FFEL Loan Purchase Participation Program

1
FFEL Loan PurchaseParticipation Program

• Operational Closeout Webinar
• June 3, 2009

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• Presenters
• William Blot
• Chief Financial Office
• Federal Student Aid
• U.S. Department of Education
• Margaret Ayanian
• Business Operations
• Federal Student Aid
• U.S. Department of Education
• Patricia Trubia
• Program Compliance
• Federal Student Aid
• U.S. Department of Education

3
Introduction

• Target Audience
• Personnel at FFEL lenders, guaranty agencies, and
  custodians who administer the Departments
  2008-2009 Loan Purchase programs.

4
Introduction (Cont.)

• Webinar Objectives
• Review program termination procedures and related
  cut-off dates defined in the Master Participation
  Agreement (MPA) and the Master Loan Sale
  Agreement (MLSA).
• Review timeline for final sales (puts).

5
Agenda

• Deadline to execute MPA
• Deadline for current MPA holders to execute MLSA
• Cut-off to sell Participation Interests (PI)
• Notification Requirement
• Final Puts
• Loan Eligibility
• Timeline
• Guidelines
• Final Redemptions
• Termination
• Post-termination compliance AUPs/audits
• Questions

6
Deadline to Execute Legal Agreements

• MPA
• The Department will not execute an Adoption
  Agreement to enter into a Participation Agreement
  with any sponsor after July 1, 2009.
• To execute this agreement, it is prudent to
  submit the MPA package as soon as possible, but
  no later than 7 business days in advance of the
  cut-off (i.e., June 22, 2009), in case the
  Department requires additional information or
  changes to submitted documents.

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Deadline for Agreements (Cont.)

• MLSA
• In order to exercise the put option, the sponsor
  (together with its Eligible Lender Trustee, if
  applicable) must have an executed MLSA on or
  before July 1, 2009.
• To execute this agreement, it is prudent to
  submit the MLSA package as soon as possible, but
  no later than 7 business days in advance of the
  cut-off (i.e., June 22, 2009), in case the
  Department requires additional information or
  changes to submitted documents.
• The deadline to execute an MLSA has already
  lapsed for lenders not in an MPA.

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General Cut-off Date to Sell PI

• Sponsors without an MLSA may only sell
  participation interests through the date of
  termination (i.e., July 1, 2009).
• Sponsor s with an MLSA must generally exercise
  the option to sell participation interests (i.e.,
  to submit funding requests) by August 1, 2009.
• Participation Interests sold (i.e., participation
  funding requests paid) follow the standard
  funding request process as defined in EA53.

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Exceptions to General Cut-off Date

• Sponsors may sell participation interests after
  August 1, 2009 only if the loans meet the
  following conditions, as defined in Section 1 of
  the MPA
• 1st disbursement on the loan was made by 7/1/09.
• 1st disbursement was participated by 8/1/09.
• the final disbursement will occur no later than
  9/30/09.
• this final disbursement is participated no later
  than 30 days after the date of final
  disbursement, but no later than 9/30/09.
• the loan must be put to the Department and the
  sponsor must notify the Department of an intent
  to sell put this loan.

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Notification to Closeout Participation

• All sponsors shall notify the Department as soon
  as possible with respect to their plans through
  the Loan.Participation_at_ed.gov mailbox to indicate
  whether they will sell their loans and/or redeem
  their participation interests, when they will do
  so, and in what amounts.
• Sponsors must provide notification no later than
  August 14, 2009

11
Email Notification Template (draft)
12
Loan Eligibility for Puts (Programmatic)

• Only Stafford and PLUS loans made for a loan
  period that includes, or begins on or after July
  1, 2008 and for which the first disbursement is
  made on or after May 1, 2008 and no later than
  July 1, 2009.
• Loan must be fully disbursed by put date. (Note
  For this purpose put date is defined as the date
  the loan transfer conversion file is created 9
  business days prior to the purchase date).
• Loans must include all eligible subsidized and
  unsubsidized 2008-2009 loans for the borrower.
• No defaulted loans or loans claim filed for any
  reason.
• No loans with borrower benefits, except
• An upfront borrower fee reduction.
• .25 interest rate reduction for automatic
  repayment.

