Loan Purchase and Loan Participation Webinar by jolinmilioncherie


									FFEL Loan Participation Program

  Participation Operations – Part 3

             August 15, 2008

      Participation Operations – Part 3   1
• Jeff Baker
   Director Policy Liaison & Implementation
   Federal Student Aid
   U.S. Department of Education

• Jay Hurt
   Chief Financial Officer
   Federal Student Aid
   U.S. Department of Education

      Participation Operations – Part 3   2
                     Jeff Baker
Director Policy Liaison & Implementation
           Federal Student Aid
      U.S. Department of Education

     Participation Operations – Part 3   3
• Title: Loan Participation Program
   • Participation Operations – Part 3
• Date: August 15, 2008
• To Participate You Must –
   • Logon at URL provided in registration confirmation email;
   • Dial in to 1-888-324-6476
     Confirmation number: MGERHARD
• Additional information on the Loan Purchase Programs at:

             Participation Operations – Part 3   4
            Webinar Objectives
• Purpose: To answer questions from Participation
  Operations Webinars – Part 1 and Part 2

• Target Audience: Personnel at servicers, lenders and
  custodians who are responsible for record keeping

• Limitations: Will not include matters concerning the
  Loan Purchase (PUT) Commitment Program. This
  information will be provided in other formats, including in
  subsequent Webinars

• Loan Purchase (PUT) Commitment Program Webinar -
  part 1 will be held on August 22, 2008

          Participation Operations – Part 3   5
               Legal Authorities
• Ensuring Continuing Access to Student Loans Act of
  2008 (P.L. 110-227)
   • HR 5715
   • Signed by the President on May 7, 2008
   • Strengthened GA Lender of Last Resort Program
   • Provided Secretary authority to purchase FFEL loans.
   • Cannot provide advanced funding to lenders
• Federal Register Notice
   • Required by statute
   • Draft Posted to IFAP on June 24, 2008
   • Official Publication July 1, 2008

          Participation Operations – Part 3   6
           Program Objectives

• 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 federal government

• No statutory authority to provide advance funding

          Participation Operations – Part 3   7
Two Programmatic Components

Loan Purchase Commitment Program

  • Commitment by ED to purchase eligible 2008-2009
    FFEL loans through September 30, 2009
  • Called “put”
  • Any FFEL lender/holder
  • Loans must be fully disbursed to be purchased
  • 45 day advance notice of loans to be sold
  • ED’s commitment has value in financial markets

        Participation Operations – Part 3   8
Two Programmatic Components

Loan Participation Purchase Program

   • Commitment by ED to purchase “participation
     interests” in eligible 2008-2009 FFEL loans through
     September 30, 2009
   • ED’s purchase will provide immediate liquidity
   • To terminate ED’s participation interest lender
     repays ED with defined yield.
       • Loans can be re-purchased by lender
       • Loans can be sold (put) to ED

          Participation Operations – Part 3   9
   Loan Participation
   Purchase Program

Topics from Previous Webinars

   Participation Operations – Part 3   10
• Technical Requirements/ED Policy
  – Approval Process, Eligibility, MPN
• Operations
  – 799, LIDs, Loan Modifications, Participant’s Yield,
    Monthly Reporting
• GA Matters
  – Guarantee terms, LIDs, Reporting
• New Questions

           Participation Operations – Part 3   11
                 Approval Process
• Certificate of Good Standing
   – Office of the Comptroller of the Currency issued
     "Certificate of Corporate Existence" is acceptable for
     National Banks
• Certificate of Incorporation
   – OCC Charter Certificate is acceptable for National
• An ELT affiliated with a Sponsor cannot serve as
  Custodian for that Sponsor

            Participation Operations – Part 3   12
                   Loan Eligibility
• Borrower Benefits
  – An unconditional upfront borrower fee reduction
    that is made prior to or at the time of the final
    disbursement on the loan.
  – Reductions in interest rates of not more than
    0.25 percent, contingent on the borrower’s use
    of automatic payment process.
  – No other benefits associated in any way with
    the loan at the time of participation are

          Participation Operations – Part 3   13
                   Loan Eligibility

• Notice of Intent to Participate
  – All historical holders of a loan do not need to
    submit the NOI, only the originating lender and
    current holder who is the Sponsor.

          Participation Operations – Part 3   14
       Master Promissory Notes
• True and exact copies are acceptable
  – Original MPNs do not need to be provided.

