Why Haven’t Loan Officers Been Told These
Facts? How to Leverage Employee Housing Assistance Programs to Fill Your Pipeline
What are employee housing assistance programs, and how can mortgage loan originators (MLOs) identify parties to connect with these programs, ultimately leading to increased referrals? Employee housing assistance (EHA) is a common benefit offered by many employers, especially to attract valued employees or job candidates. In areas with relatively high housing costs, employers often provide various housing benefits to gain a competitive edge in hiring and retention. Typically, housing assistance is offered during employee transfers or when new hires come on board.
Employers navigate around win-lose negotiations regarding salaries and bonuses and instead adopt win-win strategies, including three-dimensional negotiation. This negotiation method broadens traditional two-party negotiations by including a third party that can offer benefits that the employer cannot provide. One example of a third party that can facilitate three-dimensional negotiation is relocation companies.
Relocation companies provide experts who serve as valuable facilitators during the moving process. They handle everything from organizing “familiarization trips” to the new work site to addressing challenges with lenders and real estate agents. By using these experts, employers can help reduce the costs and inconveniences associated with moving. Essentially, this allows employers to provide employees with a retail benefit that they can acquire at a wholesale price.
Employers have utilized relocation assistance as an employee benefit for many years. Most high-value employees anticipate receiving this support when they are required to relocate for work. To streamline the moving process and minimize the associated stress and expenses for both the employer and the employee, companies often partner with relocation firms or similar service providers. Additionally, these relocation companies can help reduce costs for employers by negotiating concessions with various service providers.
Many lenders participate actively in this economy, and some have specialized relocation experts who understand how to utilize special Employer Housing Assistance (EHA) programs. These lenders often have established relationships with relocation companies and/or directly with employers.
To effectively compete with these lenders, it is essential to offer “direct billing” services in cooperation with relocation companies or employers. Direct billing means that the lender collects closing costs from the employer rather than the employee. Typically, the lender pays these costs upfront at closing and subsequently invoices the employer or the relocation company. This arrangement alleviates both the employer and employee from the hassle of reimbursement processes.
Relocation companies usually facilitate these arrangements, so you may consider reaching out to them to solicit their business. Alternatively, you can approach employers directly for opportunities.
The Growing Trend of Colocation: A Return to the Office
A recent survey by the Pew Research Center reveals that the trend of returning to the office is increasingly significant in human resource management. Currently, employers are under pressure to negotiate with high-potential and essential workers, as well as recruits. Even when there are many candidates available, high-potential hires and existing employees often receive special treatment, like relocation assistance, including EHA.
If you can’t access the standard housing assistance program, think about offering a premium white glove solution instead. With the affordable housing crisis impacting many households, employee housing assistance programs are one of the strategies that employers use to attract and retain talent.
From the Pew Survey
“Among workers who are not self-employed, a growing share with jobs that can be done from home say they’re now required to work from their office, workplace or job site a certain number of days per week or month. Among those who aren’t currently working from home all the time, 75% say their employer has put these in-person work requirements in place, up from 63% in early 2023.”
Where to Start
There is no need to reinvent the wheel. Fannie Mae (FNMA) and Freddie Mac (FHLMC) have established employee housing benefit programs that align well with employer assistance initiatives. However, what about high-cost areas? It is crucial to identify a few jumbo lenders who are eager to do business.
It is essential to identify and engage the key stakeholders involved in the process. For instance, senior management needs to be involved because the direct billing arrangements commonly used in this sector require legal agreements between the lender and either the employer or the relocation company. Additionally, it is important to include underwriting and processing management to ensure that there is no need to verify the closing cost funds. A successful first transaction is crucial for future success.
Take a look at some of the GSE requirements below.
FNMA Community Seconds
FHLMC Affordable Seconds
From FHLMC 5501.4 Employer Assisted Homeownership (EAH) Benefit
Employer Assisted Homeownership (EAH) Benefit
Financial assistance provided to an employee from the employer pursuant to an established, ongoing and documented employer benefit program, provided (i) the employer is not an interested party (as described in Section 5501.5) and (ii) the funds were not obtained from an interested party either directly or through a third party. See Section 5501.4 for additional requirements.
No Debt Service: Qualification
If the monthly payment of principal and interest or interest only begins on or after the 61st monthly payment under the First Lien Mortgage or if repayment of the loan is due only upon sale or default, the amount of the monthly payment may be excluded from the monthly debt payment-to-income ratio; otherwise, the required monthly payments must be included in calculating the monthly housing expense-to-income ratio.
From FNMA
Community Seconds are subordinate mortgage loans that can help make homeownership more accessible to borrowers. Although Fannie Mae does not purchase Community Seconds loans, we do require that they meet certain criteria when they are subordinate to first mortgages purchased by Fannie Mae.
The GSE EAH programs are similar but may differ. Know thy investor. There are a variety of requirements and limitations. For example:
- The Community Seconds loan must be a fixed-rate loan and the interest rate may not be more than 2% (200 basis points) higher than the initial note rate of the first mortgage.
- (FHLMC) If the Affordable Second is an Employer Assisted Homeownership Benefit, the terms of the secondary financing must not require immediate repayment in full, except when the borrower terminates their employment for any reason, or the employer terminates the Borrower’s employment for any reason other than the Borrower’s long-term disability, elimination of the Borrower’s position or a reduction in force.
