Qualifying Buyers

Once potential buyers are approved by the SFMTA, they need (if necessary) to get their loan applications approved by a qualified financial institution. As mentioned in my previous post, it's a good idea to schedule a loan appointment ASAP.

The San Francisco Federal Credit Union has put together the Taxi Medallion Loan Package on the left, which will also be used by Montauk Credit Union of New York. For more information you can check SF Federal's website: http://www.sanfranciscofcu.com/loans/taximedallion_loan.htm

(I should point out that I'm not shilling for them. I'm mentioning them primarily because they have been working together with the SFMTA to get their package together. They are already "good to go": they don't have any prepayment penalties or hidden fees, and it costs nothing to apply for one of their loans.)

Last week I spoke with the SFFCU's Vice President of Lending Rebecca Reynolds Lytle about the qualifications necessary to get a loan to buy a medallion. She agreed with my previous list stating that the credit unions are looking for:

• Two years worth of tax returns.
• No current or recent bankruptcies or other horrible credit.
• No conviction for fraud or tax liens.
• A good credit rating could be helpful.

But Lytle added that she's not so much interested in abstract standards as she is in dealing with applicants on a one to one basis. She says that she sees her job as one of "helping to put San Franciscans into small businesses."

I asked her about drivers who have no credit history. Of course many lenders think that having "no credit" is as bad or worse than having "bad credit." But cab driving is a cash business and many drivers (like myself before I had my medallion) only deal in cash. I pointed out to Lytle that I had bought expensive cameras, computers and cars on cash before I ever had a credit card and that I considered myself a good risk.

She said that she realized that she was dealing with a cash business and that not having credit would not necessarily stop her from making a loan. What she would be looking for is:

• Can the applicants demonstrate a cash flow?
• Do they have bank accounts or investments?
• Do they own a house or other property?
• What other assets do they have?

Conversely Lytle also wants to look at their expenditures.

• Do they have house or other payments?
• How many dependents do they have?
• What are their other expenses?

The bottom line is, can they make the payments?

Ms. Lytle says that she wants to "look at and evaluate" each person's individual situation and that she "wants to educate drivers on how to get a loan."

If she has to turn people down for a loan, she wants them to understand why. If the problem is bad credit, Lytle would like them to understand how to repair their credit issue. If the problem is a lack of a downpayment, they can save up their money and apply for any medallions that might be sold in the future.

The main thing she wants to do is form relationships with potential buyers that could lead to the buyers using the credit union for other services that they might need.

Ms. Lytle is set for a deluge of medallion loan applications. She and two loan officers will be working full time to expedite the process.

To call for an appointment the number is (415) 359-2977.

Note: The final figures are: 145 potential sellers and 1,400 potential buyers. 100 letters were sent out to buyers yesterday.

Matching Buyers to Sellers

As I'm writing this, Director Christiane Hayashi and her crack team at Taxi Services is going through a list of 209 sellers and 1330 buyers to pick 100 from each group and match them up with each other. Hayashi is limiting the initial sale to 100 medallions because that is all her department is able to cope with at the moment.

First, Taxi Services has to make certain that drivers and medallion holders meet some basic criteria. (Sellers, for instance, have to be disabled or at least 70 years old; and buyers have to be on the waiting list and been working for 4 out of the last 5 years.) Then, Taxi Services has to put the would-be participants through a somewhat complex selection process.

The oldest drivers and those with disabilities will be given preference as sellers.

The buyers will be chosen primarily by their position on the waiting list.

Taxi Services will also try to match up buyers and sellers from the same color schemes so that cab companies don't lose medallions.

As soon as the 100 wanna-be buyers are matched up with the 100 sellers, Hayashi will send out an application package. This could be as early as today, meaning that some of the letters could arrive as early as Thursday or Friday.

Then the prospective buyer-driver will be need to schedule a medallion hearing with the SFMTA to see if he or she officially qualifies as a buyer.

Once qualified as a buyer, the driver then will have to turn in a Taxi Medallion Loan Package to a qualified bank or credit union to see if she or he qualifies for a loan.

As consortium of lenders led by the Montauk Credit Union of New York City and the San Francisco Federal Credit Union as already been approved by the SFMTA.

Rebecca Lytle of the San Francisco Credit Union suggests that drivers schedule their appointments with the loan companies soon after their appointments with the SFMTA so that the process can be completed ASAP.

As I mentioned in last weeks post, Sellers and Buyers, the medallions will be sold on a first come, first serve basis. Those who jump through the hoops the fastest, will be the first to sell or buy.

