Ruining Medallion Borrowers is Ruining Communities

The New York taxi medallion market is very, very sick.

The Chicago taxi medallion market is dying.

The Boston taxi medallion market is dead.

The value of each medallion in the three markets peaked at the top of the Big Taxi Bubble in June 2014

  • New York owner operator medallions peaked at $1,050,000
  • New York taxi fleet medallions peaked at $1,300,000
  • Chicago medallions peaked at $375,000
  • Boston medallions peaked at $700,000

Combining the 22,312 medallions in the three cities and weighting by the prices and number of medallions in each city, the total peak value at the top of the Big Taxi Bubble in June 2014 was $20.1 billion.

Due to relentless competition from Uber, as of November 2015, only 18 months later, the total value has swooned 42% to $11.7 billion.

Uber has destroyed $8 billion.

Any predictions for 14 months from now on December 31, 2016?

From $700,000 to $270,000 Boston has plummeted by 61%.

Just like the real estate bubble leading up to the collapse in 2008, banks had a lending party leading up to the crash.

And just like the real estate crash, banks got addicted to pumping up prices to pump-and-lend. See the article by my colleague, Jay Hickman, on suspicious medallion transfers in Chicago by Big Taxi.

There have also been suspicious 2015 medallion transfers in Boston by Big Taxi.

76% of the total of $7.5 billion taxi medallion loans outstanding in the country are held by the lenders I call the Big Taxi Twelve. Note values below are approximate.

Taxi Medallion Loans Outstanding Institution
   
$1,500,000,000 Melrose Credit Union
$800,000,000 Capital One
$728,000,000 Medallion Financial
$700,000,000 Signature Bank
$530,000,000 Progressive Credit Union
$300,000,000 LOMTO Credit Union
$249,000,000 Banco Popular
$236,000,000 New York Community Bank
$214,000,000 BankUnited
$170,000,000 Montauk Credit Union
$159,000,000 Valley National Bank
$103,000,000 ConnectOne
   
$5,689,000,000 Big Taxi Twelve
$1,811,000,000 Other Institutions
$7,500,000,000 Total Medallion Loans Outstanding

The third largest, Medallion Financial (NASDAQ:TAXI), is active in New York, Chicago and Boston. Their local office is in the ritzy Back Bay neighborhood of Boston.

Alfred (Alec) Raberov
Regional Sales Manager
Medallion Financial
45 Newbury St # 207
Boston, MA 02116
Phone: (617) 536-0344

Medallion’s $728 million in medallion-related assets are owned by REAL people in REAL immigrant communities who are drowning in debt.

Sometimes the management of lending institutions want their stake holders to forget hundreds of millions of dollars must be paid back by owner operators who have been devastated by Uber just in the past year.

How will these guys pay for their medallion loans over the NEXT year? How can a level playing field be created?

I propose a solution for Boston.

Whether we are Uber Supporters or Uber Opponents let’s support a

Coalition Against Big Taxi (CAB)

See:

Prediction: Coalition Against Big Taxi (CAB) Causes Cartel Collapse

Who are the borrowers who owe Medallion Financial $728 million?

Let me introduce you to Jude Odimegwu.

Jude owns West Auto Management, a small business challenging to keep afloat in the best of times. He operates out of his garage at 147 West Street in Hyde Park, a neighborhood of Boston. His garage is one of the five who lease medallions to shift drivers through the Independent Taxi Operator Association (ITOA), one of the seven licensed radio associations. ITOA is comprised of 300 independent taxicabs, 16% of all Boston taxis.

Jude owes Medallion Financial $7,736,000, of which $5,016,000 is held on a nonaccrual basis.

Jude’s drivers fall into two categories:

  • Drivers who lease a medallion, but provide their own taxi
  • Shift drivers who own neither a medallion nor their own taxi.

Over the past year, thousands of licensed taxi drivers have been deserting the medallion industry to drive for Uber. As an owner of a small taxi business, Jude is at serious risk if even a small percentage of his taxis are idle.

Taxi regulators set the maximum at $500 per week for leasing a medallion for each of the two shifts. Leasing of the vehicle is additional. In the past, with 6,400 licensed taxi drivers in the city, owners of Boston’s 1,825 medallion haven’t had a problem leasing at the maximum amount.

However, the diversion of riders and medallion taxi drivers to Uber drastically changed the economics. As of June 30, 2015, 22% of trips and 25% of revenue have been diverted to Uber.

