NCUA Hood Says There Is No One-Size -Fits-All Solution to NYC Taxi Medallion Loans

In a September 3, 2019 letter to Representative Alexandria Ocasio-Cortez, National Credit Union Administration (NCUA) Chairman Rodney Hood responded to her and other members of the New York City (NYC) congressional delegation inquiries about taxi medallion loans by credit unions and efforts to modify loans for financially struggling taxi medallion owners.

Chairman Hood wrote that he shared her concerns for taxi drivers, but noted that there is no one-size-fits-all approach to resolving these challenges.

Chairman Hood wrote at the end of 2014, when medallion prices peaked, there were 8 federally insured credit unions that originated the vast majority of the loans secured by New York City taxi medallions. Those 8 credit unions held a combined $3.9 billion in assets. Today, six of those eight credit unions have either been liquidated or merged and are no longer in business. Only one of the six credit unions that are no longer in business was found to have engaged in indirect lending on a small portion of its taxi medallion portfolio.

Chairman Hood noted that in 2015 the average outstanding taxi medallion balance was less than $350,000.

The letter noted that that these credit unions had some deficiencies in their underwriting standards and ignored repeated warnings from the agency about the dangers of excessive concentration in taxi medallion loans.

Chairman Hood further wrote that NCUA is updating its examination scope requirements to ensure credit unions analyze a borrower's ability to repay the loan and to ensure the agency addresses, through informal and formal enforcement actions, any cases where the credit union is not properly undertaking this analysis. Those updated procedures will become effective with the release of the 2020 examination program.

The letter stated that bad actors should be held accountable and NCUA is aggressively pursuing institution-affiliated parties, who have violated the law, breached their fiduciary duties, and engaged in unsafe and unsound practices. However, the agency found no evidence that credit unions engaged in market manipulation.

Hood stated that NCUA, as liquidating agent for Melrose and LOMTO, is actively identifying distressed borrowers in an effort to rework their loans, where possible, including payment reductions, lower interest rates, and term adjustments. But Hood acknowledges that these efforts are complicated by the sharp decline in value of taxi medallions and, in some cases, the high level of cash-out refinancing activity that took place on individual loans.

The letter is below (click on images to enlarge).