February 20, 2020

NCUA sells majority of taxi medallion portfolio

The NCUA announced Wednesday that it sold the majority of its taxi medallion loan portfolio to investment firm Marblegate Asset Management LLC. NAFCU had shared with the NCUA an analysis from the association's Share Insurance, Liquidity and Development Fund Oversight Committee (SIF Committee) on the agency's stewardship of the taxi medallion loans.

"After thorough research and careful consideration, the NCUA determined this sale was the most appropriate action to meet its statutory obligation under the Federal Credit Union Act to achieve the least long-term cost to the National Credit Union Share Insurance Fund," the NCUA said in the announcement. "Of equal importance, this sale also provides borrowers and their families greater certainty about the management of their loans. Private entities have specialized skills and greater resources and flexibility to work with borrowers in ways the NCUA cannot."

The NCUA's release provides further details on its process to manage the portfolio and the sale, noting that the National Credit Union Share Insurance Fund (NCUSIF) had suffered more than $760 million in losses due to credit union failures related to taxi medallion loans. Two firms ultimately advanced to the final due diligence round and submitted offers; NAFCU would have preferred an auction format with multiple bids to ensure the highest price possible.

Read the full release.

NAFCU's SIF Committee, in its analysis to the NCUA earlier this month, noted "that such a large amount of assets under active management by the NCUA's Asset Management and Assistance Center (AMAC) is without recent precedent" and stressed the importance of maintaining the safety and soundness of the NCUSIF. The committee noted that while NAFCU members could support NCUA's efforts to obtain an expeditious sale dependent on fair pricing for the portfolio, what constituted a fair price could pose a challenge.

"NAFCU members have expressed questions and concerns relative to the factors NCUA will use to determine whether or not an offer represents fair pricing, given the rarity of these transactions in the open market," the committee wrote. "Ultimately, if it is determined that a fairly-priced transaction is not feasible at this time for the entire portfolio of medallion loans, the NCUA should consider exploring other avenues to achieve a fair price in the most expeditious way possible."

NAFCU will review the NCUA's sale of the majority of its taxi medallion loan portfolio and inform credit unions of its potential implications. Given the size of the transaction, it was imperative that the NCUA get the highest price possible, with due consideration to the handful of active credit unions with existing exposures to similar loans.