Without Injunctive Relief from Uber, CU Taxi Medallion Lenders Predict Carnage

An August 28 letter from the law firm representing four New York City credit unions specializing in taxi medallion loans to Zachary Carter, corporation counsel for the de Blasio administration, warns that without immediate injunctive relief to enforce hail exclusivity, the taxi medallion industry will collapse and the credit unions that finance taxi medallions will face irreparable harm.

The 8-page letter notes that delinquencies and troubled debt restructuring have risen significantly at the largest taxi medallion lending credit union, Melrose Credit Union. The letter further points out that numerous medallion loans made by Melrose are maturing in the next six months and that Melrose is no longer in a position to refinance or modify these loans, as these loans mature with significant end of term balloon payments. The letter warns that widespread foreclosures are a near certainty.

Attorney Todd Higgins wrote:

"To illustrate the magnitude of the crisis rapidly unfolding as a direct result of the City’s failure to enforce hail exclusivity, we advised Justice Weiss that Petitioner Melrose Credit Union’s (“Melrose”) aggregate medallion loan delinquencies on January 1, 2014 were approximately $32,000. As of May 31, 2015, delinquencies had ballooned to approximately $167,704,125. Likewise, on January 1, 2014, Melrose had no medallion loans that were classified as troubled debt restructurings. As of May 31, 2015, troubled debt restructurings were approximately $148,491,250. Thus, as of May 31, 2015, Petitioner Melrose alone had approximately $316,195,375 in delinquencies and troubled debt restructurings across its medallion loan portfolio. As of July 31, 2015, Melrose’s medallion loan delinquencies had risen to $206,248,126 — an increase of approximately 23%, just since the Order to Show Cause was first signed by Justice Butler on June 1, 2015. As of July 31, 2015, Melrose had approximately $395,626,920 in delinquencies and troubled debt restructurings across its medallion loan portfolio — an increase of more than 25% in the same period. Petitioner Melrose has warned that it can no longer realistically continue modifying medallion loans or continue refinancing medallion loans at increased loan to equity ratios as those loans mature with significant end of term balloon payments. Melrose has approximately 471 of these loans maturing over the next six months, with balloon payments totaling approximately $212,000,000. In December alone, Melrose has 190 medallion loans maturing with almost $83,000,000 in balloon payments becoming due. Given the dramatic acceleration in delinquencies and troubled debt restructurings, widespread foreclosures are a near certainty."

The August 28 letter states that this harm is not a hypothetical scenario but "a reality that is already unfolding."

Coincidentally, since April 2015, the National Credit Union Share Insurance Fund has added $17.2 million in Reserves to $186.8 million.