We are excited to introduce our new ribbis awareness initiative, addressing various transactions that raise ribbis concerns. Over the next few weeks, we will publish a series of articles that highlight ribbis issues that people might not be aware of, which could pose problems during the home purchasing process.
PART II
Submitted by the Bais Hora’ah
In the previous issue, we explained that before borrowing money, customers must investigate whether the lender is Jewish, and if he is, whether he has a proper heter iska. If someone takes a mortgage from a bank and only afterward finds out that it has at least one Jewish owner, and there is no heter iska, there is no way to remedy the situation retroactively. He will likely have to refinance the loan by taking a loan from a non-Jewish lender to repay the first loan, which will usually cost a lot of money. It is therefore vital that borrowers find out long before the final stages of taking a mortgage whether the lender is Jewish, and whether there is a proper heter iska in place.
Do not wait until the last minute, because that, too, can cause unnecessary financial loss, such as missing the closing deadline and potentially losing your down payment. Additionally, due to time pressure, you might be forced to use a less reliable heter iska.
We advise potential borrowers to review the information compiled by KFI Kosher, which has invested great effort into investigating this matter and has arranged with many large banks enhanced heter iska documents, with arbitration clauses.
What determines whether a bank is Jewish-owned?
The answer to this question is very complicated and depends on many factors, and each individual case may need to be posed to a Rav who is well-versed in the relevant halachos.
Before asking a Rav, a customer should try to gather the following information:
- Is the company privately owned, or publicly owned?
- If there are Jewish partners in the lending institution, do the Jewish partners have enough of a stake to influence management decisions?
The answers to these questions will provide the Rav with the background information he needs in order to rule whether there is a need for a heter iska (see Shu”t Igros Moshe, Even Ha’ezer 1:7; Bris Yehuda 30 note 43; Mishnas Ribbis 2, note 10).
What is the status of a credit union in hilchos ribbis?
A credit union differs from a traditional bank in that it is owned by all the members of the union, who are considered equal partners regardless of how much they invest; those who place a million dollars in the credit union are on par with those who invest $10. Some poskim rule, therefore, that if even one member of the union is Jewish, he is considered enough of a partner to create a ribbis issue that must be addressed.
In the past, the European banking system was similar to the system of credit unions, and the poskim struggled to find leniencies to permit borrowing from such a lending institution, based on the combination of several sevaros (logical arguments).
Many poskim rule, however, that because nowadays loans can be taken from financial institutions owned by non-Jews or from those with a heter iska, one should not rely on those leniencies. If there is a great need for a loan from a credit union, one should consult a Rav.
Co-borrowers
Often, a person who wants to take out a mortgage does not have enough credit history or income, and the bank is willing to lend them money only if someone cosigns the loan, with the cosigner listed as a borrower. Some poskim view this as though the cosigner is taking a loan from the bank and then lending it to the (actual) borrower with ribbis (Mishnas Ribbis 18:14), which is categorically forbidden.
It is likely, however, that the cosigner’s status is not that of a borrower but of an areiv kablan (guarantor who agrees that the lender may demand payment from him without going to the borrower first). The only reason the bank categorizes him as a borrower is so they will be able to force him to pay as an areiv kablan and not a regular areiv (guarantor who may be approached for payment only if the borrower defaults).
But even if the cosigner is an areiv kablan, there could still be a ribbis issue, because many poskim rule that although a Jew may serve as a regular areiv for a loan taken from a non-Jew, he may not serve as an areiv kablan on a loan (Shulchan Aruch, Yoreh Dei’ah 170:1, Chavas Daas ibid. 1; Shulchan Aruch HaRav, Hilchos Ribbis 64).
It is possible to remedy this issue by setting up a proper heter iska.