- (FNMA) When the borrower’s employer is the provider of the Community Seconds loan, the financing terms may provide for the employer to require full repayment of the debt if the borrower’s employment is terminated (either voluntarily or involuntarily, for reasons other than those related to disability) before the maturity date of the Community Seconds loan.
Note that the FHLMC program restricts the employer loan agreement from calling the note in case of layoff.
FNMA Community Second Checklist
FNMA B5-5.1-02, Community Seconds Loan Eligibility (05/03/2023)
FHLMC Affordable Seconds Checklist
BEHIND THE SCENES – A Return to Normative Loan Servicing, Goodbye HUD Language Assistance Mandate, GSEs Foreclosure Prevention Numbers
After years of loss mitigation efforts, primarily driven by two significant events—the 2008 Great Recession and the 2020 COVID-19 pandemic—the federal government seems eager to return to more modest interventions. On April 15, the Department of Housing and Urban Development (HUD) announced a further normalization of Mortgagee Letter 2025-12 regarding COVID-19 Recovery Loss Mitigation Options, set to conclude on September 30, 2025.
On another front, the GSEs report slight increases in problem loans; see the report highlights below.
From The Mortgagee Letter 2025-12
In January 2025, HUD published a new permanent set of loss mitigation tools intended to maintain streamlined processes that minimize burdens on Mortgagees, provide sustainable loss mitigation solutions to Borrowers to address delinquency, prevent foreclosure, and mitigate risks to the Mutual Mortgage Insurance Fund (MMIF).
Upon further review of the policies, HUD has determined additional changes are necessary to protect the MMIF. HUD continues to see increased default rates on the COVID-19 Recovery Options, as well as the use of the COVID-19 Recovery Options in a manner inconsistent with prudent management of the MMIF. To help address both issues, HUD has determined that Borrowers should be limited to one permanent Loss Mitigation Option every 24 months versus every 18 months.
HUD has also determined that certain language access provisions are unnecessarily burdensome. Accordingly, they should be removed.
HUD has also found that some compensations that would be paid to Borrowers under the new set of permanent Loss Mitigation Home Disposition Options and Cash for Keys are not cost effective and will be maintained at the existing amounts.
The Trump Administration will continue its review of the entire FHA permanent loss mitigation waterfall to ensure the policy prevents foreclosures while protecting taxpayers and mitigating financial risks to the MMIF. FHA will continue to review how the available home retention options could be improved to better incent reperformance and ensure borrower ability-to-repay. HUD will also conduct an overall evaluation of the Payment Supplement tool, including an assessment of its performance
and function, to determine if it should remain a part of HUD’s loss mitigation program. Lastly, to swiftly address potential risks to the MMIF and taxpayers, HUD is moving the effective date of the new permanent Loss Mitigation Options to October 1, 2025.
4Q24 Highlights — Foreclosure Prevention
The Enterprises’ Foreclosure Prevention Actions:
- The Enterprises completed 50,741 foreclosure prevention actions in the fourth quarter of 2024, bringing the total to 7,098,462 since the start of conservatorships in September 2008. Of these actions, 6,392,882 have helped troubled homeowners stay in their homes, including 2,746,932 permanent loan modifications.
- Initiated forbearance plans rose to 46,902 in the fourth quarter from 30,938 in the third quarter of 2024. The total number of loans in forbearance at the end of the quarter was 50,873, representing approximately 0.16 percent of the total loans serviced and 8.8 percent of the total delinquent loans.
- Twenty six percent of modifications in the fourth quarter of 2024 were modifications with principal forbearance. Modifications that include extend-term only accounted for 73 percent of all loan modifications during the quarter.
- There were 170 completed short sales and deeds-in-lieu during the quarter, bringing the total to 705,580 since the conservatorships began in September 2008.
- The 60+ days delinquency rate increased from 0.75 percent at the end of the third quarter to 0.83 percent at the end of the fourth quarter of 2024.
- The Enterprises’ serious (90 days or more) delinquency rate increased to 0.57 percent at the end of the fourth quarter of 2024. This compared with 4.12 percent for Federal Housing Administration (FHA) loans, 2.58 percent for Veterans Affairs (VA) loans, and 1.68 percent for all loans (industry average).
Tip of the Week: Little Improvements = Big Returns
Standing out from the crowd isn’t necessarily about being twice as good as your competitors. For many MLOs, the key lies in achieving a 20% improvement in performance. But how can you measure that, and what specific metrics should you consider? It’s a subjective challenge, and finding meaningful metrics can be difficult.
However, a straightforward approach is to use your own performance as a baseline. Aim to improve your performance by 20%. What are some ways that MLOs can distinguish themselves?
360
A 360-degree review is a thorough performance evaluation that collects feedback from various sources, including the MLO, their manager, peers, processors, and referral sources. This feedback offers a well-rounded perspective on an MLO’s strengths and areas needing improvement.
SWOT 75
Most people are familiar with SWOT analysis. A thorough SWOT analysis can be quite extensive. Instead of examining all four areas of the SWOT, focus on just three.
If you’re feeling ambitious, consider conducting a 360-degree assessment to inform your SWOT analysis.
The more specific you are about what and how you measure, the more impactful your analysis will be in motivating you. Combine this exercise with effective goal-setting strategies, and you will become a force to be reckoned with.
