The federal credit union regulatory agency’s recent sale of taxi medallion loans acquired through liquidations of credit unions was preceded by a “thorough” vetting of bidders to ensure only reputable firms dedicated to working in good faith with borrowers were considered as potential buyers, the chairman of the agency told a credit union conference Tuesday in Washington.
National Credit Union Administration (NCUA) Chairman Rodney Hood told the group that the agency evaluated various options for disposing of the assets, including holding and servicing the loans and asset sales structures such as structured sales and securitization. But the agency, “after careful consideration, investor outreach, and consultation with an independent financial advisor, determined a singular bulk sale would be the best vehicle to resolve these specific cases and yields the best feasible recovery,” he said.
Hood was responding to concerns raised in a Jan. 22 letter from the group sponsoring this week’s conference, the Credit Union National Association (CUNA), that he said included the assertion that disposing of the assets in a sale to a single buyer would yield lower asset values and the suggestion that the NCUA hold the assets until some future date and allow credit unions to purchase the distressed assets.
Hood said the NCUA reached out to 23 qualified firms with experience in handling distressed commercial assets, and six of those submitted bids. “After an extensive review, the NCUA allowed two firms go through to the final due diligence bid round and received two independent offers,” he said. The agency last week announced it had sold its portfolio of taxi medallion loans to Marblegate Asset Management LLC. Hood, in his speech, didn’t name the other firm that offered to buy the loans. The agency also has yet to disclose the sale price.
NCUA, in explaining its decision announced last week for the sale, noted it was the most appropriate option under its statutory obligation to ensure the least cost to the National Credit Union Share Insurance Fund (NCUSIF), the federal fund that insures savings in credit unions. The agency acquired the portfolio of taxi medallion loans through liquidations of credit unions such as Melrose Credit Union and LOMTO Federal Credit Union, both of New York.
Hood’s speech included a few highlights of initiatives under way at the agency to help credit unions meet the needs of underserved rural areas and to clean up the agency’s own guidance and processes.
The NCUA chairman didn’t give a lot of specifics about what’s ahead in this area, but he said he’s asked staff for a set of policy tools to help credit unions ensure services to rural communities that lose access to financial institution branches or where the services offered fall short of the need. Some tools, he said, have already been implemented. For example, he said the NCUA was the first federal financial regulator to issue guidance on working with businesses in the legal hemp industry. He also cited the agency’s changes in commercial real estate appraisal rules. More details will be discussed in coming weeks, he said.
Hood also said NCUA will perform a comprehensive review of all agency guidance letters and legal opinions to see if they remain relevant. Once the review is complete, he said, the guidance will be revised and updated for clarity and to ensure it reflects “modern practices and the current environment.”
Additionally, Hood said the agency will explore ways to make agency operations more efficient and effective; revise supervisory procedures to improve oversight; and make significant steps toward modernizing its information technology infrastructure. Announcements are yet to come, he indicated.