Helping a relocating employee and their family establish a home in their new location is a vital part of the relocation process. The purchase of a home is one of the most significant financial transactions a family will undertake. Providing a network of reputable national lenders to help facilitate the purchase is the first step to ensure a successful process for your valued employees. This section will provide an overview of what services and benefits are provided by mortgage lenders specializing in employee relocation.
I. What Are The Basics?
The mortgage lending industry offers many choices in loan programs and the structure of home financing. Within the relocation arena, you will find specialization of the services in the following areas: products, processes, solutions and quality control.
Overview: In addition to a full range of standard consumer first mortgage products, lenders specializing in relocation offer a set of loan programs that cater to the needs and habits of the relocating employee. Below are samples of some of the most popular loan programs and the benefits they offer.
Adjustable-Rate Mortgages: A loan program that offers an initial fixed-rate that converts into an adjustable-rate format for the remaining term of the loan. The initial fixed-term generally is priced lower than the standard fixed-rate mortgage. This program assists the employee who relocates regularly to receive the benefit of a lower rate with a reduced risk of exposure to rate adjustment.
Interest-Only feature: A payment feature that can be applied to a variety of loan programs. This loan feature allows the relocating employee to reduce their monthly payments during the initial interest-only period. If the relocating employees’ goal is to build home equity during the interest-only period, they can make voluntary principal payments in addition to the interest only payments whenever they choose.1
Second Mortgage: An additional line of equity can be a tool to structure home financing to potentially offer improved interest rate pricing, lower down-payment requirements and assist in avoiding mortgage insurance.2
Overview: Providing home financing for corporate transferees and new hires has been uniquely developed by a relatively small number of national lenders. Through collaboration with relocation managers, corporate human resources departments and relocation service companies, specific mortgage companies have emerged with the title of “Relo” lenders. Relocation specific loan programs and processes have allowed employees to move domestically or internationally (to the U.S.) without the usual complications (or change to challenges) that general consumers sometimes endure.
RFI/RFP Response: Relocation specific lenders are available and eager to respond to a corporations “Request for Information” (RFI) and/or “Request for Proposal” (RFP). These requests are designed to define the capabilities and requirements of the lender and allow the corporate client to understand how a mortgage provider will enhance the relocation experience as it pertains to home financing.
Initiation/transferee contact: Notice of a relocation initiation and transferee contact protocols are defined by the corporate client to fit the corporate culture while connecting the employee with the relocation mortgage provider in a timely and orderly fashion.
Borrower prequalification/pre-approval: Utilizing a centralized team format, relocation lenders have dedicated staff that harness technology to provide loan decisions that are quick, while providing counseling that supports the relocation policy.
Corporate reporting: Corporate reporting is another staple of a lender’s menu of services. Providing reports customized to the client need and preference highlight factors that help the client understand the trends of their workforce as it pertains to home financing. Customary information reported on a periodic basis includes: average amount of down payment, mortgage products usage levels, geography of closed loans, conversion percentages and volume summary.
Overview: Lenders that offer “Corporate Relocation” as a specific line of business have developed services in order to help corporate clients mobilize their workforce. The goal of the lender is to provide home loan assistance that is swift, accurate, economical, and flexible. It is not unusual for the transferee to receive a deeper discount than the general borrower because of the financial profile of the typical corporate transfer.
Direct Billing: Direct Billing of closing costs eliminates the requirement for the borrower to bring their own funds to closing for costs that will be paid by the corporation. Costs paid for by the corporation are calculated in advance and the amount wire transferred to the closing office. The amount is then invoiced to the corporation or relocation service company for reimbursement. The direct billing feature reduces stress for the relocating employee and eliminates the need for the employee to submit paperwork to the employer for closing cost reimbursement.
Reduced Documentation: Relocation specific variances can be obtained for employees transferred under a corporate relocation policy that may allow for reduced documentation.3
Mortgage Subsidy: Interest rate buy-downs and a temporary subsidy of the employee mortgage payment are available to enable the corporation to ease the burden of moving an employee to high-cost areas or provide assistance with housing expenses when needed.
Foreign National Program: Corporations that bring citizens of other nations to the United States can do so with ease by sourcing a relocation lender that provides a foreign national program. Typical services of the program include a loan process and underwriting criteria sensitive to the unique challenges of an international move, as well as hours of operation and staff to accommodate working with an employee outside of the US.
Group-move Assistance: In a “group move” situation, on-site counseling can be arranged in the current location or the destination city for a group of employees moving with the corporation. Pre-qualification and pre-approval programs allow the transferee to understand his or her borrowing power prior to arriving in the destination city and making an offer on the new home.
Policy Adherence and Consultation: Understanding the relocation policy of the corporate client and strict adherence to its provisions is of paramount importance. Often the national lender will be asked for “best practice” advice when the corporation is establishing or re-evaluating relocation policy. The national lender is frequently a consultative business partner.
D. Quality Control
Overview: An advantage corporations have in working with a mortgage lender dedicated to the relocation industry is the commitment to certain standards and quality controls. By sourcing specific lenders, corporations can ensure there is continuity of process and procedure, as well as oversight and reporting of service delivery. Corporations may request a customized approach to working with their relocating employees as well as set a required level of customer satisfaction.
II. What’s Unique in Chicago?
As one of the nation’s financial hubs, many national lenders specializing in relocation mortgage service are represented right here in the great City of Chicago. Mortgage lenders who support CRC and participate in the educational programs provided are up to date on current trends and challenges and are best positioned to bring excellent service and value to the corporation.
III. Avenues to Source a Relocation Mortgage Lender
There are several ways to source a Relocation Mortgage Lender. A good place to start is right here at CRC! Most of the leading lenders in our industry have representatives that are CRC members. Asking for references from the numerous, experienced, corporate relocation managers is also a good avenue. Certainly referring to The Roster of Members and Resource Guide of the Employee Relocation Council (ERC) which lists virtually all the leading lenders and their representatives names and phone numbers.
IV. Mortgage Industry Associations and Related Groups:
Illinois Mortgage Bankers Association: www.imba.org
Mortgage Bankers Association of America: www.mbaa.org
Department of Housing and Urban Development: www.hud.gov
Freddie Mac (FHLMC): www.freddiemac.com
Fannie Mae (FNMA): www.fanniemae.com
Authored by CRC Members:
Cathleen Podell, CRP – Wells Fargo Home Mortgage
Bob Meyers, CRP – Wachovia Corporate Mortgage Services
1. The Interest-Only payment feature will allow you to make minimum interest payments for a set period of time, then full principal-and-interest payments for the rest of your loan/line term. At the end of the interest-only period, you will be required to pay down the outstanding principal, which will increase your monthly payment, possibly substantially, even if you have a fixed interest rate. Always consider making more than the minimum payment during the interest-only period to begin reducing principal. Depending on the product specifics, a loan/line with the Interest-Only payment feature may result in higher interest rates or Annual Percentage Rates than a traditional mortgage product. 2. Home equity loans and lines of credit are available through Wells Fargo Diversified Products Group, a division of Wells Fargo Bank, N.A. 3. In certain circumstances, borrowers may be required to provide documentation. Depending on their specifics, programs that do not require the standard information and documents may result in higher interest rates and Annual Percentage Rates than a traditional mortgage program. Information is subject to change without notice. Wells Fargo Home Mortgage is a division of Wells Fargo Bank, N.A. © 2007 Wells Fargo Bank, N.A. Equal Housing Lender. All rights reserved. #54211 12/07 – 3/08