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Timeline Final Put Dates
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Key Final Put Dates

• To allow for final put transactions to include
  loans fully disbursed through September 30, 2009,
  a final loan transfer conversion file will be
  accepted as late as Thursday, October 1, 2009.
• The sponsor/selling lenders requested purchase
  date may be reset to the next available put date
  based on the overall volumes scheduled for
  year-end.
• Final settlement date on puts where the final
  loan transfer conversion file is received on
  Thursday, October 1, 2009 will be scheduled to
  occur on Wednesday, October 15, 2009.

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Reminder Remaining Blackout Dates
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Final 45-Day Notice of Intent

• Final 45-Day Notice of Intent to Sell for the
  2008-2009 Put Program is due by August 14, 2009.
• To be paid by the end of September 25, 2009,
  final notice should be submitted by August 11,
  2009.
• 45-Day Notice should include all eligible loans
  to be fully disbursed by September 30, 2009.
• Sponsor/Selling Lender (if Sponsor is electing
  to sell loans as opposed to redemption) should
  follow instructions for submission of 45-Day
  Notice of Intent to Sell as provided in
  Electronic Announcement 23.
• Final loan transfer conversion file will be
  accepted as late as October 1, 2009 to allow for
  fully disbursed loans through September 30, 2009.

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Guidelines for 08/09 Puts

• In selecting fully disbursed loans for the put,
  the sponsor/selling lender must include all
  eligible subsidized and unsubsidized Loans for
  the borrower.
• If additional loans become eligible for the same
  borrower between day 45 (date of Notice of Intent
  to sell) and Day 9 (date of submission of loan
  transfer conversion file), the sponsor/selling
  lender must include those additional loans on the
  conversion file and in the put sale.
• Similarly, any loans that become ineligible
  between day 45 and day 9, those loans should be
  removed from the put sale.

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Guidelines for 08/09 Puts (Cont.)

• If a sponsor has partially disbursed loans in
  participation, the sponsor has two options if
  they choose to put
• 1. Redeem the disbursement(s) in participation
  and sell (put) the fully disbursed loan in a
  standard put transaction.
• 2. Participate the additional disbursements and
  then sell the fully disbursed loan out of the
  participation in a single bill of sale.

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Guidelines for 08/09 Puts (Cont.)

• If a sponsor has loans in participation and other
  loans for the same borrower outside of
  participation, the sponsor has two options if
  they choose to put
• 1. Redeem the loans in participation and sell
  the loans together in a standard put transaction.
• 2. Participate the additional loans and then
  sell them out of the participation in a single
  bill of sale.
• 3. Each loan may be included in separate put
  transactions one from participation and one
  standard, not from participation.

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Guidelines for Redemption

• Submit all redemptions as part of the normal
  monthly (or weekly) collection and reporting
  process as defined in EAs 17 and 53.
• In accordance with the MPA Section 15, Paragraph
  (e), the Department acquires ownership of any
  loans in participation not sold or redeemed as of
  the termination date. Such loans shall become
  the property of the Department without
  remuneration to the sponsor or any further action
  by the Department and the participation interests
  and the rights of the Department and the sponsor
  under the MPA are automatically terminated.

21
Termination Date

• For sponsors who have not entered into an MLSA on
  or before July 1, 2009, the Loan Participation
  program will terminate on July 1, 2009.
• For sponsors who have entered into an MLSA by
  July 1, 2009, the Loan Participation program will
  terminate on or by September 30, 2009 (with
  settlement of final sales transactions occurring
  as late as early October 2009).

22
Final AUPs

• In accordance with Section 8(a)(5) of the MPA and
  Section 5(B)(ix) of the MLSA, the Sponsor and
  Seller, respectively, shall deliver an Agreed
  Upon Procedures (AUP) letter to the Department,
  performed in accordance with the guidance
  published by the Department.
• The AUP guide, dated December 9, 2008, issued by
  the Department states that ED reserves the right
  to require more frequent AUP engagements.
• In order to close out the programs, all AUPs for
  both the participation and put program are due to
  the Department by November 30, 2009.

23
Participation Closeout Audit

• The custodian must submit to the Department a
  final closeout audit of the custodians
  activities under the Participation Interest
  conducted by an independent auditor selected by
  the sponsor.
• The custodian shall submit such audit prior to
  the later of
• 90 days after the Termination Date, or
• 90 days after the date on which the Department
  publishes audit guidance. The Department will
  issue this guidance at a date to be determined.

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