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Presentaion_Master_Loan_Sales_Agreement_Webinar_072408

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					                     FFEL Loan
                Purchase Commitment
                      Program

                 MASTER LOAN SALES
                    AGREEMENT

                    JULY 24, 2008
                    Loan Purchase Program   1
July 24, 2008
                        Presenters
       Jeff Baker
          Federal Student Aid
          U.S. Department of Education

       Dennis Cariello
          Office of the General Counsel
          U.S. Department of Education




                   Loan Purchase Program   2
July 24, 2008
                        Program



                    Introduction

                        Jeff Baker
                     Federal Student Aid
                U.S. Department of Education



                  Loan Purchase Program   3
July 24, 2008
                        Logistics
   Title: Loan Purchase Commitment Program
       Master Loan Sales Agreement
   Date: July 24, 2008
   To Participate You Must –
       Logon at URL provided in registration
        confirmation e-mail; and
       Dial in to 1-888-324-6476
        Confirmation number: MGERHARD
   Additional information on the Loan Purchase
    Programs at www.federalstudentaid.ed.gov/ffelp
                  Loan Purchase Program   4
July 24, 2008
                 Webinar Objectives
   Target Audience: FFEL lenders/holders,
    secondary markets, servicers, and guaranty
    agencies.
   Purpose: To provide an overview of the terms and
    conditions of the Master Loan Sales Agreement for
    the Loan Purchase Commitment Program.
   Limitations: Will not cover the Loan Participation
     Purchase Program and will not include details on
     process flows, data elements, cash flows,
     reconciliations, and compliance. This information will
     be provided in subsequent webinars.

                  Loan Purchase Program   5
July 24, 2008
                  Problem & Goals
   Problem:
     Lack of liquidity in financial markets impacting
      ability of FFEL Program lenders and secondary
      markets to find cost effective financing.

   Goals:
     Ensure that eligible students and parents receive
      federal student loans for the 2008-2009 academic
      year.
     Support the FFEL Program as a successful
      private/public partnership.
     Ensure no net cost to the government.

                  Loan Purchase Program   6
July 24, 2008
                    Legal Authorities
   Ensuring Continuing Access to Student
    Loans Act of 2008 (P.L. 110-227)
     H.R. 5715
     Signed by the President on May 7, 2008

   Federal Register Notices
       Required by statute
       Draft Posted to IFAP on June 24, 2008
       Official Publication July 1, 2008
       Corrections Notice Published July 17, 2008


                    Loan Purchase Program   7
July 24, 2008
                      Response
   Two Loan Purchase Programs –
      Loan Purchase Commitment Program (the “Put”
       Program); and
      Loan Participation Purchase Program.


   The law does not authorize the Department
    to make advances or to otherwise “lend”
    money to FFEL lenders.



                 Loan Purchase Program   8
July 24, 2008
                         Program


      Master Loan Sales Agreement
                 (Posted July 10, 2008)

                     Dennis Cariello
                Office of the General Counsel
                U.S. Department of Education



                   Loan Purchase Program   9
July 24, 2008
                     Section 1: Terms
           Notice of Intent to Participate
  Lender may not sell a loan to the Department
   that was first disbursed before the date ED
   received the lender’s ‘Notice of Intent to
   Participate’ (NOI), except –
        If ED receives the NOI by July 31, 2008,
          interests in loans first disbursed on or after
          May 1, 2008 may be included.

     ED will respond to submission within two
        business days. If no response, call
        (202) 377-4401.
                    Loan Purchase Program   10
July 24, 2008
                     Section 1: Terms
                Notice of Intent to Participate
     Originating lender’s NOI ED receipt date
      determines a loan’s eligibility, not a subsequent
      holder’s NOI ED receipt date.

     Submission of NOI does not commit lender/holder
      to sell loans. It only establishes the option to to
      sell and the eligibility of loans.

     No minimum purchase amount required to
      participate in the “Put” Program.

                    Loan Purchase Program   11
July 24, 2008
                   Section 1: Terms


       Establishes the terms under which a lender
        may sell eligible loans to the Department.

       Bill of Sale and Loan Schedule required
        (Exhibit B).

       Lender must notify the Department of intent to
        sell by August 14, 2009 and sale must be
        complete by September 30, 2009.

                   Loan Purchase Program   12
July 24, 2008
           Section 2: Commitment to Lend



       Lender (Seller) represents to the
        Department that it:
           Will continue to participate in FFELP.
           Will make or acquire FFELP loans with
            funds from private sources when they
            become reasonably available.



                    Loan Purchase Program   13
July 24, 2008
                Section 3: Definitions
   Eligible Borrower Benefits –
     An unconditional upfront borrower fee reduction(s)
      that is accrued and paid or made prior to the date
      on which a Participation Interest is sold to ED;
      and
     Reductions in interest rates of not more than 0.25
      percent, contingent on the borrower’s use of
      automatic payment process.
   Eligible Lender – an entity that meets
    requirements of HEA §435(d), including an
    ELT.

