Employee-assisted housing plans can benefit businesses

Brent Baldwin is vice president with UMB Bank.

As employers, we look at any and all opportunities to increase employee retention. In today's marketplace, many workers stay on a job for only a few years then quit and join your competitor across town.

What if there was something that employers could offer above and beyond a normal employee benefit package? What if employers could offer an extra benefit to employees and actually have a positive impact on a company's bottom line? Employer-assisted housing can be that extra benefit.

Employer-assisted housing is a partnership between the employer, employee, a mortgage lender, and a mortgage provider such as Fannie Mae.

The employer offers the housing benefit, such as down-payment assistance. The employee participates by applying for the benefit, meeting the criteria set by the employer. The lender provides first mortgage underwriting and origination and manages the relationship with the employee. Fannie Mae works with the lender to provide appropriate lending programs and with the employer to best customize the company plan.

Options under an employer-assisted housing plan are solely up to the employer's discretion. In other words, a company can offer employees a program tailor-made to best suit the company's human resource and financial needs while helping employees achieve dreams of homeownership.

Some options that employers have utilized include offering grants, forgivable loans, deferred or repayable loans, matched savings or home buyer education.

Grants are a one-time payment to an employee, usually repaid if the employee leaves before a specified time period of employment. A forgivable loan is made at the same time the lender originates the first mortgage loan and is usually forgiven after a specified time.

Deferred or repayable loans are similar to a forgivable loan except that there is a defined repayment feature. Matched savings allow the employer to match funds the employee puts in a separate account dedicated for home purchase.

Home buyer education can consist of training classes to help an employee learn to improve his or her credit and to better understand the home buying process.

These options generally help employees clear at least one of the major obstacles to homeownership such as insufficient down payment, lack of savings for closing costs, or not having a trusted source of information regarding home buying.

As the economy works to regain its strength, a popular objection of providing an employer-assisted housing program is affordability. It's true, with some options under a program, there can be costs involved. However, these costs can be lessened by a number of factors including limiting the dollars allotted to a specific amount per year, making the program available to a certain tenured level of employee, or just starting with the low-cost option of home-buyer education.

Another employer objection is "What's in it for me?" An employer-assisted housing program can reduce the costs of recruitment, turnover and training.

Let's look at providing a forgivable loan to cover closing costs on an employee's loan, about a $3,000 company investment. Under many programs this loan is secured by a second mortgage on the employee's home. This loan can be forgiven after the employee remains with the company for five years; however, if he/she leaves before the forgiveness, the company will be paid in full upon sale of the home.

If a company has turnover where employees typically leave after a few years, then a program such as could help encourage long-term employment. The savings a company earns by retaining the employee rather than spending dollars for new employee training can be significant.

If a business is located in an area of the community specifically targeted for redevelopment, other loan programs may be available as well, including reduced rate programs.

The Springfield redevelopment area is defined as south of Kearney Street, north of Grand Street, east of Kansas Expressway, and west of National Avenue; however, a company can choose an area that is most desirable for itself and its employees.

While it may sound complicated, it really isn't. Fannie Mae, the nation's largest provider of home mortgage funds, is instrumental in helping businesses across the country develop their customized employer-assisted housing plan. The Kansas City office of Fannie Mae can be reached by calling 816-960-2055.

Locally, the Urban Neighborhoods Alliance can be an excellent source to assist businesses in formation of an employer-assisted housing program. UNA's phone number is 417-831-6200.