Common Review Initiative _____

1
Common Review Initiative_____

• Mike Hawkes, ECMC
• Brent Dove, USA Funds
• Penny Hagan, MOHELA

2
CRI A One-Year Update

• Mike Hawkes
• Educational Credit Management Corporation

3
CRI Concept

• Guarantors are combining resources to conduct a
  single review of large lenders and servicers
• These CRI reviews will go toward meeting the
  requirements of 682.410(c)(1) for each
  participating CRI guarantor

4
CRI Goals

• Improve the quality of lender program reviews
  conducted by guarantors (including non-CRI
  reviews)
• Reduce redundancy of reviews by guarantors

5
CRI Approval

• In March, ED approved CRI as a pilot project.
• Pilot runs from January 1, 2004 through December
  31, 2005.
• Working on measurements of effectiveness to
  evaluate whether CRI should be permanent

6
Participating CRI Guarantors

• 33 guarantors have signed CRI participation
  agreements
• Non-participants currently are
• Alaska
• CSAC/EdFund
• New Hampshire
• North Carolina

7
CRI Administration

• Formed a CRI Council meets monthly via
  conference call
• Formally adopted a CRI review guide and workbooks
  for attribute testing
• Adopted an administrative guide

8
CRI Leadership

• Leaders are
• Aaron Cook NELA Chair for 2004-05
• Rick Buckingham USA Funds Chair for 2006-07
• Jim Elvekrog Great Lakes Secretary
• Carol Lindsey TG Treasurer

9
CRI On-site Reviews

• CRI review teams have conducted five on-site
  reviews in 2004
• CFS/Suntech
• MOHELA
• Wells Fargo
• ACS
• AES

10
2005 CRI Reviews

• Edfinancial Services
• KHESLC
• Nelnet
• Sallie Mae

• Educaid
• Citicorp
• Regions Bank
• Potential for two additional reviews

11
CRI Training

• October 26-27 face-to-face meeting
• Topics on agenda included
• Review scheduling and preparation
• Workbook review and practice
• Preparing and sending the report
• IDEA software potential
• CRI website

12
CRI Web Presence

• Public Site
• www.nchelp.org
• Click on Initiatives
• Select Common Review Initiative

13
CRI Public Site
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CRI Private Site

• Private site
• Facilitate review team preparation
• Storage of review files, workpapers
• Security for each folder customized

15
CRI Private Site
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CRI Private Site
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CRI Private Site
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CRI Private Site
19
Questions?

• Mike Hawkes
• 804-267-7101
• mhawkes_at_ecmc.org

20
CRI A Reviewers Perspective_____

• Brent Dove, USA Funds

21
Review Scheduling

• Contact lender/servicer to confirm dates are
  acceptable
• Contact team members to ensure no conflicts exist
• Contact ED lead reviewer
• Obtain list of required reviews from CRI Review
  Scheduling Lender Selection Workgroup

22
Review Planning

• Contact guarantors with required reviews
• Ensure list of lender codes is correct
• Request error rate percentages for NSLDS
• At least 75 days before the review, contact the
  lender/servicer
• Verify review dates
• Collect contact information
• Send and discuss electronic questionnaire

23
Engagement Letter

• List all guarantor names and corresponding code
  in body of letter
• Specify period of review scope
• Include list of data elements to be provided
• Attach list of lender codes to be reviewed
• Specify a need by date for data elements

24
Engagement Letter

• Send 60 days before on-site review
• Send courtesy copy of letter to all lenders for
  which the CRI review is being conducted at the
  servicer
• Send courtesy copy of letter to ED lead reviewer

25
Engagement Letter

• Questionnaire
• Sample copies of due diligence notices
• Copies of audits and program reviews completed
  within last two federal fiscal years
• Data file containing all data elements

26
Data File

• Borrower name and SSN
• Lender ID
• Servicer ID
• Guarantor ID
• Unique loan ID
• Guarantee date
• Loan type
• Subsidy indicator

27
Data File

• Loan period begin and end dates
• 1st disbursement date and amount
• Current loan status
• Loan status date
• Cancellation date and amount
• Refund date and amount
• Out-of-school date

28
Data File

• Interest rate
• Current principal balance
• Capitalized interest balance
• Deferment begin and end dates
• Forbearance begin and end dates
• Date entered repayment

29
Data File

• Total payments
• Days delinquent
• Claim paid date
• Loan purchase date
• Loan sale date
• Loan transfer date

30
School as Lender

• Send letter to school, requesting the following
  documentation
• Organizational chart
• Financial statements
• Description of how I SA payments were used for
  need-based grant programs

31
Random Samples

• Run servicers data files through IDEA software
  to select a random sample
• A sample of 179 accounts is selected for each CRI
  chapter
• At least 30 days before the review, send a core
  sample of 29 accounts for each testing area

32
On-site Review

• Entrance conference
• Remain in constant contact with lender/servicer
  staff
• Attend scheduled meetings
• Exit conference

33
CRI Chapters

• Chapter 1 - Origination and Disbursement
• Chapter 2 Conversion to Repayment
• Chapter 3 - Deferments
• Chapter 4 Forbearances
• Chapter 5 Collection and Claims

34
CRI Chapters

• Chapter 6 Payment Application Rate Changes
• Chapter 8 Credit Bureau Reporting
• Chapter 9 Purchase/Sale/Transfer
• Chapter 10 Consolidation Loans
• Chapter 11 NSLDS Reporting