                  Loan Purchase Program   14
July 24, 2008
                Section 3: Definitions
   Eligible Loan –
     Only FFEL subsidized and unsubsidized Stafford
      Loans and Federal PLUS Loans (parent and
      grad/student). Sub and unsub must be included
      together.
     For loan period that includes or begins on or after
      July 1, 2008.
     First disbursement on or after May 1, 2008 and no
      later than July 1, 2009.
     Will be fully disbursed no later than September
      30, 2009.

                  Loan Purchase Program   15
July 24, 2008
                Section 3: Definitions
   Eligible Loan –
     Servicing agreement must be able to be
      terminated with no more than 30 days notice.
     Loan may be sold even if in, or previously in, the
      Participation Program.
     Loan not eligible if Lender of Last Resort Loan
   Seller –
     An Eligible Lender or the holder of beneficial
      interests in Eligible Loans.


                  Loan Purchase Program   16
July 24, 2008
                Section 3: Definitions

  Purchase Price
   For each loan sold ED will pay an amount
    equal to the sum of –
      The outstanding principal balance of the loan, as
       of the Purchase Date;
      The accrued and unpaid interest due from the
       borrower, as of the Purchase Date;
      Reimbursement of the one percent loan fee paid
       by the lender pursuant to HEA section 438(d);
       and
      $75.00.

                  Loan Purchase Program   17
July 24, 2008
                Section 4: Sale/Purchase


       Seller must provide ED with at least 45
        days notice of intent to sell loan.
       Sale will be consummated when:
           Seller satisfies closing conditions;
           ED receives Bill of Sale - with loan detail
            schedule (Exhibit B);
           ED receives Notes and other required
            documents.
           ED makes payment to lender.
                    Loan Purchase Program   18
July 24, 2008
           Section 4: Sale/Purchase


       Each seller can sell loans no more
          frequently than weekly.
       Servicing rights must be released upon
          sale.
       Servicing transferred at the direction of
          ED.
       Any holder (not just originating lender)
          can sell loans.
       Subsidy and SAP through purchase
          date – using normal 799 Form process.
                     Loan Purchase Program 19
       Guaranty ends upon sale.
July 24, 2008
           Section 5: Conditions Precedent



       Initial Document Delivery
           At least ten business days prior to first
            purchase the Seller must submit to ED:
              Adoption Agreement (Exhibit A);
              Officer’s Certification (Exhibit C);
              Opinion of Counsel (Exhibit D).



                    Loan Purchase Program   20
July 24, 2008
           Section 5: Conditions Precedent



       Seller must also:
           Provide a security release certification if
            loans have been pledged.
           Notify borrowers of the sale, as required.
           Provide an irrevocable power of attorney to
            ED.
           Provide an Agreed Upon Procedures
            report from an independent public
            accountant.
                    Loan Purchase Program   21
July 24, 2008
          Section 6: Reps and Warranties



       As to the Seller:
           Is duly organized and in good standing in
            its State;
           Is an eligible lender or beneficial holder;
           Operates program in compliance with
            applicable laws and regulations;
           Has full power to hold and sell loans;
           Has executed and is not in violation of the
            Master Loan Sales Agreement.
                    Loan Purchase Program   22
July 24, 2008
          Section 6: Reps and Warranties



       As to the Seller (continued):
           Transfer of loan shall be treated as a sale
            on the books and records of the Seller;
           Is solvent and will not be rendered
            insolvent as a result of the sale; and
           Has appropriate internal controls that verify
            the existence and accuracy of its legal
            documents, credit documents, and
            underwriting decisions.
                    Loan Purchase Program   23
July 24, 2008
          Section 6: Reps and Warranties


       Loan Level Representations:
           Seller has good and marketable title to the
            eligible loans being sold;
           Seller is authorized to sell, assign, transfer
            or reacquire loans;
           No consents or approvals required prior to
            sale;
           Loans were made and serviced in
            accordance with applicable laws and
            regulations;
           Not in violation of agreement.
                     Loan Purchase Program   24
July 24, 2008
        Section 6: Reps and Warranties


     Loan Level Representations
      (continued):
            Provides for the repayment of the loans
              through a schedule that fully amortizes the
              principal balance at maturity;
            Borrower payments have been allocated to
              reduce principal and interest on the loan;
            Due diligence and reasonable care has
              been exercised in making, administering,
              servicing and collecting on the loans;
           
July 24, 2008 Borrowers were eligible to receive the
                       Loan Purchase Program 25
          Section 6: Reps and Warranties
    Loan Level Representations (continued):
        All loan fees were paid to Secretary;
        Beneficial interest will not remain with the Seller
         that would result in the loans being included in
         the Seller’s estate in the event of bankruptcy;
        An electronically signed note must have been
         signed in compliance with applicable law and
         regulations; and
        Loans have not been pledged or otherwise
         conveyed.



