CARLISLE, Penn.-Cornerstone Federal Credit Union's "Win the Race to Become Mortgage Free" promotion was so successful, the $96-million CU was forced to suspend it on the fourth day.
That promotion came about after CEO Dave Keffer told Credit Union Journal management kept hearing from members who had significant equity in their homes and only a few years left on their mortgages. He said Cornerstone wanted to make it "worth their while" to refinance.
Terms of the Deal
"We had some extremely attractive interest rates with maximum terms that would allow them to get those rates," he explained. "Sometimes those types of loans carry heavy closing costs, points or fees, which keep people from refinancing, so we prominently noted in our marketing that there were no closing costs."
Cornerstone required the loans be refinanced from another lender, not a purchase, and owners had to have at least 30% equity. Terms were 2.75% APR for 10 years, 3.0% for 15 years or 3.25% for 20 years.
"We had it on our website, put it in the newsletter and had an e-mail blast," Keffer recalled. "We also noted there were limited funds available to lend to get people to respond."
After just three days, Cornerstone had received more than 65 valid applications. On the fourth day, Keffer said reps had to start telling callers the program was temporarily suspended and the CU would have to call them later.
"We are trying to deal with the ones that are on the table right now and if we have funds available we might go back," he said. "With extremely low mortgage rates moving back up, that was another variable."
Even with all fees waived and low rates, Keffer said the program is good for Cornerstone, because the income generated exceeds any returns on investments.
'No Closing Costs' Most Appealing
"As long as we are looking at shorter terms it is like a car loan or a home equity," he said. As long as there is not a huge spike in interest rates in a very short amount of time we should be fine. Also, we have sufficient liquidity."
"Based on phone conversations, the most appealing aspect of the promotion-far and away-was the no closing costs feature," added Keffer.
Cornerstone FCU has more than 10,000 members and three branch locations in the Carlisle and Newville area, in addition to a student branch at Big Spring High School.
