Fee-based product meets Muslim financing needs
Credit union creates home ownership financing product with support from a local imam.
Creating a fee-based home ownership financing product for Muslim members has been a lesson in serving faith-based communities at Opportunities Credit Union in Winooski, Vt.
Opportunities built its home ownership product for Muslim Vermonters by listening to members, learning about a faith community’s religious principles and values, and staying determined to get it right, says Kate Laud, president/CEO at the $60 million asset credit union.
The two-year process allowed Opportunities to create a home ownership product that gives members exclusive enjoyment and use of a whole property. In exchange for this exclusive right, Opportunities asks the homeowner to make “profit rate payments.”
The new product will launch by July 2022.
“The structure will help our Muslim neighbors buy a house instead of raising their families in rental apartments,” Laud says. “We will offer a home financing program that is competitive and, most important, Shariah-compliant.”
Opportunities will serve as a correspondent for the financing program. It will originate, process, and close the transaction, and then sell it to an investor who handles servicing.
“Monthly payments are comprised of two parts under this arrangement: a profit payment and an acquisition payment,” Laud says. “Together, these two amounts make up a predictable monthly amount which is competitive with the monthly payments offered in a conventional mortgage.”
She adds that the obligation to pay is styled as an installment purchase, where the consumer agrees to make monthly payments to a co-owner. These monthly payments result in a scheduled transfer of the co-owner’s ownership share to the consumer, which are calculated in the same manner as a traditional amortization schedule.
Laud expects most transactions to range near the area’s average home value of $250,000. She hopes this type of financing will attract Muslim members from all 14 counties in Vermont.
The product was developed with support from the imam at a local mosque, who is already a credit union member. The imam led the credit union to other sources of information.
Several summer interns from Champlain College, all from Muslim families, provided marketing support and student perspectives.
“Bringing a product like this to market takes a village,” Laud says. “We’ve had nothing but support from local banks, the local mosque, a bank in California, our investor in Virginia, and our friends at the Vermont Department of Financial Regulation.”
Along the way, it was important to learn about the special considerations for serving a faith community seeking to observe religious values. While COVID issues delayed progress, Opportunities also was “very cautious about doing this right,” Laud says.
She adds that Opportunities continues to create new products aimed at traditionally underserved groups, including:
- Vehicle loans that lower the interest rate by 2% for borrowers with low credit ratings or high outstanding car loan balances. The loans are supported by a Vermont savings bank grant.
- “Impact loans” of up to $50,000 with a 3% interest rate for business borrowers with low credit ratings.
- A 0% interest rate loan now in development to pay for the cost of naturalized citizenship applications, which require a $725 application fee plus other costs. Gifts from an anonymous donor and the Vermont Community Foundation created the revolving loan fund.
