Driving a taxi continues to be a rough ride in the age of Uber and Lyft.

Many San Francisco cabdrivers say they are mired in debt paying off their $250,000 medallions — permits allowing them to run their own cabs. Almost half of the city’s 1,476 medallion holders want to sell, including about 300 who paid for their medallions and 391 who earned free medallions after years on a waiting list and now are older than 60 or disabled.

But they can’t. No one has purchased a medallion in more than three years because taxi income has been ravaged by cheaper ride-hailing.

At the same time, some cabdrivers who’d like to continue driving said they received abrupt foreclosure notices on their medallion loans, potentially hurting their ability to work and threatening their creditworthiness, even though they made on-time payments.

The city and the credit union that made medallion loans are embroiled in a legal battle over who is at fault.

“The taxi drivers are victims, caught in the middle,” said Norma Garcia, director of policy and advocacy for the Mission Economic Development Agency. “This calls into question the city’s responsibility to look closely at whether the market has failed.”

Nurtin Basaran, 53, bought his taxi medallion for $250,000 in 2010, scraping together a $50,000 down payment. It initially was a fixed-rate loan, but as ride-hailing caused his income to dwindle, he switched to an interest-only payment with a five-year balloon, meaning the balance would have to be refinanced after that period.

He said he made all his payments on time to the San Francisco Federal Credit Union, the entity that backed local medallion loans. But in July he received a letter saying that when his balloon loan matured on Aug. 1, the credit union would not refinance his loan. His choice was to pay off the remaining $161,159 or face foreclosure, the letter said.

“It means disaster,” he said. “They’re trying to take my job away so I will be with no job. I said to them, ‘This is really unfair.’”

Basaran, a father of two, said his wife recently started waiting tables to help support their family as they fear his income falling even more if he loses his medallion.

After The Chronicle contacted the credit union about the foreclosure warning letters, it refinanced Basaran’s loan.

Just as with a home foreclosure, losing a medallion loan can have devastating consequences, Garcia said.

“These people were trying to build family wealth by investing in something they thought was worthwhile,” she said. “What helps to lift families out of poverty is generational wealth. That’s now being siphoned out of their families.”

Also as with homes, balloon loans temporarily make payments lower, but are difficult to refinance when the underlying asset — in this case, the medallion — has declined in value.

Medallions 1,476 medallions in service as of May 1. April 2016 was the last time a medallion sold. 691 medallion holders want to sell, including 391 medallion holders who received them free after years on a waiting list and now are over age 60 or disabled, and 300 drivers who purchased medallions. 170 medallions have been foreclosed (these would be sold first if there were any buyers). More than two-thirds of medallion loans are short-term (five years or less) balloon notes that need to be refinanced as they expire. Ride-hailing There are 12 times more Uber and Lyft trips than taxi trips per day in San Francisco. Taxi income Only 17% of medallion holders earn a sustainable income, according to an MTA-commissioned report from May 2018. Less than $40,000 year: average income for purchased medallion holders. More than $54,000 a year: average income for medallion holders who received their medallions for free before the purchase program. They earn more because they don’t have loan payments. Leases paid by taxi companies to medallion holders average $750 per month now, compared with $2,500 per month before Uber/Lyft. Sources: SFMTA, S.F. Federal Credit Union

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Jonathan Oliver, the credit union CEO, said in statements that it sold nine loans to another credit union — he wouldn’t name it — which chose not to renew them. The San Francisco credit union has sold 172 loans to other credit unions, which potentially could foreclose on them as the balloons mature. It owns 274 loans outright.

About 170 medallions already have been foreclosed upon, often because drivers simply stopped paying.

“Unfortunately, the ability of taxi drivers to repay a new medallion loan is about as bad as it can get,” Oliver said. “Today, taxi drivers earn a fraction of what they used to make, and the medallions have little value. Lenders are very unlikely to make a new medallion loan under these conditions. If they decide not to make a new loan, they could direct us to foreclose.”

The credit union filed a multimillion-dollar lawsuit last year against the San Francisco Municipal Transportation Agency. It says the agency promised to maintain a healthy market for medallions but let the taxi business collapse by not reining in Uber and Lyft. Based on these assurances, the credit union issued $125 million worth of loans when the city began medallion sales in 2010, the suit says. (Previously medallions were available free to drivers who spent 15 or more years on a waiting list.)

