A letter to the National Credit Union Administration from four credit union groups — including the New York Credit Union Association — urges the agency to refrain from selling its taxi medallion loan portfolio.
The Jan. 23 letter to NCUA Chairman Rodney Hood outlines why the four groups believe the sale of taxi medallions is a bad idea, and lays out actions the agency should instead take.
“As the largest holder of taxi medallion loans, steps taken by NCUA will have a broad and far-reaching financial impact,” the letter stated. “Such a sale would have a significant adverse impact on credit unions and borrowers. For several reasons, we urge the NCUA to refrain from such a drastic step.”
The letter was signed by Association President/CEO William J. Mellin; CUNA President/CEO Jim Nussle; Illinois Credit Union League President/CEO Tom Kane; and CrossState Credit Union Association President/CEO Patrick Conway.
The letter outlines the following concerns with NCUA’s rumored plans to unload its medallion portfolio:
- Selling to a single investor would be a “quick and easy solution,” but a single buyer sale would likely result in a lower sale price and would negatively impact the Share Insurance Fund.
- Credit unions that currently hold taxi medallion loans could face substantial collateral harm. Selling off the entire portfolio could further depress the market value of the taxi medallion loans, which in turn, could lead to significant devaluation of similar loans that are held by credit unions, and put them at substantial risk.
- The reputational risk to NCUA and the entire credit union industry associated with the taxi medallion crisis is “significant” and any harmful impact on consumers, which could otherwise be avoided, could potentially be highlighted by the media, resulting in additional reputational harm to credit unions.
The letter urges NCUA to take “pressing steps” to establish a plan on how it can better communicate with the industry and public regarding its actions on taxi medallion loans. The group suggests that NCUA could partner with credit unions to service the loans, work out loan modifications with the borrowers, and over time reduce the agency’s — and the Share Insurance Fund’s — exposure to these loans.
The letter also states that NCUA could mitigate the adverse consequences on credit unions holding these loans “by directing examiners to pursue Prompt Corrective Action forbearance for credit unions that are pushed into PCA territory due to a decrease in the value of medallion loans resulting from NCUA’s sale.”
Last October, Mellin penned a letter to Hood expressing concerns about the long-term reputational damage to credit unions that could result from NCUA’s unwillingness to work with borrowers.