In the early 2000s, mortgage financier Freddie Mac agreed to buy these types of “mortgages,” and at this point, others probably wish they had too. Because Islamic mortgages tend to be more straightforward than some of the exotic offerings seen in traditional Alt-A and subprime lending, the homeowner default rate is probably a lot lower.
Fannie Mae is also an investor in these types of loans, which they refer to as “no-interest financing,” and in lieu of a mortgage, they become an investor in the property itself.
This allows smaller banks and mortgage lenders to offer the option and then sell it to Fannie or Freddie so they have funds to make new loans to future customers. The lack of trickery and bait-and-switch has encouraged more Muslims to consider an Islamic mortgage, as it further justifies the choice.