Minnesota starts state shari’a loan program

posted at 11:30 am on March 8, 2009 by Ed Morrissey

With a rapid influx of Muslims to the Twin Cities area, some private banks began offering shari’a mortgages a while back.  Muslims have a strict proscription against paying or accepting interest on loans, which makes home mortgages impossible, but private lenders have created ways to satisfy both profit and religious motives.  Now the state of Minnesota has jumped into the shari’a loan market with its own offering (via William Amos):

For many Minnesota Muslims, it’s been virtually impossible to buy a home, because Islamic law forbids the paying or charging of interest. To help close the home ownership gap among Muslim immigrants, the state’s housing agency has launched a new program offering Islamic mortgages. …

Sheikh is the first home buyer to get a loan through the state’s New Markets Mortgage Program. That’s because, program manager Nimo Farah said, he has all the makings of a successful homeowner.

“I had lots of applications, but he’s the first one, because really, he was ready. He has been working at the same job for quite a while; he took care of his credit; he had the right size family, and he had all his documents together,” she said. “He was basically ready to go.”

The program is targeted at low-to-moderate income families. Qualified applicants have to complete first-time home buyer education classes. The goal is to help Muslim home buyers build wealth and reap the benefits of home ownership.

How does it work?  The state buys the home and then sells it to the buyer at an inflated price, more or less masking the market interest rate as principle.  They they set a 30-year payment schedule where the family pays down the debt, but without any interest.  The state makes a profit eventually, and people get to buy homes rather than rent.

My objections to this have less to do with the religious aspects of this than the intrusion of the state into a private lending market.  Other private lenders had begun meeting the market demand by crafting shari’a loan models themselves.  The state’s entry into this market will act to push others out, as the state has more lending power and more credibility than private lenders do.  That essentially steals capital from the market, and it also reverses the tax flow, as profit in the private market would generate revenue to the state.  Minnesota is cheating itself in this transaction.

Moreover, our state faces a $7 billion shortfall over the next two years.  Why are we buying houses for people at six figures a throw in exchange for monthly payments over the next 30 years?  The capital we have needs to go to more legitimate state functions, instead of distorting the lending market once again.  And how well qualified are these buyers, anyway?  As we discovered in the Community Reinvestment Program, when the government pushes loans to an “underserved market,” it usually means significantly increased risk.  Will the state foreclose on delinquent borrowers?  That’s a question the FHA faces on a federal level without the added issue of religion (via Melissa Clouthier):

But the subprime mortgage market has crashed and borrowers are flocking back to the FHA, which has become the only option for those who lack hefty down payments or stellar credit. The agency’s historic role in backing mortgages is more crucial now than at any time since its founding.

With the surge in new loans, however, comes a new threat. Many borrowers are defaulting as quickly as they take out the loans. In the past year alone, the number of borrowers who failed to make more than a single payment before defaulting on FHA-backed mortgages has nearly tripled, far outpacing the agency’s overall growth in new loans, according to a Washington Post analysis of federal data.

Many industry experts attribute the jump in these instant defaults to factors that include the weak economy, lax scrutiny of prospective borrowers and most notably, foul play among unscrupulous lenders looking to make a quick buck.

Gee, what a surprise — government distorts the lending market again.  And while I’m mainly discounting the religious angle of this story, it’s interesting to note that the usual “separation of church and state” argument from the Left has been conspicuously absent here.  Is it a legitimate function of American government, at the state or federal level, to set itself up as a lender just to help a religious sect get around its own set of beliefs?  I’d say no.

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Some legal firm should sue on behalf of the people, challenging the constitutionality of the program. The people are allowing the state and fed to assume too much power in the private sector.

hillbilly on March 8, 2009 at 3:30 PM

Why not change the Mall of America to the Mall of Shari’a?

Where foot bathing and beheadings can be found in the same department store.

Kini on March 8, 2009 at 3:44 PM

Geithner parody on SNL

Michael Steele parody on SNL

Obama-Rahm parody?