You can contact the appropriate people at:

 SFMTA: (415) 701-4400.

 San Francisco Federal Credit Union: (415) 359-2977.

Montauk Credit Union of New York: (212) 989-5200.

Barry Korengold on Shorts and the SFO

Since I still don't know anything about SFO, Barry Korengold of the San Francisco Cab Drivers Association (SFCDA) has been kind enough to share this article with me. The photo is also his.

I should point out that "a short" is technically a ride where a cab driver can drop off a customer and get back to the airport cab lot within 30 minutes. If they make it within the time limit, the drivers go to the front of a waiting line for customers.

Originally designed to help drivers who get short rides, it has been both abused by and abused drivers over the years. If traffic is heavy, drivers often can't make it back to the airport on time. Conversely, it is possible to go from the airport to some hotels in downtown SF and get back to SFO within 30 minutes if one drives 90 mph. Thus the practice has led to much road racing and some accidents. (See my own experience as an airport player.)

The SFO administration wants to end the practice because of the racing.

Over a hundred drivers showed up at the meeting held in the airport museum at SFO on May 13th. Airport Commissioner Larry Massola attended, as well as Deputy Airport Director Tryg McCoy, Assistant Deputy Airport Director Henry Thompson, DAJA (ground transportation) General Manager Abubaker Azam, Jarvis Murray from the SFMTA and a lawyer from the City Attorney's Office.

Tryg McCoy opened the meeting by explaining the reason they need to get rid of the time based short system, which is basically because it leaves SFO open to lawsuits if they have a system which encourages drivers to speed. He also explained that a small group of driver reps have been meeting and will continue to meet to discuss alternatives and hammer out details. He wanted to make it clear that they understand that for economic reasons most drivers want some sort of short system, but that a time based system is out of the question.

They let all drivers speak for 3 or 4 minutes, and those who wished, came up a second time for shorter comments. There were some new ideas as well as ideas that had been discussed previously by the smaller group. Though the mood and suggestions of drivers varied, the general feeling of the room seemed to be acceptance that the 30 minute short system is ending and we'll wait and see what else they come up with.

I explained that although we'd like to see a GPS system, it's not feasible at this point and that in the meantime, the system that seemed to go over best with all the people at our previous meetings was one where the starters would give tickets to the passengers that are going to certain designated local cities, who would then give them to the cabdrivers. This would be done before they reach the cabs, to avoid drivers making deals with passengers to lie about where they are going. Details of this plan, would be discussed at future meetings between the airport and cabdriver reps.

One idea I think is worth contemplating, was presented by John Han. It would be to not have a time limit at all on the tickets, so that if you got for instance a Daly City trip, then got a radio call in southern SF, you could take the call, and use your short ticket later. This could be limited to the same day or not.

I think it's commendable that the airport is holding these meetings and consulting cabdrivers about how to replace the current system. They're not just dumping something on us that they dreamed up out of the blue. Deputy Airport Director McCoy also wanted to make it clear that they aren't holding to the July 1st deadline for eliminating the current system and that more meetings with drivers will be held before they decide what will replace it. They must then present the plan to the Airport Commission for approval.

Barry Korengold -

President, SFCDA

Sellers and Buyers

The MTA could begin selling medallions as early as the week of May 24, 2010.

Director Christiane Hayashi has finally hired two experienced investigators and Taxi Services will be able to process 12 medallions a week.

When the participation deadline of May 14th passes, Hayashi will try matching buyers to sellers. If, for instance, she receives 300 requests to sell, she will find 300 buyers for the medallions. These buyers will be chosen on the basis of their order on the Waiting List.

This would be in addition to the 20 0r 30 revoked medallions that the MTA will be selling outright. So, in this example, there would be 320 or 330 buyers and 300 sellers aside from the MTA. Logically, the MTA medallions will be sold first.

Once the buyers are selected, the game will change from seniority to a race. It will work something like this:

• On May 17th, Chris Hayashi will send letters out to potential sellers (making certain that they do want to sell) and buyers.
• They will be given 45 days to respond but ... the first people to get their paperwork in will be the first sellers and buyers.
• All qualified sellers and buyers who return their paperwork within the 45 day deadline will be able to sell or buy taxis but on a last come, last served basis. Even if the Pilot Plan ends, they will still be able to sell.

