The Housing Chronicles Blog: Some employers helping workers avoid foreclosure

Tuesday, June 17, 2008

Some employers helping workers avoid foreclosure

Apparently stepping into the void left by the Darwinian nature of foreclosures and their aftermath, some employers are assisting workers to avoid foreclosure or find rental properties after they're evicted. From a Wall Street Journal story:

In the wake of the mortgage crisis, a small but growing number of workers are getting help avoiding or coping with foreclosure from an unlikely source: their employers. So far, a handful of companies -- from small manufacturers to large companies like home-financing behemoth Fannie Mae -- are offering assistance, such as interest-free loans, grants and support in securing rental properties. They're also beefing up their employee-assistance programs, or EAPs, and adding more educational seminars on personal finance.

A January survey of 329 human-resource professionals showed that in 2007, 20% of employers said they received more requests from workers for pay advances than the year before, reports from the Society of Human Resource Management. Thirty-nine percent of respondents also saw an uptick in withdrawals from retirement savings -- widely seen as an indicator of financial woes.

Productivity tends to wane when workers are suffering from financial or other pressures, says Laura Wallace, manager of work/life programs at SAS Institute Inc., a business-intelligence software company. Providing help "just makes really good business sense," she says. "If you're worried about losing your home, your creativity is going to go out the window."

Baptist Health executives say it became clear that many of its 12,000 employees were struggling with mortgage problems late last year, when requests for loans from its Sunshine Fund surged. Launched in 1986, the program, funded by employee and matching company funds, was designed as a way for workers to help their fellow colleagues through emergency financial hardships -- and it was in danger of drying up for the first time. "If we grant all these requests, we'll run out of money," Brian Keeley, Baptist Health's chief executive, says he recalls thinking.

The chain's hospitals are located throughout South Florida -- where foreclosure rates are among the highest in the nation, according to foreclosure-tracking firm RealtyTrac Inc.

Faced with a growing number of desperate employees, the nonprofit established a new fund dedicated to helping workers who face foreclosure. The fund now has $280,000 -- employees contributed $10,000 of that -- and has helped more than 100 employees with mortgage-assistance loans averaging between $3,000 and $5,000 in the first five months of 2008. Employees have two years to pay back the interest-free loans...

In February, Fannie Mae set up a confidential email "hotline" for its employees with mortgage woes, says Joy Cianci, vice president of grant, program and volunteer initiatives. Since Fannie Mae is in the mortgage business -- it buys mortgages from banks and other lenders and packages them as investment securities -- the company can help qualifying employees quickly pursue a mortgage restructuring.

For workers who must sell their homes, Fannie Mae in March began identifying low-cost rental properties near its Washington, D.C., headquarters. And since these workers could have trouble securing a lease because of credit problems, the company also works with landlords to ensure they'll be paid through a monthly payroll-deduction plan. Employees who can't afford a security deposit for a rental property may be eligible to receive a financial-hardship grant...

Most U.S. employers -- about 87% -- allow workers to make hardship withdrawals from their defined-contribution retirement plans, according to the Profit Sharing/401k Council of America, a national association. But many of those that don't are now starting to consider offering the option, says Stacey Carter, vice president at Segal Co., a New York benefits and human-resources consulting firm. Helping workers avoid foreclosure is the primary reason, she adds.

Indeed, more workers have in recent months been making hardship withdrawals, which don't have to be paid back but are subject to taxes and penalties. In the first quarter of 2008, Fidelity Investments in Boston saw a 16% increase from the same period in 2007 in 401(k) hardship withdrawals. Still, this represents just a small fraction of Fidelity's 13 million plan participants, according to a spokeswoman for the financial-services provider.

Other employers, ranging from universities and technology firms to service providers say they're also grappling with how to help employees save their homes, but say they've yet to find a way to help...

Still, some employers say the mortgage problems workers face aren't a workplace matter. "If you got over your head in a mortgage because you were too uninformed to understand or you stretched too far, an employer doesn't have an obligation to fix your mess," says Jay Whitehead, president of Crossing Media LLC, a business-magazine publisher in Edison, N.J. The company has 20 employees and Mr. Whitehead says he recently rejected one person's request for help with a mortgage. "It's an equity and fairness issue," he says.

Good thing Mr. Whitehead never makes mistakes!

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