Hood defends NCUA's unpopular decision to sell taxi medallion loans
WASHINGTON — National Credit Union Administration Chairman Rodney Hood fought back against critics of the regulator’s decision to sell a portfolio of taxi medallion loans.
Hood said he believed selling the loans would ultimately help borrowers who bought the taxi medallions at inflated prices and provide greater certainty over loan management.
The agency announced last week that it sold more than 4,000 loans from two failed credit unions to investment fund Marblegate Asset Management.
How borrowers would be treated was a consideration during the due diligence process, and some potential investors were turned down because NCUA was not confident that the medallion holders would be treated fairly, Hood said. NCUA engaged in a thorough process that involved vetting 23 firms interested in the distressed portfolio, he added.
“I understand this decision may not be popular or satisfy everyone,” Hood said Tuesday during the Credit Union National Association’s Governmental Affairs Conference in Washington
The decision to sell the portfolio has been hammered by New York City taxi drivers, Rep. Gregory Meeks, D-N.Y., and CUNA. Jim Nussle, president and CEO of CUNA, said that the trade group would submit a Freedom of Information Act request for additional details about the deliberations surrounding the deal and didn’t rule out potential legal action.
Hood said timeliness was also a factor in deciding to sell the loans since holding onto the credits “beyond a reasonable period” could create additional problems. He pointed to an audit of NCUA’s Asset Management Assistance Center from 2012, which found that the “AMAC needed to determine a liquidation strategy which would maximize the value obtained for the properties acquired.”
The collapse of the taxi medallion market and eventual failure of several credit unions cost the share insurance fund $750 million. NCUA didn’t disclose a purchase price for the portfolio, but The Wall Street Journal reported it was $350 million. That equals about $77,000 per loan.
CUNA and three league partners urged against a sale in a letter to NCUA in January, arguing that a sale to a single buyer would affect the value of medallion loans held by credit unions.
During his speech, Hood pointed out that the letter’s authors were unaware of the portfolio’s size, characteristics or assets of the individual loans.
“While the agency preferred a bulk sale offer, we also advised interested bidders that we would take subset bids on a portion of the portfolio,” Hood said. “The sum of the subset bids submitted were not greater than the bids for the overall portfolio.”