Impact on credit unions unclear as NCUA announces taxi medallion sale

Taxis on 7th Avenue at Times Square, New York City

Despite ongoing concerns from credit union organizations about potential long-term reputational damage to credit unions, the NCUA announced the sale of the majority of its New York City taxi-medallion loan portfolio to Marblegate Asset Management LLC, an investment firm with a history of purchasing troubled assets. The announcement yesterday comes as members of the New York Taxi Workers Alliance planned to attend today’s NCUA board meeting.

For nearly 18 months, the NCUA evaluated “a variety of approaches” for resolving the medallion portfolio, including holding and servicing the loans, pooled sales, structured sales, and securitization, a Feb. 19 NCUA press release stated.

“After careful consideration, investor outreach, and consultation with an independent financial advisor, the NCUA determined a single bulk sale was the best option to meet its statutory requirements and prevent any unnecessary volatility in the already stressed taxi medallion market,” the release stated.

The NCUA’s holdings included medallion loans from Melrose Credit Union and LOMTO FCU, which supported the New York City taxi industry for nearly a century until their liquidations in 2018.

NCUA did not release details of the sale, but the Wall Street Journal reported that the $350 million deal includes loans of more than 3,000 New York City medallions, and the purchase by Marblegate apparently is not its first. Marblegate began buying taxi medallions in the fall of 2017 and purchased about 300 medallions for more than $50 million, according to an Oct. 13, 2018 Wall Street Journal report.

In an October 2019 letter, New York Credit Union Association President/CEO William J. Mellin urged the NCUA to work diligently to safeguard the credit union industry’s reputation while finding a balance that protects both the borrowers and the Share Insurance Fund. In the letter to NCUA Chairman Rodney Hood, Mellin expressed concerns about the long-term reputational damage to credit unions that could result from NCUA’s unwillingness to work with borrowers.

And as previously reported, in response to rumors that the NCUA was considering selling off its medallion portfolio, four credit union groups — including the Association — urged the NCUA to refrain from immediately selling its taxi medallion loan portfolio.

The Jan. 23 letter to NCUA Chairman Rodney Hood outlined why the four groups believed the sale of taxi medallions was a bad idea, and laid out actions the agency should instead take. The letter was signed by Mellin; CUNA President/CEO Jim Nussle; Illinois Credit Union League President/CEO Tom Kane; and CrossState Credit Union Association President/CEO Patrick Conway.

The full press release from the NCUA on the taxi medallion sale can be accessed here.

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