Wednesday, May 19, 2010

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:

(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.


  1. Hey Ed,

    If one chooses to buy a medallion, do you know what happens if needs to sell it down the road? Does he have to give the City and drivers fund a total of 20%. If so, then isn't a person really buying a 250k medallion that is only worth 200k the minute he buys it? I mean, a person could get sick a few years after buying one, not be able to fulfill the driving requirement and be forced to sell at a loss, especially when he is gaining so little equity at 7% interest. On those adjustable rate loans which have reasonable monthly payments, only a small fraction is going to the principal. Is this really a good deal?

    Armand (DeSoto)

  2. I don't if the detail have been worked out but I believe that there would be pro rata return of the deposit if the buyer can't fulfill the agreement due to sickness or death.

    More info will follow.

  3. As far as whether or not this is good deal, you should ask the 1,400 who participate as buyers.