to me because I’m Arab.” or “Oh, he’s a Malaysian Sheikh, his opinion is irrelelvant to Indian Muslims.”
It happens A LOT and if you’ve never encountered it then alhamdulillah you are blessed; however racism is a HUGE problem among Muslims and we cannot ignore it.
All Khalid is saying is that since they ignored the Asian scholars, maybe they will pay attention now that Arab scholars are saying it too. Meaning that they will be forced to look beyond their own bigotry.
This exchange is important, I hope people don’t ignore it just because it is shaded out.
Tamer
October 21, 2014 at 9:02 AM
I’m afraid thats not really convincing. I agree that people, unfortunately Muslims included, have elements of racism. However, when it comes to money and halal-and-haram, I believe that Muslims follow those who posses knowledge because of their knowledge and not because of their race. Putting it in terms of Arabs vs Asians turns off the up and coming generation (me included) and creates (by bringing attention to) unnecessary divides (that although exists, no one wants to hear that his people are racist).
DustonB
October 21, 2014 at 9:26 AM
Tamer, you said “I believe that Muslims follow those who posses knowledge because of their knowledge and not because of their race”
I wish I could believe that.
I sincerely wish that I hadn’t personally heard disgusting and hateful bigoted statements coming from educated people against Scholars of other ethnicities.
I wish that I had not heard people being denounced as “idiots” or “munafiq” because of where they came from or what their background ethnically was.
The reality is that I’ve heard Arab scholars refer to Southeast Asian Alims as “stupid monkeys” while calling their fatwas (rooted in Qur’an and Hadith) “Idiotic ramblings”
Racism is real, and somehow intellectualism hasn’t purged it.
I sincerely wish that it wasn’t the case.
Hamayoun
October 16, 2014 at 10:05 PM
Salam, can we get Guidance to comment on this?
Hamayoun
October 21, 2014 at 9:51 PM
Salam, that is very strange. That’s not the way I understand what AMJA said about Guidance.
Nasir Chhipa
May 16, 2016 at 12:47 PM
How can the Guidance Financed house is a Saraiah compliant? If he/she is claiming interest when filling tax return at the end of the year.
Hassan
October 17, 2014 at 9:08 AM
This is weird, I read article differently. Why are you not highlighting the following part in most of their fatwa
“Whoever remains away from it has kept himself safe and has protected his faith and honor. “
Sharif
October 17, 2014 at 10:28 AM
Anyone have names of the smaller companies whose contracts are generally permissible but their ability to fulfill the needs of the general Muslim community are somewhat limited? “(2) Companies whose contracts are in agreement with Islamic law”
Depending on the location and situation of the readers, those companies could be a viable option.
Is there a list available somewhere?ra
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DustonB
October 20, 2014 at 4:51 PM
Wow… I typed out a complete thought and it was blocked as being “spammy” even though there wasn’t a single link or anything of the sort.
OK; simple statement then:
My problem with all of these so-called Islamic Financial Institutions is that they have no provision for building a home from scratch.
Basically Muslims aren’t allowed to have anything new, we have to buy used homes from non-Muslims.
Aly Balagamwala
October 27, 2014 at 1:24 AM
Dear DustonB
We apologize for the inconvenience. Since spam filters in WordPress (the back-end for most websites) are not very customizable, sometimes valid comments seem not to go through. It possibly stems from a combination of things that combined create a red flag. We sincerely apologize for this. Thank you for taking the time to read and comment on MuslimMatters.org.
WasSalamuAlaikum
Aly Balagamwala
Comments Team Lead
DustonB
October 28, 2014 at 2:23 PM
Salaam Alaikum,
Thank you for the response on that issue. I appreciate it.
Hustry
October 20, 2014 at 10:49 PM
Why not use the systems that muslims have been using for centuries? I’m sure this is not the first time in history that muslims wanted to buy houses? Maybe the historians should dig up the old records and see what we were doing before?
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Siraaj
October 27, 2014 at 3:46 PM
Guys, the investment industry as a whole in this country is a gigantic sham. There is more than enough academic and journalistic content to fill a lifetimes worth of reading discussing every single one of these scams. Wall Street has lobbyists galore selling us debt and investments to clear our bank accounts and fill their own pockets.
Want an education? Take a loan that can’t be paid back to attend a big name university while will have zero impact on your life after you get in the door of your first job.
