FFEL Loan Purchase Commitment Program

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FFEL Loan PurchaseCommitment Program

• Master Loan Sales Agreement and Operations
  Webinar
• September 12, 2008

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• Presenters
• Jeff Baker
• Director Policy Liaison Implementation
• Federal Student Aid
• U.S. Department of Education
• Margaret Ayanian
• Business Operations
• Federal Student Aid
• U.S. Department of Education

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Logistics

• Title Loan Purchase Program
• Purchase Operations
• Date September 12, 2008
• To Participate You Must
• Logon at URL provided in registration
  confirmation email and
• Dial in to 1-888-324-6476 Confirmation number
   MGERHARD
• Additional information on the Loan Purchase
  Programs at www.federalstudentaid.ed.gov/ffelp

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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

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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

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Two Programmatic Components

• Loan Participation Purchase Program
• Commitment by ED to purchase participation
  interests in eligible 2008-2009 FFEL loans
  through September 30, 2009
• EDs purchase will provide immediate liquidity
• To terminate EDs participation interest lender
  repays ED with defined yield.

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Two Programmatic Components

• Loan Purchase Commitment Program
• Commitment by ED to purchase eligible 2008-2009
  FFEL loans through September 30, 2009
• Any FFEL lender/holder
• Loans must be fully disbursed to be purchased
• 45 day advance notice of loans to be sold
• EDs commitment has value in financial markets

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Webinar Objectives

• Purpose To provide high level overview of the
  operational processes involved in notification
  and execution of required documents for the sale
  of loans to the Department for the Loan Purchase
  Commitment Program.
• Target Audience Personnel at servicers and
  lenders responsible for loan sale operations.
• Limitations Will not include information on the
  Loan Participation Purchase Program. This
  information was provided in other formats,
  including previous Webinars.

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Agenda

• Walkthrough of Sales Process in Detail
• 45 Day Notice of Intent to Sell Loans
• Schedule of Available Sale Dates
• Loan Transfer/Conversion File Requirements
• Pre-Sale Reporting to Selling Lender
• Preparation of Bill of Sale documents
• Settlement at Purchase Date and Funding
• Multiple Sale Transactions - Example
• Post-Settlement Reconciliation
• Loan Transfer Reporting
• Collateral Documentation Requirements
• Questions

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Loan Purchase Instruction Package

• Instructions for submission of Loan Purchase
  documents described during this webinar are
  available at www.federalstudentaid.ed.gov/ffelp
• Electronic Announcements
• 23 Initial Document Submission Instructions
• 26 Bill of Sale Submission Instructions and
• 27 Loan Transfer Conversion File Layout
  Submission Instructions

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45-Day Notice

• See Electronic Announcement 23 for
• 45-Day Notice of Intent to Sell Loans form and
• Instructions for submission of the form and
  related schedule
• 45-Day Notice of Intent to Sell Loans includes a
  Projected Loan Schedule Summary of Loans to be
  Sold.
• Only Eligible Loans
• 45-Day Notice of Intent to Sell is sent as a PDF
  attachment to an email addressed to
  ED.Servicer_at_ed.gov. Subject line should say
  45-Day Notice of Intent to Sell.

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45-Day Notice

• 45-Day Notice must be received by the Department
  not less than 45 Days before the Requested Sale
  Date.
• Separate 45-Day notices (may be for the same
  Purchase Date) for
• Straight PUT
• PUT from a Participation Interest
• Loans for each third party lien holder
• ED will schedule the Purchase Date. If requested
  Purchase Date during ED blackout period, next
  available Purchase Date will be used. High
  volume on a day may result in a change to the
  requested Purchase Date.

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45-Day Notice

• Within 48 hours of receipt of the 45-Day Notice
  of Intent to Sell Loans, the Seller will receive
  an acknowledgement of receipt from ED with the
  scheduled Purchase Date.
• Seller will be requested to provide
• Servicer contact information
• Secured Lender (Lien Holder) information, if
  applicable
• Third party payment instructions, if applicable.

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Schedule of Available Purchase Dates

• Selling Lenders are encouraged to schedule sale
  dates throughout the month

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Schedule of Available Sale Dates - Example
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Conversion Transfer File Requirements

• If first time sale to the Department, ED Servicer
  will work with Sellers Servicer to coordinate
  intersystem test of the first data file.
• Nine (9) Business Days prior to Purchase Date,
  Sellers Servicer will provide ED Servicer the
  Loan Transfer/Conversion File in the required
  format.
• Loans in detail report must be same loans as
  reported with data from the 45-Day Notice of
  Intent to Sell.
• Loan Transfer/Conversion File specifications are
  attached to Electronic Announcement 27.

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Conversion Transfer File

• ED Servicer will perform eligibility and data
  integrity edits on the loan data in the
  conversion file.
• Sellers Servicer will be contacted by phone and
  email, during the three (3) business days after
  receipt of the conversion file.
• ED Servicer will work with the Sellers Servicer
  to resolve any loan eligibility and data
  exceptions. In eligible loans will will be
  removed from the conversion file.
• Revised sales totals (if needed) will be
  calculated by the ED Servicer and reported on
  standard Pre-Sale Reports.

