OKLAHOMA CITY-In the wake of the string of recent, devastating tornadoes in this region, Communication FCU reported it is seeing a surge of member interest in its storm shelter loan program.
In response, the credit union has dropped the rate on the product to 0.99% from 2.99% .
In the two weeks after tornadoes ripped through Moore, Okla., CFCU booked nearly 300 loans to members looking to build such structures, according to Stephen Lark, VP of marketing and corporate development at the 56,000-member, $877-million credit union. Prior to the outbreak of storms, he said, the CU had about 600 storm shelter loans on the books, and several others that had already been paid off since the program was launched in late spring 2011.
'Insane' Amount Of Business
"We've just seen an insane amount of business," said Lark, adding that while the CU pushes the loans every year beginning in late March or early April, the always-popular product traditionally sees an uptick after storms hit. About 40% of people coming in for the loan since last month's tornadoes are new members, though that mix is the typical response following most storms.
Lark said that the recent strong response is probably half due to the storm and half due to the rate. While CFCU was the first in the market to offer such loans, other lenders have since begun marketing similar products. Lark said that cutting the rate was more about making sure the shelter loans were affordable to everyone and not due to competition.
"Through the storm season, if we don't have anything in our area we probably see 30 to 50 applications per month from mid-April through the end of summer," said Lark. "But once there's a significant storm like this, it just brings so much more awareness to people. Especially with a devastating tornado such as this one, it's hard to survive unless you're below ground if the building you are in is impacted."
The shelters can be built underground or above ground, though the price varies by the size and location of the shelter. Below-ground rooms run between $2,500 and $4,500, said Lark, while above-ground rooms can be as much as $7,000. Lark said he recently had a below-ground shelter installed in his home that cost him $2,900 and can hold six to eight people.
Given the pricing, how does Communications Federal earn any margin on the loans? It almost can't. Lark offered the example of a $3,500 loan with a three-year term at 0.99%, which generates $53.68 in interest.
"It probably doesn't even cover our cost to originate the loan," acknowledged Lark. "But we want people to be able to afford the shelter, and it's another way we can make the shelters more affordable for our members and those in the area."
CFCU staff are trained to cross-sell and look for other lending opportunities, and all loans are fully underwritten, said Lark. "On a storm shelter we're not going to do a super hard sell, but the product generates such goodwill that people are very open and receptive to other products."
The CU is promoting the offering via its website, social media pages, branch displays and more. In addition, a media push is coming soon, which will include billboards and radio ads.
"I'm sure we will see a drop-off," predicted Lark. "We haven't thus far, because we had the catastrophic tornado on May 20, and then on May 31 there was a smaller tornado, but the loss of life was almost equal. With two of them back-to-back like that, we have not seen a slowdown yet."
