$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.
- $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.