Common Review Initiative CRI

1
Common Review Initiative (CRI)

• Bob Palmer, Connecticut Student Loan Foundation
• Judy Royce, Florida Department of Education
• Rick Buckingham, USA Funds

2
Common Review Initiative (CRI) The Review
Scheduling and Lender Selection Process

• Bob Palmer, Connecticut Student Loan Foundation
• Judy Royce, Florida Department of Education
• Rick Buckingham, USA Funds

3
Two Primary Goals

• The two primary goals of CRI are to
• Improve the quality of FFEL program reviews
• Reduce the redundancy of FFEL program reviews

4
Established Workgroups

• Five CRI workgroups were established to help
  achieve the CRI goals
• Common Review Procedures
• Review Scheduling and Lender Selection
• Cost and Staff Sharing
• Administration and Governance
• Industry Partners Liaison

5
Mission

• The mission of the Review Scheduling and Lender
  Selection (RSLS) workgroup was to address CRIs
  reduced redundancy goal by determining which
  lenders and servicers to review and when.

6
RSLS Workgroup Objectives

• The RSLS workgroup objectives were to
• Identify reviews of serviced vs. non-serviced
  lenders
• Develop a two-year schedule to ensure all reviews
  are conducted efficiently and timely

7
Initial QA

• Initial QA addressed by the RSLS workgroup
  included
• Who will we review? Top 100 or use other
  standard?
• For CFR 682.410(c) mandated reviews, initially
  identified top 11 servicers and top 2
  self-serviced lenders.
• What if a lender only deals with a limited number
  of guarantors?
• Use the criteria of 4 or more GAs impacted.

8
Other QA

• Other QA addressed by the RSLS workgroup
  included
• If we do a servicer review, how will it apply to
  serviced lenders?
• Assuming ED approval to meet regulatory
  requirements, a CRI servicer program review would
  cover all lenders contracting with that servicer.

9
Other QA (cont.)

• Other QA addressed by the RSLS workgroup
  included
• Do we need an on-going group for scheduling?
• Initially this workgroup will gather GA data to
  identify CRI lender/servicer reviews. Then form
  a scheduling committee to create a regional or
  national schedule based on identified reviews.

10
Scheduling Model

• The initial scheduling model included a review of
  all lenders/servicers that would be reviewed by
  more than one GA to eliminate all redundancy.
  But this was not cost effective. Decided to
  review Top 15 lenders/servicers to eliminate most
  redundancy. This criteria was later amended to
  review only those lenders/servicers required to
  be reviewed by at least 4 or more GA's.

11
Statistics - Lender

• Lender review redundancy statistics
• 14 GAs review Educaid/Wachovia
• 14 GAs review Wells Fargo
• 12 GAs review Citibank

12
Statistics - Servicer

• Servicer review redundancy statistics
• 24 GAs review Sallie Mae
• 24 GAs review Nelnet
• 10 GAs review ACS

13
Summary

• CRI reviews covering the preceding 6
  lenders/servicers would eliminate 98 GA FFEL
  program reviews! So let's get with the CRI
  reviews so we can all stop singing the blues!

14
Common Review Initiative (CRI) -

• Bob Palmer, Connecticut Student Loan
  FoundationJudy Royce, Florida Department of
  Education
• Rick Buckingham, USA Funds

15
The Beginnings

• Starting Point Using the FSA Lender/Servicer
  Review Guide
• Shared Materials from Participating Guarantors
• Developing Excel Workbooks Based on Each Chapter
  of the Guide and Shared Materials/Best Practices
  from Guarantors and ED
• Development of Common Questionnaire and Other
  Common Workpapers

16
Sampling Methodology

• Shift from Borrower-focused testing to Attribute
  Testing
• Obtain system data files from Lender/Servicer to
  derive samples to test
• Use EDs pre-defined 10 error rate threshold but
  add statistical validity to the sampling process

17
Sampling Methodology (cont.)

• Use a 95 Confidence Level in Testing and
  Determine Sample Sizes Based on Tolerable Error
  Rate of 10
• Samples will be selected from lender codes that
  are required reviews under 410(c)

18
Sample Size and Max of Errors
19
Conducting the Review - Review Basics

• Review team will consist of between 5 7
  reviewers, no more than 2 from any particular
  agency
• Each review team will have a Lead Reviewer
  whose responsibilities include
• Coordinating the review and leading the review
  teams efforts
• Assigning reviewers to review tasks to be
  completed
• Corresponding directly with lender/servicer
  contact person
• Signing the Program Review Report(s)
• Facilitating Information Exchange
• Packaging and Sharing Review Workpaper Files

20
Conducting the Review - Lender Notification

• Lead Reviewer will contact lender by phone to
• Determine contact person for the review
• Establish review dates
• Determine location for on-site review
• Inform contact person of number of reviewers that
  will be on-site
• Explain questionnaire and send via e-mail, if
  possible
• Request Lender/Servicer System Data File
• Lead Reviewer will send formal notification
  letter to lender/servicer after call

