For more than two decades, Guidance Residential has offered Shariah-compliant home financing through a model built on co-ownership rather than interest-based lending — an approach grounded in Islamic financial principles.
With more than $10 billion in financing provided to date, the Reston, VA-based company is the largest U.S. provider of Shariah-compliant home financing for Muslim-American families. And now for the first time, another financial institution is originating and selling these mortgages through a correspondent platform: Community Credit Union ($113.5M, Lewiston, ME).
A state-chartered cooperative with approximately 12,700 members, Community Credit Union saw a specific and persistent need in its community. Many Muslim residents were eager to become homeowners but had no interest-free financing option that aligned with their religious beliefs. After nearly a decade of listening, advocating, and partnering with experts, the credit union became the first in the nation to offer Shariah-compliant home financing using Guidance’s Declining Balance Co-ownership Program.
This collaboration isn’t just about a new mortgage program — it’s about values, service, and inclusion. By creating a scalable, compliant model, the two organizations have opened a door for not only the Maine credit union’s market but also other credit unions across the country to serve underserved populations in their own communities.
Here leaders from both institutions explain how the partnership works, what they’ve learned, and why this model aligns so well with credit union cooperative principles.
Instead of interest, the buyer pays a usage fee in exchange for their exclusive use and enjoyment of the home. … The program has been reviewed by world-renowned Islamic scholars and developed with Freddie Mac and 18 law firms to ensure full legal, Shariah, and GSE compliance.
Guidance Residential’s Perspective
John Tuma, Vice President of Strategic Partnerships
What are the core elements that make a mortgage product compliant with Shariah law, and how does Guidance Residential’s Declining Balance Co-ownership Program meet those standards?
John Tuma: Shariah law prohibits the use or receipt of interest (riba) and encourages risk-sharing, fairness, and asset-backed transactions. Our Declining Balance Co-ownership Program uses a model where Guidance and the homebuyer jointly purchase the home. The buyer gradually buys out Guidance’s share over time through fixed monthly payments.
Instead of interest, the buyer pays a usage fee in exchange for their exclusive use and enjoyment of the home. That fee is based on a pre-agreed profit rate. This structure maintains Shariah compliance while aligning with modern mortgage operations. The program has been reviewed by world-renowned Islamic scholars and developed with Freddie Mac and 18 law firms to ensure full legal, Shariah, and GSE compliance.
How does this differ from a standard correspondent lending arrangement?
JT: The key difference is in the contract structure. This is not a loan — it’s a co-ownership agreement. That surprises some partners at first. But operationally, the process is quite familiar. Credit unions originate, process, underwrite, and close the contract using standard Agency guidelines. The documents include a few specialized agreements to ensure Shariah compliance, but we’ve designed everything to integrate easily. After closing, we purchase the contract, securitize it through the GSEs, and handle servicing. It’s a low-friction way to serve a highly motivated, underserved market.
How much demand is there for this kind of product among Muslim-Americans?
JT: We’ve financed more than 40,000 homes, but that’s a fraction of the need. There are more than 3.5 million Muslim-Americans in the United States, and many postpone or avoid homeownership entirely because conventional mortgages aren’t an option for them. We estimate hundreds of thousands would consider purchasing a home if they had a trusted, values-aligned financing option in their community. This represents a major opportunity for credit unions, whose entire industry was founded on and continues to be committed to member service, financial inclusion, and community trust.
How do you work with credit union partners to navigate compliance and regulatory requirements?
JT: Every state and credit union has different regulatory frameworks. In Maine, Community Credit Union worked closely with state lawmakers to clarify that this model fit within the state’s rules. That step won’t be necessary everywhere, but we work with each partner to assess their own regulatory position. We also offer a broker model, available in most states, that simplifies participation even further since Guidance funds the contracts directly. All contracts are underwritten to standard Agency guidelines and are ultimately securitized through Fannie and Freddie, which helps keep the structure familiar and straightforward. Our job is to make this accessible, flexible, and secure for our partners and their members.
Why was now the right time to allow credit unions to originate your program directly?
JT: After 20 years of refinement, we had the platform, compliance structure, and support systems in place. Community Credit Union brought the commitment, local insight, and willingness to do the groundwork. Together, we created a scalable correspondent model that preserves the program’s integrity while expanding access to halal home financing for underserved communities. We’ve since launched a broker platform as well, which is a streamlined option for even easier implementation. Our missions were aligned, the demand was already there — and the Community Credit Union team, under Jennifer’s leadership, helped turn that shared vision of expanding values-based homeownership into a reality.
Why is Shariah-compliant mortgage such a critical piece of values-based financial services for Muslim-American consumers?
JT: Buying a home is one of the most important financial decisions a family makes. If that decision can’t be made in accordance with their values, many families simply delay or forgo homeownership altogether. By offering a Shariah-compliant option, credit unions demonstrate cultural understanding and genuine inclusion.
That builds lasting trust, which can lead to stronger relationships across other products — like checking, savings, and retirement services. This is about more than mortgages. It’s about long-term financial empowerment and meeting communities where they are, with solutions that reflect their principles.
How can credit unions learn more?
JT: We’re here to support you. Reach out to us at partners@guidanceresidential.com to explore how the program works and whether a correspondent or broker model is the right fit for your credit union. There’s no cost to get started, and we provide training, support, and a complete onboarding process.
Community Credit Union’s Perspective
Jennifer Hogan, President/CEO, Community Credit Union
What motivated Community Credit Union to pursue a Shariah-compliant homeownership option, and what did that nearly 10-year journey look like?
Jennifer Hogan: We kept hearing the same thing from members of our local Muslim community: they wanted to buy homes, but they couldn’t do it with traditional interest-based loans. That’s not something we could ignore.
Over the years, we researched, built relationships, and explored what was possible. We found the right partner in Guidance Residential. It took time to align the legal, operational, and compliance aspects, but we’re proud of where we landed.
How big is the potential market locally, and how does this program align with your mission?
JH: There are more than 7,000 Muslim-Americans in Maine, and many of them live in our service area. We’re a CDFI and a low-income designated credit union (LICU), so we exist to serve people who are often overlooked or underserved. Offering Shariah-compliant financing aligns with our mission to promote inclusion, community development, and financial opportunity for everyone we serve.
How does originating a Shariah-compliant contract differ from a conventional loan?
JH: Surprisingly little. The process — application, underwriting, disclosures, closing — is almost identical. Guidance Residential helped us incorporate a few unique documents to ensure Shariah compliance. But we still use standard agency underwriting guidelines. Our team adapted quickly, and the support from Guidance made a big difference.
Did you need to add new staff or change workflows?
JH: No new staff were hired. We designated a few internal champions in lending and compliance and leaned on Guidance’s training and review process. They double-check each file before closing to ensure everything aligns. We may scale up staffing if volume increases, but for now, our existing team is managing it well.
Do you offer other Shariah-compliant financial products?
JH: Yes. We started with non-interest-bearing deposit accounts – basic savings and checking solutions that also align with Islamic principles. That was an important first step and helped build trust with the community. Launching this mortgage program is a continuation of that effort. We plan to keep listening and expanding as we learn more about what our members need.