Citizens Bank has begun offering down-payment sized, forgivable loans to employees seeking to purchase a home.

Despite speculation that rising home values in the real estate market may be a gossamer bubble, the fact remains housing costs in the Bay State are soaring, making it difficult for middle-class families to enter the market.

This is no surprise to Thomas J. Hollister, chairman of the Greater Boston Chamber of Commerce. Hollister said the chamber has been looking into ways Boston-area employers can help employees find and afford homes. “Everyone recognizes it’s a real issue for the region,” said Hollister.

Because he’s also the president and chief executive officer of Citizens Bank of Massachusetts, Hollister is in a unique position to begin such a program.

“Mayor [Thomas] Menino has done a lot of work on this and is similarly looking for groups to try to help. So as a corporation, Citizens was interested in trying to help and, secondly, through employee surveys, we knew this was an important matter for our staff,” said Hollister.

While the bank won’t be purchasing homes for its employees, it is offering forgivable down payment-sized loans to employees who earn less than $100,000.

The Home Buyer Assistance Program was launched at the end of June by the $53 billion Citizens Financial Group, which is based in Providence, R.I. The program is available to the 13,000 New England and mid-Atlantic employees. Within Massachusetts, Citizens has about 3,300 employees who may take advantage of the program, Hollister said.

Employees who make less than $100,000 per year may borrow $5,000 or $8,000 to purchase a single-family or multifamily home. Employees who have worked for the bank for at least one year may use the money for a first-home purchase or a second-home purchase as long as it’s the employee’s primarily residence. Those working at least 20 hours a week are eligible. If an employee stays in the bank’s employ for five years after the loan is given, it is totally forgiven. If not, the loan is forgiven at a 20 percent rate per year, according to Citizens spokeswoman Melodie Jackson. There is no interest charged on the loan and the loan is “grossed-up” to account for taxes so that the employee receives the full amount of the loan.

The $8,000 amount is given to employees purchasing a home in what is deemed an “emerging community,” including cities like Brockton, East Boston and Chelsea, said Hollister. It’s modeled after Fannie Mae’s Employer Assisted Housing program.

‘Incentive to Stay’

“It sounds like a heck of a program,” said Wilfred M. Sheehan, senior vice president in the Duxbury office of Clark/Bardes Consulting.

Sheehan, a compensation specialist, said this kind of program would definitely enhance employee retention efforts. The Citizens program is innovative it could become an important part of the benefits package offered to employees, he said.

Although Citizens already offered $1,000 for employees to use toward closing costs and a reduction of mortgage points if employees took a home loan through the bank, this program fills another niche, said Hollister.

“One of the tricks for buying a home is just gathering the monies to make a down payment. That came through on our surveys, so we thought this would be a very material benefit for our staff and it would also be a contribution to [solving] the housing [crisis] that challenges our region,” he said.

According to Jackson, there have been over two-dozen serious inquiries about the program since its announcement.

“As you know, you just don’t rush out and buy a house but the reaction [to the new program] has been extremely favorable,” said Hollister, adding that Eastern Massachusetts and Boston in particular are among the most difficult housing markets in the country.

Of course, there’s an intrinsic benefit to Citizens as well. “The plan is designed so that, whether it’s $5,000 or $8,000, it’s a forgivable loan over five years so there’s clearly an incentive to stay with the company,” said Hollister. The program is structured in a way that rewards longtime employees, which is also a strategic move. “One of our key strategies is a customer-focused strategy and you can’t do that if your people are turning over,” said Hollister.

Keeping bank employees satisfied with the options offered to them is important to most banks and many do offer some sort of loan discount to employees. But Hollister said that wasn’t the main motivation. “Interestingly, we didn’t do this directly to compete with other employers. We did do it as a matter of philosophy to become an employer of choice … a preferred work environment,” he said.

Banknorth Group and FleetBoston Financial also offer discounts for closing costs and points. FleetBoston offers its programs for several reasons.

Fleet offers discounted basic banking services and higher rates paid on CDs to employees, as well as rate reductions for borrowing and waived fees. Another benefit employees receive is waived charges for investments. If employees use the products, they will better be able to refer customers to the products, said Dini Sahadevan, who manages the specialty banking programs at FleetBoston.

“That’s really the thought process behind it – that they’ll use it and truly understand the products and services we offer, like them and in turn service the customers,” she said.

Additionally, the employees may refer friends and family members to the products offered by Fleet, she said. “It has an overall objective and not just [as] an employee benefit. But really, it’s to serve our customers better,” said Sahadevan.

Although she knows other banks offer similar programs, Sahadevan thinks Fleet does emphasize the marketing of the benefits a little more heavily. “We have a formalized orientation program and a lot of that is employee banking.”

Despite being a benefit to employees, these types of programs do not violate federal Regulation O, which limits how much and on what terms a bank may lend to its own insiders, according to a spokeswoman for the Federal Reserve. “As long as the employee who is taking advantage of the loan is not an executive officer of the bank, the loan is not subject to Regulation O,” said Susan Stawick.

In addition to these programs, several institutions have participated in a housing initiative through the chamber. Called the Employer-Assisted Housing initiative, it helps members of the chamber provide for housing assistance to their employees. Citizens’ Housing and Planning Association will deliver services funded by grants from Citizens Bank, Eastern Bank and FleetBoston Financial.