But the agency disputes those allegations.

“As a regulator, I can’t guarantee a healthy market,” said Kate Toran, SFMTA director of taxis and accessible services. “Unfortunately the world changed when these other services (Uber and Lyft) came onto the streets.”

The credit union — and many drivers — want the agency to step in and purchase medallions; that’s one aim of the lawsuit. But the transit agency says it has no obligation to do so.

Instead the agency is trying to improve business for medallion holders by giving them preference for airport pickups and creating new taxi stands at places such as the Transbay transit center, San Francisco Zoo and Alcatraz ferry landing, Toran said. It’s seeking grants to pay for taxi fares for medical trips and after-hours transport for restaurant workers, as well as increasing city employees’ taxi use.

New moves implemented in October to help sell medallions include allowing business entities to buy them, removing the requirement for medallion owners to be drivers, eliminating a 5% transfer fee on sales, and allowing any entity (such as a taxi company or investor) to purchase up to 50 medallions, Toran said.

Those changes have not resulted in a single medallion sale.

A report commissioned by the transit agency lays out the harsh financial reality.

“Only 17% of medallions earn a level of income that is financially sustainable,” it said. “Without a change in the operation of the industry, medallion loans may continue to be foreclosed. ... Aging medallion holders (lack) an appealing path out of the industry.”

Taxi drivers nationwide are facing similar crises as customers defect to cheaper, more convenient ride services. Now that Uber and Lyft are public, they may raise rates to try to make money, but they may still be cheaper than cabs. The ubiquity and convenience of app-hailed ride services make them a formidable competitor.

New York cabdrivers, for instance, have an even worse situation as their medallion prices soared to $1 million and then collapsed, leaving thousands of drivers mired in debt, the New York Times reported this year. In Chicago, almost half of the licensed cabs are in foreclosure or idled, the Chicago Tribune reported last year.

The financial shock waves are hitting local taxi companies too. SF Town Taxi, which runs about 80 taxi medallions, told the city last month that it is winding down operations, the MTA said. Yellow Cab, the city’s largest taxi operator, filed for bankruptcy in 2016 and subsequently merged with smaller companies.

Many drivers are on edge because of the unexpected foreclosures.

“I’m too much worried,” said Mohammed Shaikh, 60, who has been driving since 1996 and has had his medallion for eight years. He supports two children on his driving income. “If anything happened to my taxi, it’s like the end of life for me. I would have nothing to do.”

His balloon note is due next year. “I give my whole life savings, $50,000 to them” as a down payment, he said. “I don’t have a single penny with me right now.”

Other drivers desperately want to offload their medallions but can’t find anyone to buy them.

Jeet Ghotra has been driving a cab since 1991. For many years, he earned a decent income, he said, “not millionaire but making a living” as he and his wife raised three children.

He encouraged family members to get into taxi driving as well. His brother, two brothers-in-law and two sons also are medallion holders. “Everybody’s frustrated; everybody wants to sell,” he said of his relatives.

Ghotra bought his medallion in 2010 by taking out a $250,000 loan on his South San Francisco house.

Now at age 68, he’d like to sell the medallion. The monthly mortgage payments are a huge strain. He’s using his Social Security income to help cover them.

Drivers who have a medallion loan can stop paying and let the lender foreclose, even though that hurts their credit.

But Ghotra cannot walk away because that would mean losing the house where he lives with his wife, two sons, their wives and five grandchildren.

“This is a very sad story,” he said. “We are struggling. We are asking for help. We cannot make a living.”

His son Gagandip Singh, 34, leases his medallion to a cab company for $700 a month. Leasing a medallion to a cab company used to generate $2,500 a month.

On weekdays, Singh drives a taxi. On weekends, he drives his own car for Uber to help cover his medallion payments. “It’s really hard to make money these days,” he said.

Other drivers, such as Basaran, said that’s not for them.

“Uber (and) Lyft destroyed my life,” he said. “It’s not going to fit morally for me” to work for them. “I’d rather go to the street to beg.”

Carolyn Said is a San Francisco Chronicle staff writer. Email: csaid@sfchronicle.com Twitter: @csaid