Employers Offer Aid To Avert Foreclosures

Some Companies Provide Loans, Grants and Counseling To Workers Mired in Mortgage Debt; Co-Workers Pitch In


Last December, 36-year-old Marta Rosario was on the verge of losing her single-family home in Miami to foreclosure. That is, until her employer, Baptist Health South Florida, stepped in to help.

The five-hospital health-care system loaned Ms. Rosario $5,000 interest-free, allowing the cardiology nurse to catch up on her mortgage payments. She'd fallen two months behind after a work injury last year forced her to take a lengthy leave of absence at reduced pay. "If it wasn't for Baptist, I don't know where I'd be," says Ms. Rosario, a single mother of three who also cares for her elderly parents.

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.

Quality Float Works Inc., a manufacturing concern with 28 employees, also recently loaned two workers at risk of losing their homes $2,000 each interest-free. The money is being repaid in weekly installments automatically deducted from their paychecks, says Jason Speer, vice president and general manager of the small maker of hollow metal balls and valve parts in Schaumburg, Ill. "We treat our employees like family," he says. "We try and do what we can to make their lives easier."

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.

Many employees are seeking counseling to help them navigate financial issues. At Cary, N.C.-based SAS Institute, 665 SAS employees have attended the company's financial-advice seminars so far this year, twice as many as in the first half of 2007, says Ms. Wallace. In reaction to the housing crisis, the global software provider recently added lectures on the topic.

Zappos.com Inc., an online shoe and accessories retailer, also runs free on-site seminars about financial issues for its 800 Las Vegas-based workers. "We're hearing a lot of employees being concerned about their future," says Rebecca Ratner, director of human resources. "In Las Vegas, we have one of the highest home-foreclosure rates in the country." According to RealtyTrac, one in every 96 Las Vegas households received a foreclosure filing in May, more than five times the national average.

To that end, employee assistance program providers say they're seeing a notable increase in demand for confidential phone counseling. "Two years ago, we got one to two calls a week. Now we get two to three a day," says Zachary Meyer, senior vice president and general manager at the LifeWorks unit of Ceridian Corp., an EAP provider in Minneapolis that serves 38,000 corporations. "Housing concerns are the No. 1 financial reason people are calling us." In the past, callers seeking financial advice mainly asked about debt management, he adds.

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.

Peter Ronza, a compensation and benefits manager at the University of St. Thomas in St. Paul, Minn., says at least six employees have approached him since April with concerns of losing their home or having to file for bankruptcy. "It's not that we don't want to help," he says, but creating a loan program would first require setting up a committee to determine who qualifies. Plus, rejections might cause friction among the school's 1,500 employees, he explains. He has also had to deny requests for cashing in accrued vacation time for mortgage assistance because it's against school policy.

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.

By: Sarah Needleman
Wall Street Journal; June 17, 2008