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Islamic Mortgage Products

Islamic Mortgage Products. Islamic Finance Forum UC-Berkeley School of Law. Umar F. Moghul 860.240.6103 | umoghul@murthalaw.com. April 9, 2011. Islamic Real Estate in US. Mortgage Products (Residential, Commercial) Foreign Acquisitions (Funds and One-off) ......But domestic products?.

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Islamic Mortgage Products

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  1. Islamic Mortgage Products • Islamic Finance Forum • UC-Berkeley School of Law Umar F. Moghul 860.240.6103 | umoghul@murthalaw.com April 9, 2011

  2. Islamic Real Estate in US • Mortgage Products (Residential, Commercial) • Foreign Acquisitions (Funds and One-off)......But domestic products?

  3. Foreign Activity • Buyers: investment banks, investment companies, family offices • Properties: multifamily, warehouse/ distribution, medical office • Acquisition Financing: murabahah or ijarah mortgage financing; non-standardized

  4. Islamic Residential Market • Market Demand: • What does it mean to be “Islamic”? • And who decides? • Market Supply: • Domestic – E.g., Guidance, University Bank • Foreign – E.g., HSBC, UBK

  5. Product Structuring • Business Issues: • Consumers (“Islamic-ness”, interest deductions, deed, and conventional comparisons: pricing & risk-reward) • Liquidity • Legal Issues: • Leverage alternative • Documentation

  6. Market Success… • Establishment  Product Design  Market Demand and Marketing  Origination  Sales  Liquidity • But if sales are poor……

  7. Leverage • The Prohibition of Riba • Prohibited to charge/ earn interest, or any other benefit, in a loan transaction • Loans constitute charity, not profitable activity • Prohibited to charge default penalties, except perhaps costs incurred

  8. Market Structures • Murabahah (Cost plus Mark-up): • Form vs substance – Who decides? • OCC Letter Ruling/ Regulations and business customs • NYS Tax ruling • Liquidity challenge

  9. Market Structures • Ijarah (Finance Lease): • Ownership • Form vs substance – Who decides? • OCC Letter Ruling/ Regulations and business customs

  10. Market Structures • Musharakah (Diminishing Partnership): • Unchartered Territory • No OCC Letter, but Illinois... • PLS Sharing - Market Perceptions • Negative Equity?

  11. Umar F. Moghul • +1 860 240.6103 • umoghul@murthalaw.com www.murthalaw.com

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