This Sharia loan program…a parody, correct?

Mr. Joe on March 8, 2009 at 3:44 PM

Minnesota is cheating itself in this transaction.

Does anyone expect idiot Minnesotans to act any differently?

The hypocrisy from Muslims is astounding.

We can’t pay interest. But we can hide the interest in a payment as long as we don’t call it “interest”.

We can’t charge interest, but we can behead anyone who doesn’t believe in the teachings of Muhammad.

csdeven on March 8, 2009 at 3:47 PM

The homeowner under this scheme cannot itemize for interest deductions so maybe there is no advantage.

I would still like to see the payment structure.

FireBlogger on March 8, 2009 at 3:58 PM

So where is the lawsuit? In 5..4..3..

Bueller. Bueller.

johnsteele on March 8, 2009 at 3:58 PM

“Will the state foreclose on delinquent borrowers?”

LOL. No way. They’ll sell the assets to the highest bidder, let them try to get the money back.

Then when the squatters homeowners complain, the State will demonize mortgage holders before eventually passing a mortgage bailout of some kind, forcing it through using racial and religious discrimination as their bludgeons.

But that’s not all. The State still needs to find the money for the bailout so they’ll tax the bejezzers out of you because they will come up short. But first they’ll need to raise their salaries and stipends for all the good work they done up to then.

Dusty on March 8, 2009 at 4:03 PM

As stated in the NPR link the Minnesota African Developement Center played a huge role in this

Africa Developement center

Their Morgage page is here

Applications for the Morgages are here

William Amos on March 8, 2009 at 4:04 PM

Apparently they do accept non Muslims

However, we serve any and all qualified mortgage customers in Minnesota!

William Amos on March 8, 2009 at 4:08 PM


Does anyone expect idiot Minnesotans to act any differently?

Lemme guess….you live in North Dakota?

ChenZhen on March 8, 2009 at 4:11 PM

If the interest is built into the principle, then the bank would have to adjust the principle as the interest rates change. And when he sells the house the year later, does he owe the full amount of the principle back? If so, we’d have to laugh hysterically.

If a muslim wants to take a mortgage like this, he’s a fool and to that I would have no objection.

If a muslim doesn’t want to pay interest as long as it’s called interest, and it is just a game of semantics, then they don’t take their religion as seriously as they claim.

keep the change on March 8, 2009 at 4:17 PM

keep the change

If a muslim wants to take a mortgage like this, he’s a fool and to that I would have no objection.

I dunno. It certainly appears to be a lot less risky than, say, an ARM.

Also, there are plenty of people out there who purchase vehicles at 0% in lieu of rebates. So, these folks pay more for the car or truck to get 0%. Its essentially the same thing. You’re still paying for the time value of money one way or another. Depending of the situation, it may make more financial sense to take that arrangement, or one might go that route simply because they hate the idea of paying “interest” (there are plenty of non Muslims in that category, believe me). Are they fools? I guess it depends on how you look at it.

ChenZhen on March 8, 2009 at 4:40 PM

Isn’t that peculiar? I live in Minnesota and I have never ever heard this story. I’m sure it was in the back of the Star Tribune and Pioneer Press. It’s multi-culturalist practices like this that cause a nation’s identity to vanish.

pjean on March 8, 2009 at 4:45 PM

This is not right at all. What are they going to do next? Is this why the US Treasury Department is teaching sharia Law to the employees? This might get out of hand. Is any in Minnesota questioning this? Or do they care?

sheebe on March 8, 2009 at 4:50 PM

I keep thinking it, and it keeps being proven correct.

The world has gone insane.

Hawkins1701 on March 8, 2009 at 5:02 PM

It begins.

promachus on March 8, 2009 at 5:07 PM

Ed….time to move.

BrianA on March 8, 2009 at 5:41 PM

Islam is front and center on this issue. Liberalism is being more “tolerant” of Sharia Law that is forced on American citizens then people freely following the 10 Commandments. Muslims, moderate or not, want to see Sharia Law imposed on us and this is just the beginning. It could be the beginning of the End as well.

