Borrowing money with ribbis is prohibited by the Torah. Outside of Eretz Yisrael, though, many reason that such a situation hardly ever arises.
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R
ecently mortgage companies in the UShave greatly simplified their once-complicated procedures making loan funds more readily accessible to borrowers. For Torah-observant Jews however there remains one aspect of the mortgage industry that is far too often overlooked namely the prohibition of ribbis.
While many large banks and other lenders are owned primarily by non-Jews who are not subject to the prohibition of ribbis some of the foremost mortgage companies in theUS lending billions of dollars each year are indeed Jewish-owned. Many times however borrowers fail to realize this fact because the owner of the lending institution is not Torah-observant and thus to all outward appearances is indistinguishable from a non-Jew.
In fact one of the most popular mortgage programs in Americais run by a well-known multibillion-dollar corporation whose majority shareholder is Jewish. The result is that thousands of scrupulously Torah-observant Jews — residing in places like Brooklyn Lakewood Monsey and beyond — have been unwittingly borrowing money with ribbis.
An easy solution to this issue would be to arrange for the availability of a heter iska for prospective Jewish borrowers which would obviate all ribbis concerns. The basic premise of heter iska can be summarized as follows: While viewed by many as more heter and less iska in fact the opposite is true. A proper heter iska is a legally binding contract that transforms the loan into a genuine investment with a specific forecast for returns earned from the funds invested. The “lender” is in actuality an investing partner investing his money with the “borrower ” who is in essence the managing partner in the investment toward which the loan principal will be applied. While the specifics of the actual partnership of the iska can be structured in a few different ways an iska is a real investment partnership not a loan and the managing partner must apply the principal toward an investment for which there is a realistic expectation that it will produce the specified return.
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