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).
NCUA should have actually regulated these CU's and not been their cheerleader. Would have saved a lot of money and the need to reply to letters like this
ReplyDeleteI am not sure NCUA was a cheerleader for these credit unions. Ten years ago we bought a small pool of Taxi medallion loans and our examination team back then was complaining they did not like seeing credit unions in this business due to the only real value was the medallion collateral itself (around $500k in our case). The business is dirty and has been for a long time. It was a haven for tax fraud until the last 10 year or so due to it being a cash business with poor record-keeping at best. The brokers and the city are the majority of the problem controlling the medallion pricing. Look at the historical auction pricing and it is all there. In simple a cab can only produce some much income/revenue a year which could not come close to the prices in the last 5-6 years
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