Bulletin: TX2017004

Date:
August 08, 2017
To:
All Texas Issuing Offices
RE:
UNDERWRITING - Loan Documents Complying with Islamic Principles

Dear Associates:

In 2008, Stewart issued Bulletin SLS2008002 setting out certain broad principles and concepts that would allow Stewart to issue policies insuring loans complying with Islamic principles. That Bulletin remains Stewart’s position.

We have become aware that some lenders may be seeking new vehicles to make loans using Islamic principles in ways not approved by SLS2008002. Such loans may involve sale-leaseback situations where a borrower conveys the property to the lender or an affiliate of the lender which in turn “sells” it back to the borrower using a co-ownership document or something similar.

Stewart remains interested in assisting borrowers to finance homes in Texas using methods that comply with their religious beliefs. However, such loans must comply with long-standing rules as set down by the Texas Constitution, the Texas Legislature, and the Texas Supreme Court. Sale-leaseback transactions have been looked at with suspicion by the Courts and must have a Stewart Texas underwriter’s approval.

Accordingly, if you are presented with a set of loan documents that utilize a co-ownership concept or a lease with a title transfer at the end of the lease payments you may insure such transactions without a Stewart underwriter’s approval if the transaction law complies with SLS2008002. However, Stewart underwriter approval is needed in a transaction where the owner or purchaser of property is required to convey the property to the lender or an affiliate of the lender and the lender conveys the property back to the borrower for an increased amount to cover an amount equivalent to interest in a more traditional loan.

If you have any questions relating to this or other bulletins, please contact a Stewart Title Guaranty Company underwriter.

For on-line viewing of this and other bulletins, please log onto www.vuwriter.com.

THIS BULLETIN IS FURNISHED TO INFORM YOU OF CURRENT DEVELOPMENTS. AS A REMINDER, YOU ARE CHARGED WITH KNOWLEDGE OF THE CONTENT ON VIRTUAL UNDERWRITER  AS IT EXISTS FROM TIME TO TIME AS IT APPLIES TO YOU, AS WELL AS ANY OTHER INSTRUCTIONS. OUR UNDERWRITING AGREEMENTS DO NOT AUTHORIZE OUR ISSUING AGENTS TO ENGAGE IN SETTLEMENTS OR CLOSINGS ON BEHALF OF STEWART TITLE GUARANTY COMPANY. THIS BULLETIN IS NOT INTENDED TO DIRECT YOUR ESCROW OR SETTLEMENT PRACTICES OR TO CHANGE PROVISIONS OF APPLICABLE UNDERWRITING AGREEMENTS. CONFIDENTIAL, PROPRIETARY, OR NONPUBLIC PERSONAL INFORMATION SHOULD NEVER BE SHARED OR DISSEMINATED EXCEPT AS ALLOWED BY LAW. IF APPLICABLE STATE LAW OR REGULATION IMPOSES ADDITIONAL REQUIREMENTS, YOU SHOULD CONTINUE TO COMPLY WITH THOSE REQUIREMENTS.

References

Bulletins Replaced:
None
Related Bulletins:
SLS2008002 Sharia Compliant Mortgages
Underwriting Manual:
None
Exceptions Manual:
None
Forms:
None