As the diversion rate relentlessly climbs, drivers gain the negotiating power to lower lease rates. Idle percentages climb. Yet owners must make the same debt payments month after month.

Echoing mortgage brokers with reckless selling of home equity loans, medallion lenders convinced many owners to borrow against the pumped up value of their medallions. Normal qualification guidelines were cast aside and borrowers used the funds to subsidize negative personal and business cash flow.

Trees don’t grow to the sky. The pump-and-lend strategy can’t continue forever.

It’s only a matter of time before medallion lease payments consistently fall short of debt service on the ballooning 3 to 5-year short term loans. Cash reserves are exhausted. Eventually whether they want to pay or not, medallion owners simply run out of cash.

Medallion Financial and other lenders love to trumpet if borrowers default on their medallion loans, lenders can use personal guarantees to attach borrower’s assets in addition to their medallions.

Besides extend-and-pretend, what is Medallion Financial going to do if Jude Odimegwu is unable to make his monthly payments?

Seize Jude’s retirement savings?

Seize his family’s $450,000 house in Randolph, pay off his mortgage and take the rest to satisfy a $7.7 million loan balance?

What other assets does Jude own besides his house, savings, taxi garage and his medallions?

No politician or court is going to wave a magic wand, kick Uber out of Boston and fly us all back to 2013.

It’s time for the Big Taxi lenders to negotiate a deal with their borrowers.

Jude is a leader in the Igbo community of Greater Boston. Back in 1988, Jude was one of 17 people who joined Reverend Father Alfonsus Gusiora to create the Nigerian Catholic Community (NCC). The NCC is now thriving at St. Katharine Drexel Parish on Blue Hill Avenue in Dorchester.

As many New Americans over the years, while enjoying the American way of life, he also wanted to take part in a community sharing the way of life of his birthplace. As described on the NCC web site:

“…they hungered for Nigerian-flavored Catholicism.  The group needed a nurturing community of faith that recognized and validated the Nigerian cultural identity. They needed a safe space for worship that would foster the gifts of openness, apostolic zeal, sense of community and generosity…”

Many Boston taxi drivers are from the Nigerian community and from other countries in West and East Africa. Community gathering places like the NCC can be excellent sites for owner operators and owners of small taxi businesses to organize as a group rather than face down Big Taxi one by one. Negotiating a final settlement for every Boston medallion borrower effectively requires mobilizing ALL medallion owners who’ve borrowed from each lender.

Randolph and Mattapan — Immigrant Communities

Small medallion owners are not just individual borrowers. They are members of communities defined by neighborhood, ethnicity and of course, their shared occupational difficulties.

Jude lives in Randolph, a community with a long history attracting hard working immigrants looking for homes less expensive than surrounding communities.

Starting in the 1950s, Randolph saw significant growth in its Jewish community with the exodus of Jews from Boston’s Dorchester and Mattapan neighborhoods caused by the tactics of the block busters of the 60’s and 70’s. In 1950, fifteen or twenty Jewish families lived in the town; by 1970, Randolph had about 7,000 Jewish residents, and about 9,000 in 1980, the largest such community south of Boston.

After 1980, as Jewish and other white families moved out, Randolph was transformed by a new wave of immigrants.

Randolph is now one of the fastest growing minority cities in America. As of the 2010 Census, 60% of all elementary school students are black, 21% Hispanic, 11% White, and 8% Asian.

There are 4.2 million people living in the Boston-Cambridge-Newton Metropolitan Statistical Area (MSA) of Massachusetts in 147 cities and towns. With a population of 33,000 averaging $28,172 per capita income, Randolph is ranked #138 out of these 147.

The majority of Medallion Financial’s borrowers are from the Haitian community of Greater Boston.

Recent Haitian immigrants have created one of the most vibrant Haitian communities in the country in the Mattapan neighborhood of Boston. In 2010, 29% of Mattapan residents cited Haiti as their place of birth, higher than any other.

Mattapan was one of the “street car suburbs” that grew dramatically following the construction of streetcar lines.

Mattapan was created by waves of immigrant communities. As true throughout Boston, second and third generation Irish Catholics moved south with the trolley lines. At the turn of the century, Mattapan was transformed by the influx of first generation Jewish immigrants from Eastern Europe. Migrating from the cramped, central North, South and West Ends, the Jews of Dorchester, Roxbury and Mattapan numbered over 90,000.