Blue Collar Todd on March 8, 2009 at 5:49 PM

you guys are so intolerant


Jamson64 on March 8, 2009 at 6:12 PM

I was hoping there would be a religion/government interference thread today…..you need to see what my not-so-great state of Connecticut is proposing. I am new as a registered commenter so please forgive my poor link.
Please follow the link to read about CT bill SB1098.:

You’ll truly have blood shooting out of your eyes. My hope is to give CT some bad national publicity. We CANNOT have government interfering with how the church conducts its business. Haven’t they read the Constitution???

Please help me spread the word. Thanks!

pinny on March 8, 2009 at 6:30 PM

“When the time comes to hang the last of the capitalists, they will compete to sell us the rope.”

Who suspected V. I. Lenin was a muslm.

oldleprechaun on March 8, 2009 at 6:31 PM

Sorry “V. I. Lenin was a MUSLIM”.

Wife’s Italian. Big Sunday dinner. Need a nap. Clocks changed, etc etc etc.

oldleprechaun on March 8, 2009 at 6:33 PM

How are people of ‘modest means’ going to pay the exorbitant payment required for this debacle to work?

TinMan13 on March 8, 2009 at 6:36 PM

Ed….time to move.

BrianA on March 8, 2009 at 5:41 PM

Wrong, its time to take back this country from the vermin that have infested it. Arm yourself.

Viper1 on March 8, 2009 at 6:37 PM

When you gonna give it to me, give it to me.
It is just a matter of time Shari’a
Is it just destiny, destiny?
Or is it just a game in my mind, Shari’a?
Never gonna stop, give it up.
Such a dirty scheme. Always give it up for the touch
of the leftist kind. My my my i yi woo. M M M My Shari’a…

My apologies to The Knack…

Gohawgs on March 8, 2009 at 6:40 PM

And while I’m mainly discounting the religious angle of this story…

Blah blah blah Ed. There would not be a story if it weren’t for the religion. And while I’m still allowed to say it, I’d like to add that Islam adds exactly NOTHING to our cultural heritage.

Yeah yeah yeah, I know, our local doctor is a Muslim and a very nice guy. Islam still sucks.

CarolynM on March 8, 2009 at 7:04 PM

Are you suggesting that America has no right to tighten immigration laws because Native American’s were here first? Seriously?

How many times did you watch Dances With Wolves before you decided you to claim you have a spirit animal and that the white man is evil? *eye roll*

Montana on March 8, 2009 at 2:43 PM

Wow. Where did all that come from?

I hold the same values that Abraham Lincoln did with respect to immigration — let those who want to come here come and prove that they are assets:

There is something else connected with it. We have besides these men—descended by blood from our ancestors—among us perhaps half our people who are not descendants at all of these men, they are men who have come from Europe—German, Irish, French and Scandinavian—men that have come from Europe themselves, or whose ancestors have come hither and settled here, finding themselves our equals in all things. If they look back through this history to trace their connection with those days by blood, they find they have none, they cannot carry themselves back into that glorious epoch and make themselves feel that they are part of us, but when they look through that old Declaration of Independence they find that those old men say that “We hold these truths to be self-evident, that all men are created equal,” and then they feel that that moral sentiment taught in that day evidences their relation to those men, that it is the father of all moral principle in them, and that they have a right to claim it as though they were blood of the blood, and flesh of the flesh of the men who wrote that Declaration, (loud and long continued applause) and so they are.

That is the electric cord in that Declaration that links the hearts of patriotic and liberty-loving men together, that will link those patriotic hearts as long as the love of freedom exists in the minds of men throughout the world.