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Pre-sale Reporting to Selling Lender

• Six (6) business days prior to sale, ED Servicer
  will deliver Final Pre-Sale Reports to the
  Seller.
• Pre-Sale Reports will include a calculation of
  the final sale purchase price including principal
  and interest outstanding through sale date,
  return of the 1 origination fee, and 75.00 per
  loan.
• Pre-Sale Reports will also include a detailed
  listing of loans included in the sale.

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Pre-sale Reporting to Selling Lender

• Seller will review the Pre-Sale Reports to
  confirm loans included in sale and final purchase
  price. Loans in detail report must be same loans
  as reported in conversion file less exceptions.
• After reviewing the Pre-Sale reports, Seller will
  prepare the Bill of Sale and required Loan
  Schedule.

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Preparation of Bill of Sale Documents

• Bill of Sale documents to be submitted to ED on
  the fifth (5) business day prior to Purchase
  Date.
• Bill of Sale documents include
• o    Formal Bill of Sale
• o    Final Loan Schedule Summary
• o    Loan Schedule (Detail Listing of Loans
  Sold
• o    Security Release Certification (if
  applicable)
• o    Notice of Assignment and Designation of
  Payee Financial Institution Form (optional) or
• a subsequent notification of receipt of funds
  by the Secured Lender

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Preparation of Bill of Sale

• Two forms of Bill of Sale (see EA 27)
• Bill of Sale to be used by lenders/sponsors and
  custodians for loans in which the department
  holds a Participation Interest under the Loan
  Participation Purchase Program.
• Bill of Sale form to be used for loans that will
  be sold directly by the lender to the Department,
  outside of a participation interest.
• Will also identify of any loans subject to a
  security interest that are to be PUT to the
  Department.
• Submitted as PDF attachment to email addressed to
  ED.servicer_at_ed.gov. Subject line should indicate
  Bill of Sale and loan sale date.

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Multiple Sale Transactions - Example

• Lender wants to sell 1,000 loans
• 700 with no security interest
• 200 with a security interest from secured party
  1
• 100 with a security interest from secured party
  2
• Treat as 3 separate sales, with either
• Same Purchase Date (or)
• Staggered Purchase Dates

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Document Flow Example No Security Interest

• Sale of 700 Loans (no security interest)
• 45 Day Notice with Projected Loan Schedule
  Summary of Loans to be Sold
• Pre-Sale and Settlement
• Formal Bill of Sale
• Final Loan Schedule Summary of Loans Sold
• Final Loan Schedule Loan Detail

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Document Flow Example Security Interest

• Sale of 200 Loans with a Security Interest
• 45 Day Notice with Projected Loan Schedule
  Summary of Loans to be Sold
• Pre-Sale and Settlement
• Formal Bill of Sale, with named Secured Lender
• Final Loan Schedule Summary of Loans Sold
• Final Loan Schedule Loan Detail
• Security Release Certification
• Notice of Assignment and Designation of Payee
  (optional) or notification that Secured Party has
  received funds

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Collateral Documentation

• By Purchase Date, Seller transmits loan documents
  to the ED Servicer. Loan documents include
• Original or copy of the Master Promissory Note
  (MPN)
• School certification record if MPN not executed
  for the loan - Prior MPN used.
• Electronic session data if MPN was executed
  electronically (e-signed). All data that
  demonstrates the e-sign process that was used by
  the borrower, including the electronic signature.
  Session data must contain date and time audit
  trails.

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Settlement at Purchase Date

• ED Servicer will process the sale on the required
  loan Purchase Date. Ownership of loans will
  transfer to ED as of the Purchase Date.
• ED Servicer will assume servicing for all loans
  included in the sale, including
• Notifying borrower
• Reporting to the Guaranty Agency at end of
  Purchase Date month
• Reporting to NSLDS.

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Funding at Purchase Date

• Payment for the loan sale will be directed to
  Sellers existing 799 payment bank account
  information, unless
• Loans are from a Participation Interest, then
  funds will be sent directly to the Custodian.
• Seller has requested payment be made to a third
  party with security interest in the loans.

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Reconciliation and Adjustments

• Reconciliation will be performed by the ED
  Servicer comparing the final amount funded to the
  Bill of Sale totals and the Final Loan Conversion
  Reports. If exceptions are noted, ED will work
  with the Seller.
• Post sale adjustments received by the Seller,
  such as loan cancellations, school refunds, or
  borrower payments, must be forwarded to the ED
  Servicer for processing and application to the
  borrower accounts.

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Loan Transfer Reporting

• After loan sale, the ED Servicer will report to
  the Guaranty Agency the sale of loans to ED and
  that the GA no longer has responsibility for the
  loans.
• The GA will receive and process the loan sale
  (transfer) transactions and report such to NSLDS.
• The GAs Forms 2000 annual reporting will show
  the loans transferred out.
• After loan sale, the ED Servicer will provide
  on-going status and update reporting to NSLDS for
  the ED purchased loans.

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Questions
Questions may be asked now or submitted to the
following e-mail address loan.purchase_at_ed.gov