It's hard to think of a worse time to get into the home-loan business. But, according to upset finance staffers, Yahoo backed a senior executive's mortgage to move into a neighborhood of $3 million houses.
Companies routinely underwrite loans to move executives cross-country. Pat Wadors, a senior vice president and the no. 2 in Yahoo's human resources department, has worked in Silicon Valley for 16 years, according to her LinkedIn profile. The company's loan, a source in Yahoo's finance department tells us, would allow Wadors to move 28 miles from a home in the eastern hills of San Jose to a new one in Los Altos Hills, a posh suburb 15 minutes closer to Yahoo's Sunnyvale headquarters. (The average price of homes in Los Altos Hills is $2.9 million, according to Zillow, a price-tracking service.)
Yahoo employees, still reeling from two rounds of layoffs in the last 11 months, see it as a sign of the favoritism and misplaced priorities that run rampant in the company — just another problem Yahoo's dustbusting new CEO, Carol Bartz, will have to clean up. Update: And perhaps she already has. Yahoo's flacks have emailed: "No loan was given."
What's sparking the outrage: Wadors's boss, David Windley, and founder Jerry Yang approved the loan even as they were freezing salaries in the finance department. Says our source, "Given the economic times, no problem. It was expected and we are lucky to have a job." But Wadors's loan rankled:
Since when is Yahoo in the home loan business? It's not like she was relocating from a different state. We are in survival mode. What does Carol think about this and how many other things are they doing for the execs that they won't do for us? Yahoos should stand up and demand loans from the company to pay off our credit cards bills, heating bills, tuition for our kids' schools. That money could have funded the increases for a lot of us this year or saved a few of the people let go last month.
The Sarbanes-Oxley Act of 2002 outlawed personal loans to officers of a publicly traded company. The principal exception are relocation loans for a move of more than 50 miles prompted by a new assignment which would not seem to apply to Wadors's case.
A Yahoo spokeswoman has not yet answered an inquiry about the purpose of the loan and the interest rate Wadors would pay. Our source in finance believes Wadors's loan would start below prevailing rates and gradually increase. The terms of the loan are key: 30-year jumbo loans currently have rates between 6.7 and 8.2 percent, with a 20 percent down payment. The IRS considers the interest saved on a below-market-rate loan to be compensation. And Wadors may be senior enough that such compensation might need to be disclosed to shareholders in an SEC filing. Even if the loan was made at market rate, it's questionable why Yahoo would be committing what's likely to be millions of dollars in capital to an employee's home purchase.
Perhaps this is, as employees think, a scandalous problem symptomatic of the excesses sanctioned by Yang that Bartz will have to root out and eliminate.
Or perhaps the new Yahoo CEO will see it as an opportunity. Yahoo hasn't been making much headway against Google in Web search. Why not spend its money getting into the mortgage business, at a time when so many others are abandoning it? It's not like Yahoo, for all its woes, would be any worse at the business than the banks.