This post is part of a series of blogs outlining the positives and negatives of various employee-incentive solutions for high-cost areas. Click here to see the full description of the series.
Relocation Policy Solution #3 for High Cost Areas – Corporate Loan Program
Another solution is a corporate loan program, which is a home purchase loan a company provides to assist the employee. A corporate loan allows an employee to purchase a more costly home than with a conventional first mortgage. This loan is secured by a mortgage on the home that is purchased in the new location, and held in the second lien position. The terms of the loan are flexible and can be customized. For example, a company may provide the loan at below market interest rates, or the company can elect to defer interest charges or payments for employees in good standing. This benefit can be used as an employee retention tool, and in those cases, companies may allow a portion of the outstanding balance to be forgiven should the employee remain for a pre-determined amount of time.
If utilizing the corporate loan program, it is imperative that companies partner with a national lender fully licensed in all 50 states, including both primary and secondary financing loan programs. Why? There are lending laws and regulations that must be met by corporations wanting to provide corporate loans for their employees.
Most states require that lenders must be licensed under the state mortgage or consumer lending laws when making loans to borrowers impacted by interest charges or mortgage lien obligations that could result in foreclosure or other credit impacts. Companies must also meet federal mandated regulations from the Department of Housing and Urban Development, the Real Estate Settlement and Procedures Act, and the Equal Credit Opportunity Act.
The lender would manage the corporate loan process and ensure that all lending disclosures and processes are being followed.
As the mortgage industry has adjusted to new underwriting standards, lenders and companies have the opportunity to revise their policies to ensure their home purchase program fits their goals. The right policy changes will help assure that transferees receive consistent and fair high-cost-area assistance. As always, SIRVA is committed to providing you with the most up-to-date information so you can make informed decisions and meet your mobility objectives.
Please contact firstname.lastname@example.org with any questions on this blog.