Want a home? Don’t rent bro, buy a house because rent is just money down the drain – yearly property taxes, interest (or you can call it rent if you like), and maintenance costs on your personal time and finances are obviously not. Bad credit? No problem, here’s your sub-prime loan with jacked interest rates (sorry, “rent”).
Want furniture – finance your furniture.
Want to survive old age? Drop it in a 401(k), we’ll definitely make sure we only make safe investments.
Please bear in mind that not one single one of these organizations escapes the “do this is if you absolutely must, it’s better not to” clause. If you want to test your own sense of taqwa about this, here’s the litmus test – upon seeing the fatwa, were you intent on buying the house that maxes out your creditworthiness? Or were you intent on getting a place to own because you “need” rather than emotionally want to spend on a house because everyone else does?
If you truly “need”, I would like to see all of you avoid costly new homes, costly upgrades, costly anything. Buy a manufactured home for pennies on the dollar and put it on a property that doesn’t break the bank, that you can pay off within five – ten years. I sincerely doubt most people will do this.
For solutions to all these issues:
1. Stop investing your cash like lambs lead to the slaughter – invest it towards increasing your earning potential. Tech careers continue to explode and do not require a four degree, but mastery of the technology you want to work with.
2. Learn to save money – learn how to save on groceries, learn how to purchase lightly used goods whose value only depreciates at significant discounts (cars, furniture, etc).
3. Save up for a reasonably priced home that meets your needs – most people don’t need more than 2000 sq ft of home. Look into getting a manufactured home:
https://www.google.com/?gws_rd=ssl#q=manufactured+homes
In summary, don’t believe the hype. Every single org that has commented here and elsewhere stands to make money from your business. Most of you do not care about shari’ah compliance – you’re looking for the cheapest loan, and you’ve already determined, ironically, that despite the fatwas from various scholars who support one org (and not another, and vice versa), they are the exact same as banks, so you’re going for the bank loan.
There’s a small percentage of you that want the home, but were waiting for a fatwa, and once you got it from anywhere, you were ready to take the loan. If you’re in this group, slow down and so do some more research.
There’s a tinier percentage that remains skeptical, but still wants a home – what I’ve written above is mostly for you. You can have that home, but you need to be smart about it.
And then there are the almost nonexistent people like myself who rent, who save up and pay cash for everything, who are thrifty, who mostly stay out of debt, and realize the system for what it is – do items #1 and #2, ignore #3, whoever said you can’t participate in society without home ownership doesn’t seem to have done their homework.
DustonB
October 28, 2014 at 2:18 PM
Akhee, no offense intended but if you really think that the average person can just “save up” for a manufactured home then you are way out of touch with reality.
At 1400 square feet the manufactured home that my wife and I are getting is still going to be $145,000
Do you really think that the average person can just “save up” that amount of money?
Siraaj Muhammad
October 28, 2014 at 7:09 PM
Absolutely. Have you researched how “average” people are buying homes without debt? I would encourage looking into this.
Groceries are one of the biggest expenses. Strategic couponing can cut grocery bills over 90 – 95%. Have you investigated this?
What is your profession? Have you first considered upgrading your professional skills and then saving for a home?
DustonB
October 29, 2014 at 12:18 PM
Siraaj, Median household income in the United States is $44,000
How can a family with a household income of $44,000 buy a house without taking out some sort of loan?
In order to save up the $150,000 it would take to buy a modest home it would take nearly 20 years to save up the money barring any emergencies and assuming that they are able to find an apartment to fit the family for less than $1000 per month.
DustonB
December 3, 2014 at 9:47 AM
Siraaj, you’re still not answering my questions.
It’s okay to admit that you’re wrong.. it doesn’t make you a lesser person just because you hadn’t considered a perspective outside of your personal experience.
Yasir S.
November 10, 2014 at 5:03 PM
Assalam U Alaykum,
I was comparing Guidance & University Islamic Financial for last couple of months for buying a home at right time and did lots of research. I saw AMJA ruling on MM web site on weekend which puzzled me more. With all due respect to AMJA scholars, I do not see any difference on both besides financing model or contract but no sure why scholars have little bit favorable ruling for Guidance.
Guidance is using this ruling as the only Sharia compliant company in USA which is totally wrong. I think AMJA should clarify their position on Guidance’s claim.
Here is why I do not see any difference:
1: Both works with Freddie Mac but AMJA ruling did not mentioned about Guidance.
