Guidance Residential — Declining Balance Co-ownership Program white paper (US)

Guidance Residential's program white paper documents the declining-balance co-ownership (diminishing-musharakah) model that is the main US Shariah-compliant alternative to a conventional mortgage. Customer and financier jointly buy the home under a Co-ownership Agreement rather than a loan note — in the paper's worked example the customer contributes 5% and Guidance the remaining 95% through a purpose-built LLC. The monthly payment splits into a Profit Payment (a usage charge on Guidance's ownership share, which the paper states may be adjustable and benchmarked to an interest-rate index subject to caps) and an Acquisition Payment that incrementally buys out Guidance's share over 15, 20 or 30 years, giving the program its declining balance. The paper records several features that distinguish it from a loan: no prepayment penalty; no interest on late payments (only a capped administrative late fee, stated as $50 and set via a STRATMOR Group cost study); external funding via a Freddie Mac co-ownership arrangement; and genuine risk-sharing in which a forced sale (e.g. eminent domain) or insurance proceeds after casualty are split between co-owners according to their ownership shares. The structure is certified by Guidance's Shariah Supervisory Board, whose fatwa certificate is reproduced in the document.