Federal officials pushed to approve Islamic-compliant home loans despite repeated internal warnings that the proposal was unworkable, according to newly released Access To Information records.Blacklock's Reporter says emails reveal the Department of Finance wanted to move “extremely fast” on Sharia-compliant mortgages in the months leading up to the April 28 election, despite concerns from the Canada Mortgage and Housing Corporation (CMHC) that the financial structure conflicted with tax laws, liability rules, and existing mortgage insurance policies.“This file is moving extremely fast and it is somewhat sensitive,” read an internal CMHC email dated October 30. “The department is leading this work.”CMHC staff said Finance was so eager to approve halal loans that it considered announcing the plan before evaluating its feasibility. .“In one of our conversations with the Department of Finance, they had provided an illustrative example of, ‘Say we announce it, get the term sheets done and everyone is insuring right away, is securitization ready to go?’ If so, what happens?” the message said.The plan was quietly introduced in the 2024 federal budget, which said the government was “exploring new measures to expand access to alternative financing products like halal mortgages.” However, documents show the finance department received multiple warnings as far back as 2023 that Sharia-compliant mortgages posed legal and operational hurdles.Under Sharia law, interest payments are considered usury and are forbidden. Instead, halal mortgage models typically involve lease agreements, marked-up resale, or shared ownership arrangements with a lender’s stake diminishing over time. .CMHC concluded in 2023 these types of deals could not be insured under current federal policy. “It appears Sharia law would not be within our policies or authorities,” an executive wrote.A CMHC director noted, “It is not simply a matter of changing nomenclature around interest rates but rather the structure of the deal.”In preparing its analysis, CMHC circulated a 2010 legal review by Gowling Lafleur Henderson LLP that flagged significant liability and tax issues. The report said all models of Islamic mortgages involve the lender becoming the property owner — raising questions about land transfer taxes, as well as federal GST and harmonized provincial sales taxes..“For new and existing houses this raises issues of land transfer taxes,” the report said. “For new homes it also raises issues with respect to the federal Goods and Services Tax and harmonized provincial sales taxes.”The Islamic Housing Finance report was shared with Finance Canada three weeks before the government’s budget announcement. Around the same time, the Business Development Bank of Canada also raised objections, stating that “halal financing is not permissible.”Neither Finance Minister François-Philippe Champagne’s office nor senior finance officials named in the emails would comment on why the program was pursued despite objections. No enabling legislation has been tabled to date.