• The requirement that the Sponsor place all
  of a borrower's Stafford loans that it holds
  only applies to those loans that meet the
  definition of an "Eligible Loan" as defined in
  the Master Participation Agreement

          Participation Operations – Part 3   15
                       Form 799
• When loan fully disbursed prior to Sponsor
  placing loan into the Participation
  – Report under Sponsor LID (including all
    disbursements) up to day of title transfer
  – Custodian LID from day of title transfer.
• Normal Process -- Net amounts are owed
  when amounts on 799 offset.

        Participation Operations – Part 3   16
                    LENDER IDs
• Custodians will receive inactive LIDs during
  pre-approval phase once the Initial Approval
  Package is submitted
• LID will be activated upon approval
• LIDs will be in the 6 character series, padded
  at the end to reach 8 characters
• LIDs will expire at the end of the Participation
• Custodians will receive a unique LID for each
  Custodian/Sponsor relationship

          Participation Operations – Part 3   17
               Loan Adjustments
• Any loan adjustments to upcoming disbursements
  may be changed, but need to be updated in all
  applicable fields of the Loan Schedule
   – Example: school cancels a second/final
   – Loan will be shown as fully disbursed on next
     loan schedule
   – GA/NSLDS reporting will change to “Custodian

           Participation Operations – Part 3   18
• Disbursement Cancellation Prior to
  – When cancellation on a disbursement occurs prior to
    participation, treat as though there was no earlier
     • Example -- Loan with two scheduled disbursements
       but first is canceled prior to placement of loan into
         – First disbursement date reported upon participation
           is the disbursement that was made and not
         – Number of disbursements reported is 1

            Participation Operations – Part 3   19
• Disbursement Cancellation After Placement
  – When cancellation on a disbursement occurs after
    participation, original disbursement information must
    remain and funds returned to Sponsor must be remitted
    to the Custodian for month-end “sweep”
      • Example – After first disbursement of a two
        disbursement loan, the first is disbursement is
          – First disbursement date reported to ED remains
            the original first disbursement date that ED
          – Number of disbursements remains at 2.
          – Returned funds remitted to Custodian for sweep.

           Participation Operations – Part 3   20
         Disbursement Re-Issues
• Disbursement Cancellation and Re-Issue
  – See prior slide example for the cancellation.
  – Re-Issue is treated as a “subsequent” disbursement.
        – Example, first disbursement cancelled after
          placement in participation then re-issued
        – First disbursement date reported to ED remains
          the original first disbursement date that ED
        – Re-issued disbursement is new disbursement with
          its own date.
        – Number of disbursements will be three.

           Participation Operations – Part 3   21
                   Monthly Reporting
• First monthly reporting period will begin with the September
  30, 2008 as of date
   – Monthly Rolling Forecast must still be submitted to ED prior to
     funding the initial request

• Monthly Settlement Date Report will have Servicer detail in
  the Loan Schedule, but not in the summary report

• Monthly Rolling Forecast
   – Amount Disbursed should be the gross amount of the disbursement
     (not cash disbursed to the student as described in the instructions)

               Participation Operations – Part 3    22
                Monthly Reporting
• Updated monthly reporting instructions will provide
  additional guidance relating to Loan Adjustments
  – Updates will be announced prior to the first monthly
    reporting date

            Participation Operations – Part 3   23
                Participant’s Yield
• Department’s “Participant yield” accrues daily on a
  simple, non-compounded basis using ending daily
  participation certificate balances
  – Available cash at the custodian is swept monthly
  – Department’s Participant Yield might not be paid in full
    each month, but will continue to accrue using the
    methodology described above (without compounding)

            Participation Operations – Part 3   24
                  Loan Guarantee
• The guarantee that was granted to the lender (now
  the Sponsor) remains in effect while the loan is in
  the Participation Facility, without regard to the
  transfer of title to the Custodian.
  – Sponsor-guaranty agency relationship is maintained.
     • Amendments to the Guarantee Agreements between the
       Lender/Sponsor and the original Guaranty Agency may be
       required as required by the Guaranty Agency.
  – When removed via a repurchase by the Sponsor, the
    guaranty remains;
  – When removed by a put to ED, the guarantee ends.

            Participation Operations – Part 3   25
               Guaranty Agencies
• Reporting
  – After loan fully disbursed, the Sponsor/Custodian reports
    loan to lender’s original GA under “Custodian’s LID”.
  – GA’s report loans to NSLDS under “Custodian’s LID”
    after final disbursement.

            Participation Operations – Part 3   26
                          • Questions may be asked
                            now or submitted to the
                            following e-mail address
                            for consideration


                               Please include your contact
                                 information with your e-mail
                               Phone Number

Participation Operations – Part 3         27

To top