Thursday, August 31, 2017

Taxi medallions lenders enter conservatorship

Here at Shenwick & Associates, we’ve been paying close attention to developments concerning the plummeting values of New York City taxicab medallions.  A client we’ve been working with sent us this AP story last month that describes how the taxicab medallion crash isn’t just affecting owners of medallions and cab drivers, but has spread to lending companies.

According to the article, three credit unions that specialized in loans collateralized by taxicab medallions have been placed into conservatorship with the National Credit Union Administration (NCUA), including LOMTO Federal Credit Union and Melrose Credit Union .  The article also alleges that the NCUA is aggressively attempting to collect from borrowers, even those who are current on their loan payments, by demanding payment of the loan in full and threatening foreclosure on the assets pledged as collateral against the loan (which may include not just the medallion, but also motor vehicles and real estate).

In a April 2014 supervisory letter regarding taxi medallion lending , the NCUA advised field staff to “[c]onfirm that a credit union that places more emphasis on the collateral value than on standard cash flow qualifications supports the market premium with other committed sources of repayment to the loan and additional collateral.”  Based on this guidance, we can expect that that the management teams hired by the NCUA to administer these credit unions will demand additional collateral to further secure these loans, and if they’re unsuccessful, to commence foreclosure actions against the current collateral.

As we’ve detailed in our initial e-mail on the topic , there are many possible options to consider to address “underwater” taxi medallions, including a workout and several bankruptcy scenarios, but a detailed financial analysis is necessary.  Our firm specializes in debtor/creditor relations and bankruptcy, so if you need help with your taxi medallion debt, please contact Jim Shenwick.