Wednesday, November 15, 2017

Losses to NCUSIF from Taxi Medallion Could Reduce or Eliminate NCUSIF Distribution in 2018

Losses from taxi medallion loans to the National Credit Union Share Insurance Fund (NCUSIF) could jeopardize 2018 distribution from the the NCUSIF.

According to a presentation at the New York Credit Union Association's Credit Union CEO Roundtable in May 2017, the estimated losses from taxi medallion loans to the NCUSIF could be between $200 million to $719 million.

Below is the slide.


If losses from taxi medallion loans to NCUSIF come in at the upper end of the range, it would be in the middle of the range of the projected NCUSIF distributions of $600 million to $800 million in 2018.

In fact, Chairman McWatter cautioned during the the September National Credit Union Administration (NCUA) Board meeting, "a large increase in insurance losses ... could reduce or eliminate the projected distributions."

As of September 2017, NCUA has only set aside $286 million in reserves for insurance losses, of which $20.1 million is for specific natural person credit unions. In the case of large losses from taxi medallion loans, this $286 million in reserves would not be sufficient to cover these losses. This means NCUA would need to significantly increase reserves to cover these insurance losses going forward.

To maintain the new NCUSIF normal operating level at 1.39 percent, this would require either a reduction or elimination of the 2018 distribution.

Therefore, credit unions should not count their chickens until they are hatched.


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6 comments:

  1. AnonymousNovember 15, 2017 at 4:06 PM

    That loss estimate had the medallion value above $400,000. I think they have since fallen below $250,000.....

    ReplyDelete
    Replies
    1. AnonymousNovember 16, 2017 at 8:09 AM

      Correct. It is probably lower than that.

      Delete
  2. Dennis MoriarityNovember 15, 2017 at 5:05 PM

    We have been bamboozled if this turns out to be true!

    ReplyDelete
    Replies
    1. AnonymousNovember 16, 2017 at 8:12 AM

      Yes, you have been bamboozled.
      There is no doubt.
      How does it feel to pay for insurance to an insurer that is ok with 75% concentration of assets in one loan type?

      Delete
    2. AnonymousNovember 16, 2017 at 5:03 PM

      Now that you are bamboozled what are you going to do about it.

      Delete
  3. AnonymousNovember 16, 2017 at 8:16 AM

    Interesting. Cuna was many days late and many dollars short in advising credit unions about the CCU s. Bill hample even telling credit unions the losses would be “10basis point” when he did know better.
    Now, after we had 2 advisors warn us about taxi loans and losses that will lead to assessments as far back as 3 years ago, CUNA is now again, many days late and many dollars short.
    Cuna dues. What’s in your wallet?

    ReplyDelete

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