Blue Hill Avenue, the site of Jude Odimegwu’s church, was their three-mile long Main Street.

By targeting immigrant and low income communities, Big Taxi lenders echo the block busters of the 60’s and 70’s. In those years in Dorchester, Roxbury and Mattapan unscrupulous realtors conspired with local banks to “blockbust” Irish Catholic and Jewish neighborhoods. Owners were induced to “panic sell” on the cheap. Block by block, realtors bought property at distress prices, jacked up the prices and brought in the banks to induce black families to buy their homes for more than they could afford.

Reputable banks avoid this type of exploitation. However, like the Big Taxi lenders, unfortunately there are always enough lenders to exploit immigrant and low-income communities.

As the white community moved to the suburbs, new waves of immigrants moved in. Mattapan was transformed into a 77% African-American community. With a per capita income of $18,089, Mattapan has one of the highest concentrations of low income families in Greater Boston.

Too often this generation of lenders forget their great-grandparents were the previous generation of immigrant borrowers.

Most Boston medallion owner operators and owners of small taxi businesses, with 2 to 9 medallions each, live in modest communities like Mattapan and Randolph.

These guys battle on the streets with Uber every day.

The information below is sourced from public records.

Cesar Lucien

  • Cesar Lucien owes Medallion Financial $445,000 on his medallion.
  • At the recent market price of $270,000 for a Boston medallion, his loan-to-value ratio (LTV) is 165%
  • He owes $175,000 more than his medallion is worth
  • Cesar’s family owns a house in Mattapan, currently worth about $276,000.

Medallion Financial must stop pretending Cesar can pay his loan.

Antoine Bellamy

  • Antoine Bellamy owes Medallion Financial $405,000 on his medallion.
  • At the recent market price of $270,000 for a Boston medallion his loan-to-value ratio (LTV) is 150%
  • He owes $135,000 more than his medallion is worth.
  • Antoine’s family owns a house in Mattapan, currently worth about $396,000

Medallion Financial must stop pretending Antoine can pay his loan.

So what if Medallion can attach all of the assets of Cesar and Antoine?

What assets do these families have to pay for their underwater medallions?

Jean Theodat

In addition to Jude Odimegwu, Jean Theodat also lives in Randolph.

Jean’s medallion #121, held as nonaccrual, was scheduled for auction on July 18, 2015 and then canceled. I’m unaware of the status of his two medallion loans at this time.

Chando Souffrant

Chando Souffrant is an especially passionate owner of a small business in Boston’s taxi industry.

Chando is also a key leader of the hundreds-strong USW Boston Taxi Drivers Association (BTDA). Along with Donna Blythe-Shaw, representative of the BTDA, he has relentlessly fought for the rights of Boston’s 6,400 shift drivers, 453 owner operators and 257 owners of small taxi business with between 2 and 9 medallions each.

Yes — just as I’m a staunch Uber Supporter, Chando is a vigorous Uber Opponent.

We both testified at the Boston Uber hearings on December 31, 2014.

Referring to Uber on this video, Chando said: “…just because they have money, they can do anything? Shame on your guys. Shame on you! They are illegal. They are illegal.’’

On the video, I said: “…the consumers have sided against you. the consumers want this. the voters want this…you’re too small an industry. Uber is too big, OK? It’s a tragedy. It’s a tragedy. It’s a tragedy. But the current system is dying. It’s just dying.”

Along with many Uber Supporters I will continue to advocate for Uber.

Chando Souffrant and Donna Blythe-Shaw will continue to fight Uber.

However, all of us can fight Big Taxi together.

I urge all Uber Opponents to support the Coalition Against Big Taxi (CAB).

See:

Prediction: Coalition Against Big Taxi (CAB) Causes Cartel Collapse

According to public records, Chando owes Medallion Financial $1,468,000. Is it fair for him to continue to pay Medallion Financial the same payments month after month after month?

What’s More Likely — Uber Defeat or the Big Taxi Takedown?

The struggle against Uber has had no victories.

The struggle against Big Taxi is absolutely winnable.

A publicly held company, Medallion Financial uses a price set at $400,000 by a handful of suspicious Boston transfers earlier in 2015 to value their loans. This allows them to represent to their shareholders that the collateral used to back up Boston loans is worth 48% more than the actual market price.

