The Islamic Implication of the Standard Benchmarks in the American Islamic Mortgage Product
Journal of Islamic Banking & Finance 32.4 (2015)
9 Pages Posted: 3 May 2016 Last revised: 14 Jun 2016
Date Written: October 1, 2015
This paper examines the permissibility of the American Islamic mortgage sector use of the standard metrics synonymous with the conventional and conforming mortgage; debt to income ratio and loan to value. For this purpose, section one will discuss the formation of the traditional conventional mortgage juxtaposed with the reduction in the savings as well as an increase in spending by Americans. The second section will explore the relevant Islamic financial views on overspending and the correlation with negative societal effects such as excessive debt, grief as well as the lack of fulfillment of the rights of other. The conclusion will correlate the current American Islamic finance mortgage options to the overspending mentality due to the overwhelming adherence to the standard benchmarks. The conclusion suggests that mortgages structured with the conventional benchmarks have had a detrimental effect on personal and societal well-being, albeit labeled Islamic or not. Suggested further is the moving away from the conventional benchmarks in the next evolutionary model of the American Islamic mortgage product.
Keywords: Islamic finance, mortgage, debt-to-income, loan-to-value, musharaka, ijara, murabaha
JEL Classification: O1, P4, P5
Suggested Citation: Suggested Citation