Will the ACLU sue the State of Minnesota over “Muslim Mortgages?”

Cross posted at: www.thepoliticalclass.com


Will the ACLU sue the State of Minnesota over “Muslim Mortgages?”


From Powerline today. Full story here.

Minnesota has become the first state in which a public agency is offering “Muslim mortgages.” The issue arises because on a strict interpretation of Islam, Muslims are prohibited from either collecting or paying interest–a fact that tends to make home ownership difficult. The Associated Press reports:

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. …

Here’s how the mortgage, known as Murabaha financing or “cost plus sale,” works:

The state buys a home and resells it to the buyer at a higher price. The down payment and monthly installments are agreed to up front at current mortgage rates.

The deal is identical to a thirty-year fixed-rate loan, except there’s no additional interest, because the higher up front price factors in payments that would have been made over the life of a traditional mortgage.

A handful of private banks and lending institutions offer Islamic mortgages in the U.S., but Minnesota Housing is the first state agency to offer such a product. The program is the brainchild of Hussein Samatar, director of the African Development Center in Minneapolis.

Powerline goes on to comment on this program but the 400 pound gorilla in this story is separation of church and state.  Can a state become a third party to a contract for the specific purpose of  facilitating religious beliefs? What about the loss of deductibility of interest on the loan from federal taxes?  How long before the homeowners approach the IRS and ask for a ruling?

Where are the hoards of ACLU teams parachuting in to the state capitol over this program? Busy folding their prayer mats perhaps?