21
Conducting the Review - Lender/Servicer System
Data File

• An ad hoc report to extract testing elements from
  the lender or servicers system
• Two Primary Purposes
• To obtain samples for testing files within the
  CRI program review
• To compare data extraction to guarantor or NSLDS
  data
• Data needs to be requested early in the process
  to provide the lender/servicer with ample time to
  create the file

22
Conducting the Review - Review Preparation and
Pre-Work

• Review Completed Questionnaire
• Review Prior Program Reviews
• Solicit Input from Guarantors on problem areas
• Obtain NSLDS Reporting Error Rates and Unreported
  Loan percentages from Guarantors

23
Conducting the Review - Review Preparation and
Pre-Work (cont.)

• Derive samples from Data Files Provided and
  Provide List of Files to be Reviewed to the
  Lender/Servicer (as determined by the review
  team)
• Perform Preliminary testing in areas not needed
  to be performed on-site
• Use all of the above to tailor review scope if
  necessary.

24
Conducting the Review - On-Site Portion

• Review format does not substantially change from
  current processes
• Review times will generally begin on a Monday
  morning and end on Friday afternoon (i.e. the
  Goal is complete the on-site portion of the
  review in a one-week timeframe)
• Each reviewer will complete the workbooks which
  correspond to the CRI testing areas based on file
  sampling and other required testing components

25
Conducting the Review - Specific Testing Areas
Covered

• Origination and Disbursement
• Deferments
• Collection and Claims
• Credit Bureau Reporting
• Consolidation Loans
• Schools Acting as Lenders (where appropriate)

• Conversion to Repayment
• Forbearances
• Payment Application and Rate Changes
• Purchases, Sales, and Transfers
• NSLDS Reporting

Individual Excel Workbooks have been created
for use in testing each of the above areas
26
Conducting the Program Review - Testing Areas Not
Covered

• LaRS (formerly ED Form 799) Testing

27
Conducting the Program Review - On-Site Portion

• Once all testing is complete (and Excel Workbooks
  completed), an Exit conference will be held with
  appropriate lender/servicer officials to explain
  all preliminary findings of non-compliance
• The lender/servicer will be given a two-week
  timeframe to respond to the preliminary findings
  to clear up any incorrectly cited findings
• After that timeframe has elapsed, the program
  review report will be prepared

28
Conducting the Program Review - When Findings are
Significant

• What happens when more errors are found than
  allowed by the tolerable rate?
• It depends.
• Factors to consider are
• Increasing the sample size
• Is the error systemic in nature?
• Does the error result in monetary loss to ED, the
  borrower, or the guarantor?

29
Conducting the Program Review - When Findings are
Significant (cont.)

• General Answers
• If the error is systemic in nature, increasing
  the sample size is not necessary however, the
  lender/servicer should be instructed to perform a
  system query to identify all impacted accounts
  and make any necessary adjustments
• Non-monetary errors that are procedural in nature
  may not require additional testing
• If monetary errors are found and the sample
  results are not within tolerable rates, the
  sample size should be increased and/or a full
  file review will be required to be conducted

30
The Program Review Report

• For large, self-serviced lenders, the program
  review report will have the same look and feel of
  current program review reports used by most
  guarantors
• A program review report shell has been created
  for use in the CRI

31
The Program Report

• For CRI reviews conducted at a Servicer, a report
  will be issued directly to the Servicer, and a
  separate report will be sent to each required
  lender review conducted at the Servicer
• Program Review Report Shells have been created
  for each report type

32
The Program Report (cont.)

• The report to the servicer will be detailed and
  list all borrowers impacted by a particular
  finding
• The report to each lender will list all findings
  in more general terms and will have specific
  borrower findings applicable to that lender only

33
Report Issuance and Close-Out

• Once the report is issued, the lender or servicer
  will be given 30 days to respond to the report
• Extensions may be granted as necessary
• The review team will determine when responses
  have adequately addressed corrective actions
  required
• Copies of the program review report will be
  issued to each affected guarantor (each guarantor
  where a particular lender code is a required
  review)

34
PEPS Data Entry

• Because of 410(c) requirements, each CRI review
  will continue to be entered at the lender level
• The comment section of the PEPS review entry
  screen should be completed to clearly indicate
  the guarantors covered by the review

35
Workpaper File Retention

• The lead reviewers agency will be responsible
  for maintaining all workpapers and testing files
  from a CRI review
• Other guarantors can refer ED or other 3rd party
  auditors to the lead reviewers agency for
  confirmation of the review and/or review of the
  workpapers and testing files
• Review files will be kept for a period of not
  less than 5 years after the review has been
  conducted

36
Common Review Initiative (CRI) - Common
Workpapers and Procedures

• Bob Palmer, Connecticut Student Loan Foundation
• Judy Royce, Florida Department of Education
• Rick Buckingham, USA Funds

37
Questions?