LittleWyvern.com

You might remember that I lost all my music a few weeks ago. It turns out that the only decent program to pull the music from my ipod onto my computer actually costs money. Despite my considerable abilities when it comes to getting things for free, there didn’t seem to be any way around this one. You have to love the irony in being able to steal the music from the musicians but having to pay a software company to keep it. Nerds always win in the end. It felt like a rip off, paying for my own music, but then I realized that for my 25 dollars I was buying 4000 songs. That is about one half of one penny per song. ITunes can go bake a cake.

I recently learned something pretty interesting that I feel like sharing with all my readers. And while neither of you probably care, this story makes me look cool and that’s the only thing that really matters.

A few weekends ago I was back at my parents’ house to play cards with my brother. My mom had a favor to ask of me, which isn’t at all unusual when I stop by. Usually I am put to work doing something along the lines of mowing the lawn or picking weeds. I try to be a good kid and told my mom that I would try to help. “Great!” she said. “I need your help with a math problem.” Yeah, I thought it was weird too. To be fair, amongst my family I am easily the best with math and numbers, but my prowess doesn’t really come into play until calculus is involved. Advanced trigonometry at least. My mom is general council for Fannie Mae, she uses language not numbers. I tried to imagine what she could possibly be doing that would not only require serious math, but math at a level which I understand and she does not. The curiosity was more powerful than my sense of family duty by the time I actually resolved to do the favor. The problem she presented was totally unexpected. I quickly found myself having far more difficulty with the logic than the numbers. Behold…

Fannie Mae is one of the world’s largest lenders. While a lot of their loans are on the order of millions or billions, they also own some ridiculously high percentage of American’s mortgages. Along with one or two other mega-corporations, they own all of your debt. When a person takes a mortgage or loan of any kind, they pay back the money with interest. Lenders make their money off the interest, which makes it worth their while to actually lend money in the first place. This is all common sense, common knowledge. Enter the problem. Islamic law forbids paying interest. Any person who adheres to Islamic doctrine is expressly forbidden from paying interest on a loan. (As a side note, this also used to be true of the Catholic Church until sometime in the 20th century). If a person in the modern world wishes to obey their God, they will be unable to buy a house. Islam has not yet adapted to society in this way, forcing millions of people to choose between their religion and their way of life.

For whatever reason, my mom had taken on this problem and was working to secure a mortgage for an Islamic family. The catch is that she needed to devise a system, and more importantly the contract language to describe it, that would both be reasonable to Fannie Mae (they make money on the loan) and adhere to Islamic doctrine (the family can’t pay interest). And somehow I found myself right in the middle. I sat down at a computer where my mom had created a spreadsheet that calculated the various payment schedules of a loan. My job was to take that schedule and extrapolate a general formula that she could then turn into a legal description for the loan contract. Not a huge deal, but I couldn’t figure out why I was doing it. The solution being proposed just didn’t make sense. The idea was to set up a loan for X amount of dollars to be repaid at the price of X + I dollars over N number of months. This seems like interest to me, but after a 45 minute debate with my mom I was convinced that it isn’t. The key to making it all work involved knowing the exact payment schedule ahead of time. Interest payments are variable and depend on a number of things (the principle, the rate, frequency, etc). It is cheaper to pay off a loan quickly than to wait a long time because the owed interest compounds on itself. To satisfy Islamic doctrine we must make an arrangement where this isn’t true.

I spent about an hour going through the theory and spreadsheet with my mom before we made a breakthrough. Due to my nature of being an economic dumbass I was forced to ask a series of questions for clarification. Although bred in confusion, my line of reasoning ultimately led us to recognize a dent in the theory. I noticed and pointed out a logical flaw in the system of rewards and penalties built into the payment schedule. I felt bad about it actually; I was really hoping that my mom’s idea would work out. It seemed that I had pretty much destroyed that possibility. Her smile caught me off guard. “You’re right. God, I didn’t even think of that.” Convinced of the theory’s logical destruction I stood up from the keyboard and started to leave the room. “Sorry. I wish I could have helped.”

Two weeks later my mom told me that her proposed contract had been approved by both Fannie Mae and the necessary religious scholars. She had kept at the problem, despite the new insights, and had managed to find a solution. Fannie Mae is now among the only corporations capable of making mortgage loans to Islamic families, thanks in large part to my mom. And thanks in some small way to me, too. I can’t say exactly how it all worked out, but apparently I helped others to see through to the real problem. I guess sometimes that can be just as important as actually solving it. And the best part of it all is that our efforts don’t just help a corporation make money (although, it certainly does). The new contract structure allows otherwise good and decent people to live normal lives without sacrificing their beliefs. There’s no way to actually quantify our efforts, but it’s nice to know that I helped at least one family buy a house.