However, the market price is not $400,000. As of October 18, 2015 the market price at best was $270,000. 

Almost all of Medallion Financial’s $728 million in medallion assets are in New York, Chicago and Boston. Small medallion owners in all three cities have been devastated by Uber.

Just as they value Boston loans at 48% over market price, they continue to value Chicago medallions at $240,000 although there are several transfers at $150,000, a misrepresentation of 60%.

At the Spring 2014 peak of the bubble, Boston’s 1,825 medallions were worth a total of $1.3 billion. Lenders now claim they’re worth $730 million. Actual market value is $493 million, a 61% drop in sixteen months.

At the Spring 2014 peak of the bubble, Chicago’s 6,900 medallions were worth a total of $2.6 billion. Lenders now claim they’re worth $1.7 billion. Actual market value is $1.1 billion, a 60% drop in fifteen months.

Combined with New York, the three cities’ medallions were worth $20.1 billion when the bubble popped in June 2014. As of October 2015, they’ve swooned 42% to $11.7 billion.

Lenders continue to pretend the billions of dollars loaned against these plummeting values are not at serious risk. They continue to force borrowers to pay them monthly for underwater assets in free fall every month that Uber’s on the road.

Uber is vigorous, medallion lenders are frail.

Which makes the better target?

There are many other lenders in addition to Medallion Financial. Why did they lend so much money leading up to the medallion bubble popping in Spring 2014? Why do they continue to use inflated values?

For the publicly held, it props up their stock price. Just as in the block busting 70’s and the real estate bubble of just ten years ago, inflated loans to unqualified borrowers are justified by inflated values. Inflated values allow lenders to continue to pretend their loans are collectible.

Working hand in hand, the Big Taxi world of big medallion owners, lenders, auctioneers, attorneys and politicians try to keep the plates spinning.

Uber Supporters and Uber Opponents agree on the extreme damage over the past year.

Thousands of families in Randolph, Mattapan and hundreds of other immigrant communities in New York, Chicago and Boston are completely unable to pay back the $7.5 billion in medallion loans outstanding.

Isn’t it time for Medallion Financial and ALL other lenders to end extend-and-pretend?

The Boston medallion market is dead.

Although they continue to try, lenders can’t breathe life into this corpse.

It’s time for Medallion Financial and other lenders to be honest with all of their stakeholders.

It’s time to let the families of Jude, Cesar, Antoine, Jean and thousands of other families and their communities off the hook.

The total outstanding loan balance of Medallion Financial’s 38 individual Boston borrowers is $26,733,000.

97% of the total value of the loans are secured by medallions worth less than the loans on each.

Whether Uber Supporters or Uber Opponents:

Together we CAN win.

The list below has been obtained from public records. Inclusion does not imply support of CAB at this time.

Borrower Amount Owed
Jude Odimegwu $7,736,000
Selim Romanos $2,165,000
Chando Souffrant $1,468,000
Chenet Gabriel $1,069,000
Pierre Leroy $998,000
Siveny Augusin $973,000
Mansour Bahrampouri $937,000
Jean Theodat $930,000
Yvens Oscar $615,000
Audinel Auguste $613,000
Serge Vildrovin $525,000
Germain St. Louis $524,000
Jean Arigue Cineus $495,000
Evelin Pagan $494,000
Michael Miselman $472,000
Cesar Lucien $455,000
Hyacinthe Denis $447,000
Jackson Obei $447,000
Sarwar Amin $442,000
Prudhomme Dumerant $433,000
Jean Pierre $427,000
Antoine Bellamy $405,000
Jean Tunis $384,000
Ibsen Romain $364,000
Horace Denis $331,000
Leden Gilot $315,000
Eglemo Thenor $307,000
Jean Elie $279,000
Jaime Esteves $279,000
Jean Louine $279,000
Miralam Mohmand $271,000
Jean Eddy Goyau $251,000
Mary Ilyayev $179,000
Amidu Barrie $165,000
Jean Thermora $165,000
Duckens Saint-Fleur $69,000
Joseph Cohen $16,000
Horace Denis $9,000
Total $26,733,000

Together we WILL win.

For information on CAB, please read:

Prediction: Coalition Against Big Taxi (CAB) Causes Cartel Collapse

My disclosure update as of January 30, 2016 is here.

 

 

 

 

 

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