2: Both charge late fee but AMJA ruling mentioned about Ameena but skipped Guidance…
3: AMJA mentioned insurance payout for Devon & UIFC but this applies to all companies regardless of Musharikah or Murabaha. Insurance company always issues a check for both mortgagee & customer for repair. If house fully paid off then check will go to customer only. Even if we consider it is ok to have both names for Guidance because of Musharikah then Guidance should keep portion of claim as their % of share but they do not or cannot.
4: Bank’s right to freeze the purchaser’s account: This applies to all contracts but AMJA mentioned only for Devon & UIFC… I don’t think anyone can freeze account because of suspicion until customer stopped making payments. Please keep in mind both UIFC & Guidance follow same investor FREDDIE MAC guidelines.
5: Bank’s right to declare property in default mentioned for Devon & UIF. Same rule applies to any company who work with Freddie.
I apologize if I offended anyone but based on my experience and little research I don’t see any difference between UIFC & Guidance unless someone can explain.
Jazzak Allah Khair.
asim
October 26, 2016 at 5:46 PM
I agree with you. I went by the Fatwa as well and purchased a house through Guidance. I see no difference in terms of paying back loan. It is same as the regular bank. I feel betrayed and am frustrated. You would think that Im not a scholar in Islamic finance but any lay person who pays a monthly mortgage bill would understand that so called islamic banks are not much different than the regular banks.
Samuel
November 16, 2014 at 9:14 AM
I am puzzled by this declaration by US Muslim Jurists Resolution on Islamic Finance Companies as one of these companies listed OK to do business with sold my brother’s mortgage loan after few months to another conventational bank. I would like to see more documentation published AMJA backing their “fatwa” declaring some banks halal and some are not.
kamal hassan
December 2, 2014 at 11:45 AM
I need some one realy to convince me with,: Now if i rent i will pay around $1200-$1400 a month, where if i buy a house will cost me around $900 and the house will be mine, where when you rent you throw money a way. Where the sense in this matter. And by the way when you pay your mortgage of $900 a month for example, you will get about half of that back in the saving if you pay 3% interest. where the 3% doesnt cover the bank expenses to cover the loan.
DustonB
December 3, 2014 at 9:51 AM
I notice that NONE of the Islamic finance institutions have stopped in to explain why they refuse to provide any form of loan or financing package for the construction of new homes.
If their structure doesn’t allow for new home construction then I challenge that the entire structure is flawed and cannot possibly be 100% Islamically compliant.
SS
January 13, 2015 at 12:31 AM
http://www.amjaonline.org/en/articles/entry/amja-resident-fatwa-committee-resolution-about-islamic-home-financing-companies-in-the-us
AMJA resolution about Islamic Home Financing Companies in the US
The AMJA Fiqh Committee Resident Fatwa Committee met in Houston on the 20-22 of Dhul-Qadah 1435 A.H. (September 15-17 2014 C.E.) in order to issue a resolution concerning Islamic Home Financing in the United States. This meeting took place after an entire conference had previously been held on this topic, in which papers were discussed in the presence and with the participation of representatives of most of the relevant companies. This was followed up by correspondence between the Resident Fatwa Committee Fiqh Committee and those companies with an attempt to clarify and respond to the Shareeah issues that are present in their contracts. Sh. Jamaal Zarabozo (may Allah preserve him) also participated in this meeting in Houston. Click here read the full declaration
Ameen Housing: (See updated Fatwa below) They are based on a diminishing partnership with rent to own ending in ownership model in their relationship to the purchaser. Their contracts are not sold to the federal institutions [such as Freddie Mac]. They also avoid explicit interest in their transactions. However, their contract does contain some Shareeah objections glitches, such as unfairness in the percentage that they discount in the rent to take care of basic maintenance, expenses that be more or less than that discounted amount. Additionally, they have just introduced a late payment fee [which is another violation of Shareeah principles].
The ruling of the RFC Committee is that there is no harm in dealing with this company in case of need, although one should do one’s best to make one’s payments on time in order to avoid the late payment fee. The Committee also encourages the company to abstain from those aspects pointed out by the Committee.
Addendum about Ameen Housing contract (As for Jan 2015)
All praise be to Allah, the Lord of the Worlds, and may the blessings and peace be upon the final Prophet and upon all of his family and Companions.
The Fiqh Committee of AMJA had issued a declaration explaining the issues in the contracts of the Islamic Home Financing Companies in the United States. That ruling was based on the contracts that they used at the time of the issuing of that declaration. With respect to Ameen Housing, two issues were of major concern. One was the late payment fee when a person paid his rent late and the other was the issue of the cost of maintenance being properly distributed between the two parties wherein Ameen returned a fix percentage of the rent to the buyer/renter regardless of the actual amount of maintenance expenses.
