The recently announced sale of the agency’s taxi medallion loan portfolio to Marblegate Asset Management LLC was the best option for meeting the agency’s statutory obligation to achieve the least long-term cost to the National Credit Union Share Insurance Fund (NCUSIF), National Credit Union Administration (NCUA) Board Member J. Mark McWatters told a credit union conference in Washington Monday.
The NCUA’s holdings included medallion loans from Melrose Credit Union and LOMTO Federal Credit Union, both of New York, which were liquidated in 2018. The agency said that to date, the NCUSIF has lost more than $760 million because of these and other credit union failures related to taxi medallion loans.
McWatters, speaking Monday before the Governmental Affairs Conference of the Credit Union National Association (CUNA), still did not disclose the sale price of the taxi medallion loan portfolio.
The agency board member, whose term expired last year and who is serving now in a holdover capacity, told the credit union conference that the sale of the loan portfolio (announced last week to the surprise of many) followed some 18 months of managing the assets, conducting due diligence investigations, and negotiating with prospective purchasers. After beginning moves toward a final sale, he said, the agency learned of a possible initiative from the New York Taxi Workers Alliance to form a public/private partnership to purchase the agency’s medallion loan portfolio. In the end, however, the agency found that no party had committed funds or “demonstrated a reasonable prospect of raising sufficient funds in the near-to-intermediate term, if ever, to purchase the agency’s taxi medallion loan portfolio.” The offer, senior staff found, came “at the 11th hour without a reasonable prospect of closing an acquisition in the foreseeable future,” he said.
Had the NCUA delayed the sale to entertain other offers, it may have lost the one from Marblegate and raised the “substantial likelihood that the Share Insurance Fund would suffer additional material losses,” McWatters said. In that event, there is also a substantial likelihood that NCUA would have to forego distributions to insured credit unions for the intermediate future, if not longer, he noted, “which in turn would have been costly to insured credit unions.”
McWatters reiterated the agency’s assurances last week that it made clear to those interested in purchasing the loans that they “must work with the taxi medallion loan borrowers in a transparent, good-faith manner and in full compliance with all applicable consumer protection laws.” He also said the agency specifically excluded “vulture funds” from the process and eliminated any prospective purchasers who did not demonstrate the capacity to adequately service the loans, a track record of treating borrowers in a fair-mined manner, and a financially workable bid.
“There are, of course, other viable options available to the New York public/private partnership to assist the medallion borrowers,” he said. “For example, if ultimately successful in raising funds or receiving legislative appropriations or proceeds from litigation, the partnership and other interested parties could employ the proceeds to assist the medallion borrowers by directly repaying some or all of their outstanding loan balances or purchasing the loans and forgiving some or all of their debt. That is, all of the proceeds raised by the partnership and other interested parties could relieve the financial burden of the medallion borrowers.”