Bulletin: TX2017004

Dear Associates:

Stewart Bulletin SLS2018007 sets out certain broad principles and concepts that would allow Stewart Title Guaranty Company (STGC) to issue policies insuring loans complying with Islamic principles. That Bulletin remains STGC’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 SLS2018007. 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.

STGC 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 an STGC 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 an STGC underwriter’s approval if the transaction complies with SLS2018007. However, STGC 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.

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