My points to Mr. Brave (and to you) is that our immigration policies are certainly not liberal, and that, as a secular state, American puts no barrier to entry based on religious affiliation, and should not:

I am not a Know-Nothing. That is certain. How could I be? How can any one who abhors the oppression of negroes, be in favor of degrading classes of white people? Our progress in degeneracy appears to me to be pretty rapid. As a nation, we begin by declaring that “all men are created equal.” We now practically read it “all men are created equal, except negroes.” When the Know-Nothings get control, it will read “all men are created equal, except negroes, and foreigners, and catholics.” When it comes to this I should prefer emigrating to some country where they make no pretense of loving liberty-to Russia, for instance, where despotism can be taken pure, and without the base alloy of hypocrisy.

I’m a Catholic, one of those people whose immigration to this country was defended by Lincoln against the Know Nothings. We don’t have spirit animals, and, if we did, it would be nothing at which you should poke fun.

unclesmrgol on March 8, 2009 at 7:08 PM

Separation of Church and State? Two can play that game.

worlok on March 8, 2009 at 8:09 PM

unclesmrgol: “… I hold the same values that Abraham Lincoln did with respect to immigration — let those who want to come here come and prove that they are assets…” When Lincoln expressed those pro-immigration views the only social welfare entitlement for tired, poor, unskilled, uneducated, low-wage, low-or-no-tax-paying immigrants to exploit was homesteading a farm on the frontier. The terror threat was the occasional settler getting scalped by an indigenous person or grizzly bear, not thousands of citizens being suicide-bombed all at once by an immigrant Muslim fanatic. Times change.

kd6rxl on March 8, 2009 at 8:21 PM

YOU’VE GOT TO BE KIDDING ME! So it all depends on what the defintion of “is,” is. Come on children, they are still paying the interest! But it’s so good to see liberals and terrorists working together here in America.

apco on March 8, 2009 at 8:52 PM

Only Kalifornia can make Minnesota look good. And that isn’t saying much.

cjs1943 on March 8, 2009 at 8:59 PM

I want to know: Can non-Muslims get one of these mortgages?

If the answer is “No,” then it is flat-out unconstitutional, and must be stopped.

seanrobins on March 8, 2009 at 9:10 PM

it’s interesting to note that the usual “separation of church and state” argument from the Left has been conspicuously absent here.

Well, in all fairness it’s not like this has been a super-publicized story.

But it’s only a separation of church and state issue if the state government is giving preference to one religion over another. Although Muslims are obviously the primary beneficiaries, if Christians wanted to use the program, they could. Presumably they choose not to because they can get a better deal from the banks, and they can always refinance.

That being said, I hate this idea. This is not what governments should be doing, particularly when most states are experiencing massive budget shortfalls.

Proud Rino on March 8, 2009 at 9:14 PM


A little while back I posted a link about the ACLU investigating the state funded madrassa that was threatening non Muslim visitors that you had written a posting on. Any news on their investigation of the sacred Mohammedans and Minnesota’s obligation to pay for and promote education and instruction of the majestic laws and customs of Mohammed?

[email protected] on March 8, 2009 at 9:54 PM

William Amos on March 8, 2009 at 11:46 AM

You’ve been quitE active of late…Very impressive…Don’t stop… and , thank you.

jerrytbg on March 8, 2009 at 9:54 PM

Times change.

kd6rxl on March 8, 2009 at 8:21 PM

Only if we let them. If the rest of your comment is right, then the Democrats have won because they’ve deflected the argument into a choice between individual rights and group entitlements, and the immigrants and their individual rights must fall in the fight against group entitlement.

I don’t think so. Lincoln’s positions appear to me to be timeless.

unclesmrgol on March 8, 2009 at 10:20 PM

This country will turn more and more into a muslim run country and then the whole continent like Europe is will follow. Does anybody remembers Separation of Church and State?

ingnesis on March 8, 2009 at 10:21 PM

ingnesis on March 8, 2009 at 10:21 PM

You are absolutely correct…There is no separation between sharia finance…sharia law and islam…
They are one in the same…However…if you believe some…islam is an ideology …not a religion…
Something to ponder.

jerrytbg on March 8, 2009 at 10:35 PM

Craziness. Let’s just cater to Muslims in everything… *Sigh*

Aronne on March 8, 2009 at 11:08 PM

I have no problem with the private sector giving 0% loans to people, but the STATE? (facepalm)

popularpeoplesfront on March 9, 2009 at 12:10 AM

“Mosque and State” cannot be equated with “Church and State” because the mosque is a symbol of an oppressed people. Whereas the church is a symbol of intolerance, hate, and committing oppression against everyone else.