35
CRI Chapter 1Origination and Disbursement

• Verify each loan is supported by valid prom note
• Verify correct interest rate determined
• Verify lender provided required disclosure info
• Verify lender obtained credit history for PLUS
  credit check

36
CRI Chapter 1Origination and Disbursement

• Verify PLUS checks made co-payable
• Verify proper negotiation/consummation
• Verify proper reissue of disbursement
• Verify proper late disbursement
• Verify cancellations/refunds applied correctly

37
CRI Chapter 2Conversion to Repayment

• Review written procedures for conversion to
  repayment
• Verify out-of-school date
• Verify borrower provided timely with complete
  repayment information
• Verify timely conversion
• Verify repayment terms correct

38
CRI Chapter 3Deferments

• Review deferment forms to ensure compliance
• Review written procedures
• Verify borrowers eligibility for specific
  deferment
• Verify length of deferment is appropriate

39
CRI Chapter 3Deferments

• Verify maximum number of months for deferment
  type not exceeded
• Verify proper interest accrual
• Verify lender reported deferment to the guarantor
• Verify next payment due date timely

40
CRI Chapter 4Forbearances

• Review forbearance forms to ensure compliance
• Review written procedures
• Verify request documented and processed timely
• Verify length of forbearance documented

41
CRI Chapter 4Forbearances

• Verify signed forbearance agreement obtained
• Verify borrower eligible for forbearance type
  granted
• Verify timely resumption of payments

42
CRI Chapter 5Due Diligence/Cure/Claim

• Review written procedures for collection due
  diligence
• Review due diligence letter language
• Verify actual dates of phone calls selected from
  servicing history
• Verify timeliness of due diligence letters and
  phone calls
• Verify skiptracing initiated timely

43
CRI Chapter 6Payment Application Rate Changes

• Review procedures for allocating payments between
  principal, interest, etc.
• Determine how partial payments and prepayments
  are handled

44
CRI Chapter 6Payment Application Rate Changes

• Determine procedure for handling credit balances
  and write-offs of small balances
• Verify current interest rate is correct
• Verify correct calculation of capitalized
  interest

45
CRI Chapter 8Credit Bureau Reporting

• Verify that lender/servicer reported FFEL loan
  amounts within 90 days of disbursement
• Verify correct outstanding balance reported
• Verify delinquency status reported
• Verify payment in full reported

46
CRI Chapter 9Purchase/Sale/Transfer

• Review borrower notification to ensure proper
  information indicated
• Review written procedures for processing
  purchases/sales/transfers
• Verify borrower notified timely
• Verify guarantor notified timely

47
CRI Chapter 10Consolidation Loans

• Verify all required forms completed accurately
• Verify that LVC completed by holder of each loan
  consolidated
• Verify weighted average of interest rates
  properly calculated
• Verify length of repayment period correctly
  calculated
• Verify first payment due date set timely

48
CRI Chapter 11NSLDS Reporting

• Verify current loan status matches lender history
• Verify outstanding principal balance amount
  matches lender history
• Verify outstanding principal balance date is
  accurate
• Review written procedures for NSLDS reporting
• Review submission error summary reports
• Review unreported loan rates

49
Report Writing and ReviewClose-out

• Lender/servicer given two weeks to resolve
  preliminary findings discussed at exit conference
• Reviewer will compile draft report after
  servicers response is received

50
Report Writing and ReviewClose-out

• 45 days after servicers response deadline,
  program review report will be sent
• Lender/servicer has 30 days to respond to report
  and each subsequent response
• Closing letter will be sent to lender/servicer

51
Questions?

• Brent Dove317-806-1257bdove_at_usafunds.org

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CRI A Servicers Perspective_____

• Penny Hagan, MOHELA

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CRI Concept

• What we call Progress is the exchange of one
  nuisance for another nuisance.
• Havelock Ellis

54
Recommended Servicer Review Preparation

• Data selection
• Staff
• System
• Documents
• Reviewer working environment

55
Data Selection

• Discuss system options/limitations
• Understand the requested criteria
• Understand the reasoning behind the requested
  criteria
• Provide data for selections well in advance

56
Staff Preparation

• Questionnaire
• Experience
• Availability
• Entrance Conference
• Exit Conference

57
Technical

• Discuss system needs
• Assist reviewer in understanding proprietary
  system utilization
• Assist reviewer in extracting information from
  the system

58
Documents

• Discuss document needs
• Discuss document layout/design
• Have all documents ready for reviewer upon arrival

59
Working Environment

• Clean, well lit, ample space, communication
  capabilities
• Adequate technical accommodation
• Access to necessary systems

60
Helpful Hints

• Communicate
• Cooperate
• Clarify

61
Exit Conference

• Attendees
• General discussion of process
• Discussion of collected information
• Discussion of additional needs (if any)

62
Post Review

• Continue communication with CRI lead
• Do not hesitate to plead a case
• Retain copies of all pertinent documents

63
Response

• Response required for CRI and DE
• DE Letter of Appeal (if necessary)
• Discuss response with appropriate staff
• Provide response within outlined timeframe
• Closing letter final response from CRI team

64
Questions?

• Penny Hagan
• 636-532-0600 x3362
• Penny_at_mohela.com

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Thank you for joining us!Please be sure to
complete your conference evaluation form!

• Mike Hawkes, ECMC
• Brent Dove, USA Funds
• Penny Hagan, MOHELA