                   Loan Purchase Program   26
July 24, 2008
     Section 7: Rescission of Purchase



     The Department may rescind its
      purchase of a loan if:
            Any representation or warranty made or
              furnished by the Seller proves to have
              been materially incorrect; or
            Any circumstance or event that occurred
              prior to the purchase date that a borrower
              asserts with respect to the borrower’s
              obligation to repay all or part of the loan
              that the Department, in good faith, believes
July 24, 2008
                        Loan as to Program
              raises doubtPurchasethe legal enforceability
                                               27

              of the loan; or
                   Sections 8 and 9


       Any payment received by the Seller after the
       Section 8: Obligation to ED’s designated
        sale must be forwarded to Remit
        servicer within 2 Communication
        Payments and business days;
       Any written communication must be
        forwarded to ED’s designated servicer within
        2 business days.

       The Seller must provide assistance to ED to
        resolve account problems raised by the
       borrower.Continuing Obligation of the
        Sec. 9:
          Seller   Loan Purchase Program   28
July 24, 2008
      Section10: Liabilities and Indemnities



       Seller shall indemnify the Department
        against:
           Any taxes that may be asserted as a result
            of the transaction; and
           Any liability for any and all costs,
            expenses, losses, claims, damages and
            liabilities arising from the Seller’s willful
            malfeasance, bad faith or negligence.

                    Loan Purchase Program   29
July 24, 2008
      Section 11: Transfer of Servicing



       The Seller agrees that loans are being
          purchased on a servicing-release basis.
       Servicing arrangements must be
          terminable upon 30 calendar days
          notice.
       The Department shall obtain all rights to
          service and at its sole discretion require
          the deconversion of the loan for
          servicing directly or through a third
          party.
July 24, 2008
                    Loan Purchase Program 30
       Section 12: Merger or Consolidation



       Upon the merger, consolidation, or
        other assumption, the new entity must –
       Assume all of the original Seller’s obligations,
       The Officer’s Certificate (Exhibit C)
        and
       The Opinion of–Counsel (Exhibit (D)
       Submit to ED




                   Loan Purchase Program   31
July 24, 2008
             Section 13: Expenses



       ED is responsible for its own legal fees
          and expenses.
       Seller is responsible for all other costs
          and expenses associated with the
          preparation, execution, and delivery of
          the sale, including any deconversion
          costs. The $75 per loan fee that is
          included in the purchase price can
          cover these costs. Program
July 24, 2008
                     Loan Purchase      32
                  Sections 14 and 15


         Terms of the agreement survive the acquisition
       Section 14: Survivalthe bill of sale.
          of loans provided on of Covenants



       Section15: Communications and Notice shall
         All communications, notices and approvals
          be in writing and
        Requirements mailed or delivered to the
            address designated.



                    Loan Purchase Program   33
July 24, 2008
                  Sections 16 and 17

       All instruments shall be in the form set forth in
        the attachments to the agreement.
       Section 16: Form of Instruments

       Any documents may be amended with written
        consent of all parties.
       No waiver17: modification can be made unless
       Section or Amendments; Waivers
        it is consistent with the requirements of the
        HEA and is in writing and signed by the party
        against whom the waiver or modification is
        sought.
                   Loan Purchase Program   34
July 24, 2008
                 Sections 18 and 19

        The Seller must give access to transaction
         materials, documents, & knowledgeable seller
       Section 18: necessary to permit government
         personnel as Audits
         audit.

        Remainder of Agreement is valid.
        Re-negotiation to develop a structure that
       Section 19: same economic effect.
         achieves the Severability Clause



                   Loan Purchase Program   35
July 24, 2008
                   Sections 20 and 21

       Section 20: Governing Law
            Construed in accordance with Federal law,
             or if no applicable Federal law, the internal
             laws of New York.

       Section 21: Exhibits
            Integral part of the agreement.




                     Loan Purchase Program   36
July 24, 2008
                 Sections 22 and 23
     Section 22: Interpretive Principles
           Terms defined in the Agreement have the
            meaning assigned in the Agreement.
           Accounting terms not defined in the Agreement
            have the meaning assigned under generally
            accepted accounting principles.

     Section 23: Reproduction of Documents
           Reproductions of Agreement or any related
            document are admissible in evidence as the
            original itself of such document.


                   Loan Purchase Program   37
July 24, 2008
                 Sections 24 and 25


        Seller agrees to execute and deliver
       Section 24: Further Agreements
         additional documents, instruments or
         agreements necessary to effectuate the
         purposes of the agreement.

        Seller may, but is not required to, participate
         in ED’s 25: Other Department
       SectionLoan Participation Purchase Program.
         Programs


                   Loan Purchase Program   38
July 24, 2008
                Section 26: Adoption



       The Master Loan Sales Agreement is
        effective with respect to a Seller as of
        the latest of the dates on which the
        Seller, its ELT, as applicable, and ED
        each execute the Adoption Agreement
        (Exhibit A).


                  Loan Purchase Program   39
July 24, 2008
                           Exhibits



      A – Adoption Agreement
      B – Bill of Sale with Loan Schedule
      C – Seller’s Officer’s Certificate
      D – Opinion of Counsel of the Seller
      E – Security Release Certification with Loan
         Schedule
      F – Notice of Intent to Participate

                    Loan Purchase Program   40
July 24, 2008
                Loan Purchase Program   41
July 24, 2008

				
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