Islamic mortgage lender in Canada fails
Although UM Financial Inc went into receivership back in October, the consequences of the bankruptcy are beginning to be noticed only now.
Besides the fact that the case risk is giving a bad name to sharia-compliant finance in North America, it also poses a series of legal hurdles that could have as a result to mortgage holders the losing of their homes.
Since the use of interest is forbidden in Islam, sharia-compliant mortgages are organized so that lender and homebuyer share the costs of purchasing a home. Instead of paying interest, homeowners preffer to rent the property from the lender while gradually purchasing the outstanding share of their house.