Surely you know by now that the display of “Thou shalt not kill” in a courthouse is highly offensive, whereas Sharia law should be adopted by the very same courts.

It’s all a product of reverse evolution, and we must embrace it.

jediwebdude on March 9, 2009 at 12:24 AM

I am so happy to see this, as my NEW religion, “I-Slam” prohibits the charging of anything for housing, transportation and food.

Where’s my stuff??

MagicalPat on March 9, 2009 at 8:56 AM

If these people want to still live in the stone age with antiquated principles then let these people save up to pay cash for a home or keep renting. Why does every government bend over backward to accomodate muslims?

cadams on March 9, 2009 at 8:56 AM

Can’t wait for the Minnesota Sharia domestic violence exceptions:

“Oh, she was beaten (lightly)? She obeyed you and you took no further action against her? Sir, you are free to go. Please don’t sue.”

LibTired on March 9, 2009 at 9:10 AM

Why does every government bend over backward to accomodate muslims?

cadams on March 9, 2009 at 8:56 AM


LibTired on March 9, 2009 at 9:10 AM

Our puppets in DC are controlled by the captains of industry who supply their means of re-election. What product brand wants to be alienated from 20% of the world’s population. Our confusion constantly lies in the naïve belief that the majority of our congressmen represent the people. Time to wakey-upy.

Ernest on March 9, 2009 at 9:34 AM

Isslam must be stopped.

Let’s roll.

ex-Democrat on March 9, 2009 at 10:14 AM

The left and isslam love each other…same basic goal: destroy America:

United in Hate: The Left’s Romance with Tyranny and Terror

ex-Democrat on March 9, 2009 at 10:17 AM

I had to do a double take,

The faithful in the picture look Headless because of the caps(fez?) that they are wearing. Maybe that iswhy they pray in that position. Total submission to the allah-being. An Imam could cut their heads off with a scimitar at a moments notice

Burgher on March 9, 2009 at 11:45 AM

why do i still live in this state…

alexraye on March 9, 2009 at 2:45 PM

what is in the drinking water in minn. just when you think they hit the bottom of the barrel they break out a new
barrel.maybe we could raise some money by selling the state
to canada.they way they act up there 20 bucks would be too much

wade underhile on March 9, 2009 at 3:15 PM

Why are we buying houses for people at six figures a throw in exchange for monthly payments over the next 30 years?

Technically, the initial investment in this type of loan would be paid off after about 14 years (13 years, 10 months to be precise) after which all future payments would be “profit”. So the state would not be on the hook for the entire 30 years. There is still the question of opportunity costs, but, since we are talking about government, it is unlikely that they would have made good use of that money anyway so it is probably a wash. Your point still stands, the problem just isn’t as drastic as your text implies. Your other points about state intervention in the market are valid, of course.

One thing to note: since there is no division of “principal” and “interest” the buyers would technically be cheated out of the opportunity to pay off the loan early through additional principal payments. Over the course of a thirty year loan, the interest paid is more twice the amount of the principal at current rates ($100K loan results in $210K interest for a total “sharia loan” of $310K.) Under normal loan conditions you could vastly reduce the term of the loan by making slightly higher payments than required. But that would not be a possibility with these “sharia loans” since the entire loan is considered principal and the payment schedule does not change. Of course, since this is part of their own religious belief, the buyers would be essentially cheating themselves so it isn’t an ethical problem. But how long do you think it will be before the ACLU figures out that these folks are losing money and sue the state for “religious discrimination”?

JackOfClubs on March 9, 2009 at 5:53 PM