CU Taxi Medallion Lender Likened to Last Decade's Predatory Subprime Lenders "Credit News 24"
The Philadelphia Inquirer is compares the collapsing of the Philadelphia taxi market to the mortgage meltdown last decade and has some harsh comments about Melrose Credit Union (Briarwood, NY).The article states:
"[L]enders drew up medallion loans with huge balloon payments, made to people who couldn’t afford them but who never worried about paying them off when they came due in three years. Why? Because the taxi business was golden, generating ample revenue. Meanwhile, just as with real estate, the value of medallions kept rising.
Besides, there was always another chance to refinance.
Until, suddenly, there wasn’t."
This sounds so familiar to the the subprime mortgage crisis.
At their peak in October 2013, taxi medallion prices were $530,000. However, after Uber and Lyft entered the market, taxi medallion prices dropped precipitously and as of August 2018 were at $52,000.
According to the Inquirer story, Melrose financed medallion loans through a broker to borrowers with bad or no credit history and who neither understand or spoke English. A complaint against Melrose alleges that underwriting of taxi medallion loans was non-existent.
It is estimated that Melrose lent more than $120 million to Philadelphia medallion owners.
Because the financing of medallion loans were through thee year balloon loans, that meant every three years borrowers needed new loans to pay off those balloon loans. This also ensured new fee revenues for Melrose.
The article further notes that after Melrose was seized by the New York regulator, the credit union exacerbated the decline in medallion values as it stopped lending in the market.
Read the article.
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