After the issuing of that declaration, Ameen Housing—may Allah reward them for responding positively to that declaration—have now discontinued their late payment fee policy and have clarified to the Committee that the distribution of the maintenance expenses is handled in a way that is just.
Based on the above, the Fatwa Committee now rules that the contracts that Ameen Housing is now using are consistent with the laws of the Shareeah. We have now no Shareeah objection to their practice and it is permissible for Muslims to purchase homes through them.
DustonB
January 13, 2015 at 9:47 AM
Thank you for completely wasting your time and not coming close to addressing the issue that I raised. By all means, continue posting long paragraphs of useless information.
SS
January 13, 2015 at 12:33 AM
Addendum about Ameen Housing contract (As for Jan 2015)
All praise be to Allah, the Lord of the Worlds, and may the blessings and peace be upon the final Prophet and upon all of his family and Companions.
The Fiqh Committee of AMJA had issued a declaration explaining the issues in the contracts of the Islamic Home Financing Companies in the United States. That ruling was based on the contracts that they used at the time of the issuing of that declaration. With respect to Ameen Housing, two issues were of major concern. One was the late payment fee when a person paid his rent late and the other was the issue of the cost of maintenance being properly distributed between the two parties wherein Ameen returned a fix percentage of the rent to the buyer/renter regardless of the actual amount of maintenance expenses.
After the issuing of that declaration, Ameen Housing—may Allah reward them for responding positively to that declaration—have now discontinued their late payment fee policy and have clarified to the Committee that the distribution of the maintenance expenses is handled in a way that is just.
Based on the above, the Fatwa Committee now rules that the contracts that Ameen Housing is now using are consistent with the laws of the Shareeah. We have now no Shareeah objection to their practice and it is permissible for Muslims to purchase homes through them.
DustonB
January 13, 2015 at 9:54 AM
This whole conversation is just underscoring a fundamental disconnect that most Muslims seem to have from the reality of the American experience. an overwhelming majority of immigrant Muslims came here based on their high level of professional skills and therefore obtained occupations in the high income brackets, which then led to their children having a huge advantage in educational opportunities.
There’s nothing wrong with that and I have nothing against them for that. Alhamdulillah for their success.
However, they seem to think that the experience they have with household incomes in the six figures is the norm in America and don’t have any comprehension that there are literally MILLIONS of Muslims in American who are struggling to get by and who have no choice but to take a loan in order to get a house or else be stuck renting for the rest of their lives.
I’ll say again, the median income for America is $44,000. If your plan does not include or help people in that income bracket then your plan is already flawed.
If your plan has no place for people below that bracket then it is also challenged.
Islam is a pathway for all people, as a way of life for all people any method must somehow apply for all people. If it doesn’t, then it is not fully Islamically compliant.
Ahmed
August 5, 2015 at 4:20 PM
While it would be great if every Muslim can be financed through these companies, it’s simply not possible. These aren’t charity organizations and it’s their right to make a profit. If they just approved everyone, they would go out of business. Then instead of having some companies which are permissible to deal with, you’ll end up with no company.
If a Muslim in America needs to buy a house and cannot get approved by any of the permissible organizations, God will be forgiving if that Muslim decides to go with a conventional bank.
Kamran
April 27, 2015 at 4:48 PM
Just two days ago I asked two different sheikhs about if there was any shariah-compliant home-financing scheme with which they agree. They both separately said about guidance:
First one: It is halal but not the spirit of Islam.
Second one: I think guidance is halal because giants like Taqi Usmani and Sheikh DeLorenzo have endorsed it. Moreover, we once had Q/A with Sheikh DeLorenzo and he was able to answer all our questions.
Thought I would share.
Rashid
March 12, 2016 at 4:29 PM
What are the names or websites address of those who qualify under AMJA Fitwa.
thanks
Rashid
March 12, 2016 at 4:30 PM
What are the names or websites address of those who qualify under AMJA Fitwa in Canada.
thanks
Zeeshan Mohammed
May 19, 2016 at 7:08 PM
Salaam,
Guidance Residential: http://www.guidanceresidential.com
Ameen: http://www.ameenhousing.com
Regards,
Zeeshan Mohammed
Account Executive at Guidance Residential
Zeeshan Mohammed
May 19, 2016 at 7:09 PM
My apologies. I was responding to the initial comment you made which did not mention Canada. Neither of the two organizations I mentioned operate in Canada to the best of my knowledge.