Potential Buyers will be required to jump through the following hoops:

1. Drivers will have to prove that they have a down payment and show the source of the funds. Hayashi doesn't want loan sharks or other dubious characters lending drivers money.
2. Drivers will need to get their waybills and other necessary documents together and bring them to Taxi Services.
3. The MTA has to okay the buyer.
4. The drivers then need to qualify for a loan from a qualified lender.

The four credit unions brought together by Chris Hayashi (the San Francisco Federal Credit Union, the Montauk Credit Union from New York City, the San Francisco Police Credit Union and the San Francisco Fire Credit Union) have already set standards for loans to drivers and will be able to process them quickly.

The qualifications that the credit unions are looking for are:

• Two years worth of tax returns.
• No current or recent bankruptcies or other horrible credit.
• No conviction for fraud, etc
• A good credit rating could be helpful.

I'm going to be interviewing one of the SF Federal Credit Union officers next week to get more details on how they decide whether a driver would qualify or not. I'm unsure, for instance, if no credit history would disqualify a person for a loan. This is a cash business and there must be many drivers (like myself before I got my medallion) who pay cash for everything but are very responsible individuals.

Rebecca Lytle, the Vice President of Lending at SFFCU, said that the medallion itself secures the loan.

Director Hayashi said there was a company named HSM that would help potential buyers organize their waybills, otherwise help the drives prove that they met the necessary qualifications or help drivers with financial problems. HSM can be reached at: 415-431-7655 or www.hsmsf.com.

Hayashi also said that Taxi Services would no doubt be making mistakes in the process because it was the first time they'd ever done anything like this. She said that it would be, "A learning opportunity for everybody."

In addition, Hayashi wanted to emphasize that drivers who are turned down for loans will keep their position on The List and remain eligible for a medallion ala Prop-K. She continues to guarantee that this list will move faster than it ever has before.

Given her achievements over the last year, who would bet against her?

It's $250,00 - Of Course.

$250,000 was chosen as the Fixed Price Sale amount at a Town Hall Meeting yesterday. The figure was a forgone conclusion. Of much more interest (if you'll excuse the pun) were the details of the financing that will become available to the buyers.

Attending the meeting were Louis Jimenez (photo) and Michael Turano of the Montauk Credit Union from New York City; and Rebecca Reynolds Lytle and Stephan B. Ho of the San Francisco Federal Credit Union. These two institutions have joined with the San Francisco Police Credit Union and the San Francisco Fire Credit Union to provide loans to drivers.

The team, of course, was put together by negotiator extraordinaire, Director Christiane Hayashi, who gave the presentation.

The loans will:

• have an interest rate of around 7%.
• require a downpayment of 5% to 20%.
• be amortized over a period of either 15 or 25 years.
• have a three year balloon payment that will be refinanced at the end of the three year period.
• There will be no prepayment penalties and no fees up front.

Credit unions are required by federal law to get a 20% downpayment on a loan. One unique feature of these loans is that the seller might have to guarantee the downpayment if the buyer is unable to come up with the full 20% or $50,000.

• If the buyer can only do 5% down, the seller would have to guarantee the other 15% or $37,500.
• At 10% down, the seller would have to front $25,000.
• At 15%, the amount would be $12,500.
• The money would be held in an interest bearing CD and paid to the seller when the equity in the loan reaches the $12,500 to $37,500 figure.

Payments on the loans will be about:

• $1,800 a month at 20% down on a 15 year loan.
• $2,100 a month at 5% down.
• from $1,400 to $1,700 per month on a 25 year loan.

The creative and unique way of guaranteeing the downpayment is the brain-child of Mike Turano of Montauk. It's a response to our unique situation where the rules of the game are changing too rapidly for drivers to have planned for them in advance. It shows the willingness of Taxi Services and the credit unions to qualify as many drivers as possible.

As it is, this might turn out to be minor feature of the Pilot Plan anyway. According to Chris Hayashi, most of the drivers who have sent in their Buyer's Participation forms say that they do have the 20% downpayment.

That the loans are possible at all is due to Hayashi's bringing Montauk Credit Union into the mix. They have expertise in loaning money to medallion holders in New York, Chicago and Philadelphia.

Louis Jimenez, CEO of Montauk, said that he was attracted to the San Francisco market because he's found that individual medallion holders are very good risks. He said that he hadn't foreclosed on this type of loan in the last 15 years. He thinks that the only way he can lose money is if San Francisco does not continue to sell taxi medallions after the Pilot Plan is over.

Buyers will not be required to use only these finance companies for their loans. If they can get better terms from other qualified lenders, they are free to do so.

Tomorrow: What sellers and buyers should be doing.