Anthropology 001
Foreclosure Essay
The Islamic View of the Foreclosure Crisis
The foreclosure crisis that took place in the United States in 2010 has affected a great number of people because they had lost their homes due to inappropriate foreclosures that large banks and other lenders had created. In the online article, "Homes, Not Tents", a San Francisco neighborhood named Bernal Heights had occupants come together in solidarity to protest against the banks for lending predatory loans and subprime loans with high interests rates and high risk, which lead to the foreclosure homes in this area; this was known as the Occupy Bernal movement which took place in 2011. In the article, "Enginnering an Islamic Future" by Bill Maurer, we see an Islamic Banking system that differs from the U.S. capitalistic system. From an Islamic Banking perspective, the issues that would arise with this foreclosure crisis include unethical issues, issues of deregulation of the subprime loans, and the loss of the American dream and their identity to those who lost their homes in Bernal Heights.
First, the groundwork of the Islamic Banking is that it is ethical, meaning that it takes the well being of their people into consideration. In Bernal Heights, the large banks, such as Well Fargo and Wachovia, became the primary lenders of money through subprime loans. Subprime loans are loans that are given to people who do not meet the requirements for a prime loans. These banks were constantly making loan contracts with individuals who they knew were not going to be able to pay back their interests with their current income. So basically, these banks were lending for their own self interests to make a profit for themselves, who are the lenders. The lenders did not seem to value the borrower's risk of losing their property. The borrowers had suffered the consequences because they lost their homes. From an Islamic Banking view point, they would consider this unethical. It would be seen as inhumane to lend someone money knowing that they would never be able to repay it back, and if they did not, then they would be robbed of their home. It would be a concern for the Islamic Banking because they value the welfare of their people. This banking system believes that everyone has the right to maintaining a stale life unlike the Western Banking view that only wants to make a profit of the risk of the borrowers. The point of this perspective is about helping people live a comfortable life. The Occupy Bernal movement people had used their agency to resist and push back against the banks who were the lenders of the subprime loans. The Islamic Banking system acknowledges that business always involves risks, but this is too much risk that the banks had put on the borrowers in Bernal Heights. The banks would gamble with the loans wit the intent of winning additional money for themselves. In regards from an Islamic perspective, this would be unethical because gambling is prohibited under Islamic Law. The events that took place in Bernal Heights would not be ethical under the Islamic Banking system.
Compared to the foreclosure situation in the United States, Islamic Banking had a different approach to lending practices. In the Islamic Banking system, the issue of deregulation would raise a lot of questions. First, with the elimination of social protections of the loans, the liability and risks of these loans had been placed on the borrowers instead of the lenders, which were the banks. The high interests rates that kept accumulating of the loans that were borrowed were high enough to begin with because there were no fixed interest rates. From the Islamic perspective, if certain polices had monitored these interest rates according to the borrower's income, then the financial crisis would not have taken place. The predatory loans were contracts that seemed to be set in stone for the banks, meaning that one the money was borrowed from them, the contract was no longer negotiable. From an Islamic Banking perspective, this would be opposed by a Khiyar all-shart contract. According to Maurer, Khiyar all-shart is a contract that brings in an agreement in which on or both parties from either side has the right to rescind an otherwise binding contract within a specified period of time from its start...the contract itself cannot be bought or sold (Maurer, 10). The reason Islamic Banking made this contract negotiable was because they did not want to leave their customers empty handed. This contract would only work if they remained connected to the issue in the proposed contract. If a contract like this one had been implemented in with the predatory loans, than the financial housing crisis could have been avoided. The issue at hand in Bernal Heights was the same. Homeowners were borrowing money to pay their homes; therefore, it would have been easy to negotiate the interest rates of the loans, but the banks did not want to deal with this because they were busy bailing out other banks. They made it clear that the loan agreements were not negotiable. For the homeowners of Bernal Heights, they lost hope because they knew they were not going to be able to pay the loan back. If these loans had similar Islamic Banking regulations, then the foreclosure crisis could have been prevented.
Lastly, the foreclosure crisis also raised the issue of losing the American Dream and homeowners' identity. Coming to America, one may come to believe that their life will prosper with freedom and have an equal chance for success. In the U.S, religion and economics are separate because In regards to Bernal Heights, the elderly homeowner, Thomas German, had his home marked down for foreclosure. He served for our country for freedom, but his freedom and identity was taken away when the banks decided to take his home. From an Islamic Banking perspective, this would be seen as unethical because they value both religion and economics as a whole. They want their people to be financially secure and stable. They value that these homes have been part of the American Dream for these people. They also lose their identity because the banks treat them as objects, meaning that they seen as a property that has been foreclosed, and they fail to take into consideration the homeowners value. We can maintain an identity without a home, but it would be very difficult. Having a home provides the sense of independence and financial success. In Islamic Banking, part of their goal is to help individuals gain financial success and independence without giving them a burden like the one taking place in Bernal Heights.
To conclude, if we had the Islamic Banking system implemented in the United States, the housing crisis would have taken place like it did in Bernal Heights because this system is very ethical. Their contracts are negotiable which gives some leeway to those who are not able to meet keep up with them. Islamic Banking also takes into consideration the value of the individual and wants to help them attain success and their dreams at reasonable costs for those in need of assistance.