S
April 27, 2016 at 1:46 PM
Please reply with the valid companies in Canada. Thank you.
Burned by AHC
November 23, 2016 at 4:42 PM
I would NOT recommend Ameen Housing to anyone, honestly. I am trying to get out of my home ownership contract with them. They keep increasing the rent on you and charge your exorbitantly to exit. At this point, it look like I will have paid them $60K more in less than three years than what I would have paid the alternate Islamic model I’m trying to change to.
PotentialBuyer
November 29, 2016 at 4:12 PM
@BurnedbyAHC, would you please let us know which alternate financing you’re going for?
Arjmand
September 4, 2017 at 11:11 PM
@BurnedbyAHC Assalamu alaykum. May Allah make ease in your affairs. Can you please give more details? I am considering Ameen Housing so I want to know everything beforehand.
Shamini Rajendram
January 29, 2018 at 6:19 PM
I brought this article up to LARIBA in my dealings with them, this was their reply:
Yes, we are aware of AMJA. We tried to contact them through our Shari’aa scholar Dr. Muhammad Adam Sheikh – a Temple University Ph.D. in Islamic Studies – and Secretary of Fiqh Council of ISNA without success.
We had two options to respond:
1. To enter into attacks and counter attacks which would bring us into the sad culture of the Middle East, or
2. To find a world famous INDEPENDENT Shari’aa Audit company that looks at our work in great details and decide if we are Shari’aa compliant or not.
We found: RAQABA; a World renowned Independant Audit company with offices in London and in North Carolina. It is headed by a world famous scholar: Dr. Abdubari Mashaal who was Shari’aa scholar at Alrajhi – the largest Islamic Bank in Saudi Arabia and Kuwait Finance House.
https://www.linkedin.com/in/abdulbarimashal/ and
https://www.zoominfo.com/p/Abdulbari-Mashal/1817458356
After reviewing our work for 3-months and going through our process, they issued an audit report on our UNIQUE finance model based on Baiul Istithnaa. Their conclusion is LARIBA model is Shari’aa Compliant. We also AUDIT our finance operations annually by Raqaba.
I am pleased to attach the Shari’aa Audit in Arabic and in English. Also, the Research Paper on our Model published by the TOP Islamic Finance Shari’aa Ressearch (can be found at https://www.lariba.com/Independent_Shari'a_Auditor_s_Report-English.pdf )
M. Ali
April 12, 2018 at 7:46 AM
In my opinion there is no difference among all those So called Islamic Finance and average non Islamic bank, The matter fact I think getting a conventional loan with fixed interest rate from any Non Islamic Bank is much better an straight forward transaction….All these Islamic banks are non Islamic due to the matter fact their system built on twisting Islamic rules into their favor and very much they use interest but in different language, they change the terms of interest into utilization fee; that is insane and if you really want to help Muslim community you need to really help Muslim community by raising money for who is in needs and not make them pay THREE time the price of the house and call this murabaha, that is BS! if you want Murabaha dont balloon the price to make Muslim suffer more, where is the mercy and helping signs when you charge excessive rent and your profit is guaranteed, that is not sharing!, If you want to help I will suggest this Method of profit:
If I find a house in the price for example $300k, here are the steps it should be taken:
1- Since the Bank have all cash money, go and bargain with the seller to get the house for 10 to 20% cheaper and I am sure you can since you are going to be a cash buyer and this will make the purchase price about $250k.
2- I as a buyer will agree to buy the house for the price from 300k to $350k it depends on how long will take me to pay the house, VS $700k when you use interest or rent to own excessive fees.
Most of these Islamic banks are here for profit and not for helping Muslim community, they are out their to help them self for profit and nothing wrong with that, But the problem is when you use Islamic terminology as a selling tools, that is the problem and this what GOD prohibited.
I dare those So called Islamic banks to show me what is the benefit of using them over non Islamic banks, ,,Just name one!
Arjmand
July 10, 2018 at 9:33 AM
Assalamu alaykum,
What about Ameen Housing? Are they the same?
Bob Hannah
February 28, 2019 at 8:01 PM
The scholars forgot or chose to ignore the modernist Islamic view that riba was the exploitive moneylending to the poor as practiced at the time of the prophet. It is not the same as interest in modern regulated financial markets.