the model, we have realized the following achievements at LARIBA and
the Bank of Whittier:
a.The mortgage portfolio produced by LARIBA and the Bank of Whit-
tier was rated as one of the best 64 performing portfolios in the United
States. This was reported to us by United Guaranty Insurance Co.
b.Fannie Mae informed us that our mortgage portfolios with them
were one of the ten best-performing portfolios in the Western region,
which extends from Colorado to Hawaii.
c.The delinquency and foreclosure rate is a fraction of the national
average.
It is interesting to share with the reader the experience we had
when LARIBA’s bankers first met with Freddie Mac to allow their rep-
resentatives to inspect and look into what we do, so that Freddie Mac
could proceed with its fact-finding and approval process. We explained
our model to the four representatives. The head analyst asked us, ‘‘Do
you really mark the house to market?’’ We said yes. He asked to review
the files. He was impressed. It took Freddie Mac six weeks to approve
LARIBA, compared to the national approval time needed of six
months. Later, Fannie Mae followed Freddie Mac’s lead.
3.The rate of return on investment, based on the actual market rental
value of the property, is marginally lower than the return on capital
expected by investors:In this case, the RF bank officer and/or credit
committee would advise the prospective buyer to try to renegotiate the
price to render the investment economically viable. At LARIBA, we
have had a number of successful experiences where we helped a number
of community members negotiate a lower price for the home.Our customers may sell the property at any time and pay back the
remaining capital owed to LARIBA (the balance of the financing amount).
Partial prepayment may also be made at any time. Partial payments are
applied against the purchase installments in inverse order of maturity, and
the rental component is reduced proportionately.
B. Documentation of RF Financing for U.S. Compliance The banking and
financing laws and regulations in the United States are among the strictest
in the world. RF financing in America is offered using two approaches:
1.Start with the conventional riba-based banking product and devise
ways and means to ‘‘force’’ fit it to an ‘‘Islamic’’ solution that would
comply with (or at least look like it complies with) Shari’aa, using intel-
lectual and expert help from experienced riba bankers, attorneys, and
ex-regulators. One of the techniques is the creation of a special purposeRF Banking Model for the 21st Century 267