Islamic families have long been hampered from owning their own homes, condos and townhouses in the United States because religious doctrine bars them from paying or receiving interest. Freddie Mac made the investment in contracts from American Finance House--Lariba under an agreement that makes it the nation's first Islamic financial institution to achieve Freddie Mac seller/servicer status.

"Many American-Muslim families have stayed out of the housing market for years because they are not allowed by Islamic jurisprudence to pay, receive or be charged interest," explains Dr. Yahia Abdul-Rahman, who founded American Finance House--Lariba in Pasadena, CA in 1987. "Working with Freddie Mac will provide (our company) with much needed liquidity to meet the growing demand for Islamic home financing in the American-Muslim community. This also will provide, in the near future, members of the community who want to invest their savings according to Islamic law, with proper Islamically sanctioned investment instruments."

The housing finance contract uses standard real estate financing documents and is serviced like a conventional Freddie Mac mortgage. The key to the model is an agreement between American Finance House--Lariba and the prospective homeowner under which the financing company buys the property jointly with the client and the client purchases the shares of the financing company at cost. The homebuyer owns the title to the property, with the finance company holding a first-position lien. Before the purchase takes place, both sides negotiate maximum monthly payments based on the property's sale price and fair rental value.

Islamic home financing through American Finance House--Lariba is available now in 15 states: Arizona, California, Colorado, Florida, Georgia, Illinois, Maryland, Massachusetts, Michigan, Minnesota, New Jersey, Oregon, Texas, Virginia and Washington. Availability is pending in six more states: Alabama, Connecticut, Nevada, North Carolina, Pennsylvania and Ohio.

In addition to American Finance House - Lariba, Freddie Mac is working with other lenders to meet the need for Islamic home financing in America. The move drew praise from immigration advocates, who point to the growing Islamic community. "Becoming a homeowner, perhaps more than any other event, marks the moment when those who are new to the American community feel that they are truly at home," says Frank Sharry, executive director of the National Immigration Forum.

Freddie Mac is a stockholder-owned corporation established by Congress in 1970 to support homeownership and rental housing. More information on the housing finance program can be found at http://www.lariba.com.