Thursday, January 24, 2019

Patch: Shaky Taxi Industry Saw Foreclosures Spike Tenfold Last Year

By Noah Manskar, Patch Staff

NEW YORK — New York City's turbulent taxi industry saw a massive spike in foreclosure sales last year as drivers struggled to make ends meet and some took their own lives, records show.

The Taxi and Limousine Commission recorded 381 foreclosure-related medallion sales in 2018 — more than 10 times the 37 seen in 2017. The numbers are based on Patch's review of the TLC's monthly lists of sales, some of which include more than one medallion.

The sales accounted for about two thirds, or 64 percent, of last year's 595 medallion transfer transactions, while only 33 percent of 2017's transactions were foreclosure-related, TLC records show.

The spike is both a good and bad sign, TLC Commissioner Meera Joshi said. While many individual drivers still face financial strain, the flurry of sales suggests buyers now see viability in an industry that has seen years of instability.

"When there are purchasers that are not the banks it's a signal that there are people that believe there is a value to this asset," said Joshi, who plans to leave her post in March.

The foreclosure figures include cases in which a bank took possession of a medallion on which someone could no longer pay the mortgage, and others in which a buyer purchased a medallion from a bank.

The "vast majority" of last year's increase comprises hedge funds buying up medallions at large public auction, said Robert Familant, the former treasurer and CEO of Progressive Credit Union, a medallion lender.

For instance, a hedge fund reportedly paid $170,000 each last June for 131 medallions once owned by Evgeny Freidman, an operator once known as the "Taxi King" who pleaded guilty to tax fraud last year.

Last year's unusually large number also reflects some sales that were made in 2017 but not recorded until 2018, according to Familant, whose company recently merged with Pentagon Federal Credit Union.

The spike came at a tumultuous time in the city's taxi industry. At least half a dozen professional drivers died by suicide last year, some of them facing hefty financial burdens amid competition from ride-hailing apps.

Hundreds of medallions held by individual drivers have been forced into foreclosure or bankruptcy in recent years as their owners have seen costs mount while their businesses suffer, Bhairavi Desai, the executive director of the New York Taxi Workers Alliance, said in a Jan. 16 court filing.

"Not only have they been unable to keep up with their mortgages, (they've) also just been unable to earn enough for day-to-day living," Desai said in an interview. "I honestly never imagined to have so many conversations with drivers about food stamps, really basic benefits."

Medallion prices have plummeted in from $1 million or more in 2014 to as little as $130,000 last month, TLC records show.

That drop in value helped drive the recent spike in foreclosure sales, along with declining revenues and a lack of confidence among some owners in city regulators' ability to address the prices, Familant said.

"When the value of collateral diminishes, financial institutions are put into a very difficult regulatory position," he said.

Recent changes to medallion rules have also contributed to recent movement in the market, Joshi said. One eliminated the requirement that certain medallion owners drive a certain number of hours each year. Another eliminated the distinction between independent and corporate medallions, making it easier for banks to take back those that were independently owned, according to Joshi.

The City Council also slashed the medallion transfer tax in 2017 from 5 percent to 0.5 percent. That made the tax less of a burden for buyers, according to Joshi.

To Familant, the large number of foreclosure sales reflects the start of a "cleansing process" that allows drivers and operators a way into a business in which they now see an opportunity.

"Everyone knows the industry has had a difficult time the last few years and it was sort of in free fall. Now that free fall has stopped," he said. "Buyers came back into the industry at a point and said, 'I think it's a good buy now. I'm willing to put my money where my mouth is now.'"

But Desai called that a "rosy description" of where the industry stands. It may be easier for institutional buyers like hedge funds to buy medallions but individual drivers still face barriers, she said.

She called for a "restructuring" of the loan market to reflect the value of medallions.

"If you know you're going to have to eventually take that medallion away from the current owner and then resell it at a lower rate, why not just forgive on some of the loan now and restructure it so the current people who've already paid so much into those medallions, even if they haven't paid off the whole thing, at least they can continue to work and live off of it," Desai said.

The TLC lacks the authority to regulate banks but has encouraged them to "right-size" medallion loans, Joshi said. The City Council also passed bills in November to bolster financial education for drivers and create a task force to review changes in medallion prices.

To Familant, it's important for lenders and medallion owners to find solutions to tough financial situations that don't involve foreclosure.

"You have to go there and you have to work together," he said. "No one's going to survive unless we work together."

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