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Islamic finance in the United States: a small but growing industry
This article provides an overview of the potential market for Islamic finance and some of the challenges providers face in serving this unique market.
AUTHORS: Paulson, Anna L.; Chiu, Shirley; Newberger, Robin G.
Financial access for immigrants: highlights from the national conference
AUTHORS: Newberger, Robin G.; Chiu, Shirley; Paulson, Anna L.
Immigrant financial market participation: defining the research questions
AUTHORS: Chiu, Shirley; Newberger, Robin G.; Rhine, Sherrie L. W.
Nontraditional mortgages: appealing but misunderstood
Nontraditonal mortgages offer potential benefits for home buyers in strong, stable housing markets. Various payment options increase flexibility and enable borrowers to significantly reduce payments in the short term. In rapidly appreciating housing markets, these options also allow borrowers with certain needs, such as those who must live in areas defined by their employers (e.g., police, municipal workers, etc.), to make home purchases where real estate price increases have outpaced their capacity to buy using conventional financing. These mortgages typically feature lower initial monthly payments, or the option to make lower payments for some period, compared with traditional fixed or adjustable rate mortgages. However, these lower payments can increase significantly if the borrower initially makes only the minimum payment, which may comprise less than the interest due. Nontraditional mortgage products can be effective tools for borrowers who are financially sophisticated and understand the risks of payment shock and negative amortization.1 Less financially savvy and less credit-worthy borrowers may not necessarily understand the terms and consequences of these products. In some instances, borrowers have found they owe more than their house is worth, even in appreciating markets, as a result of negative amortization.
AUTHORS: Chiu, Shirley
Islamic finance: meeting financial needs with faith based products
This article explores the demand for and the availability of financial products for Muslims who adhere to religious prohibitions against receiving and paying interest. This is an evolving area of consumer and small business finance, and the goal of this article is to provide an overview of the potential market for Islamic finance, to describe the organizations that currently provide these products, and to highlight some of the challenges of satisfying both religious tenets and government regulations. Two facets of financial products, asset financing, and investments, are addressed. Furthermore, the article identifies three types of organizations that offer Islamic financial products and services: financial entities, nonprofits, and for-profit ventures that sell models of Islamic finance products and consulting services to firms. Drawing largely on interviews with regulators, practitioners, and experts in the field, we find that the few financial entities that offer formal Islamic finance in the United States are often motivated by strong grassroots demand in their local service areas. These entities are often charting new territory in terms of product development and conformity with government regulations. Regulatory issues have not yet been tested on a large scale, and decisions as to whether a bank may offer an Islamic financial product are typically determined on a case by case basis.
AUTHORS: Chiu, Shirley; Newberger, Robin G.