FFEL Loan Purchase Commitment Program

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FFEL Loan PurchaseCommitment Program

• Master Loan Sales Agreement and Operations
  Webinar
• August 22, 2008

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• Introduction
• Jeff Baker
• Director Policy Liaison Implementation
• Federal Student Aid
• U.S. Department of Education

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Logistics

• Title Loan Purchase Program
• Purchase Operations
• Date August 22, 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.
• Loans can be redeemed by lender
• Loans can be sold to ED

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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
• Called PUT
• 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 executing the
  legal documents and consummating the sale of
  loans to the Department for the Loan Purchase
  Commitment Program.
• Target Audience Personnel at servicers and
  lenders who are responsible for loan sale
  operations.
• Limitations Will not include information on the
  Loan Participation Purchase Program. This
  information was provided in other formats,
  including in previous Webinars.

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Agenda

• Initial Approval Package Loan Purchase Request
• Sales Process
• Eligible Loans
• 45-Day Notice of Intent to Sell Loans
• Conversion Transfer File
• Pre-Sale/Bill of Sale
• Settlement at Purchase Date
• Post-Settlement Reconciliation
• Loan Transfer Reporting
• Process Flow Example
• Questions

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Loan Purchase Instruction Package

• Instructions for submission of documents are
  available in Electronic Announcement 23 at
  www.federalstudentaid.ed.gov/ffelp

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Initial Approval Package Matrix
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• Loan Purchase Commitment Program
• Margaret Ayanian
• Business Operations
• Federal Student Aid
• U.S. Department of Education

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Loan Purchase Request Matrix
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Eligible Loans

• Section 3.I Eligible Loan Master Loan Sale
  Agreement
• 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.
• Loans must be fully disbursed prior to purchase
  date for loan sale.
• To include loans for sale with first
  disbursements made between May 1 and June 30,
  2008, the Department must have received a Notice
  of Intent to Participate from the originating
  lender by July 31, 2008.
• The date the Notice of Intent was received by the
  Department determines the first disbursement date
  for loan eligibility.

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Eligible Loans (continued)

• Section 3.I Eligible Loan Master Loan Sale
  Agreement
• Loans may not have any borrower benefits, except
  
• An upfront borrower fee reduction
• .25 interest rate reduction for automatic
  repayment.
• Loans to be sold must include all subsidized and
  unsubsidized 2008-2009 loans for the borrower.

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Eligible Loans (continued)

• Section 3.I Eligible Loan Master Loan Sale
  Agreement
• Servicing agreement must be able to be terminated
  with no more than 30 days notice for loans to be
  sold.
• Loans may be sold even if in, or previously in,
  the Participation Program.
• Loan not eligible if a defaulted or bankruptcy
  loan.
• Loan not eligible if Consolidation Loan.
• Loan not eligible if Lender of Last Resort loan.

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45-Day Notice

• Section 4.A Sale/Purchase - Master Loan Sale
  Agreement
• Lender submits a 45-Day Notice of Intent to Sell
  Loans along with a Projected Loan Schedule
  Summary of Loans to Be Sold.
• 45-Day Notice of Intent to Sell includes name of
  selling lender, requested date of sale, total
  purchase price, and includes certifications made
  by the selling lender for the loan sale.
• 45-Day Notice of Intent to Sell is completed,
  signed and dated and sent as a PDF attachment to
  an email addressed to ED.servicer_at_ed.gov.

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Projected Loan Schedule Summary
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Projected Loan Schedule Summary

• Section 3.R Loan Schedule Master Loan Sale
  Agreement
• Projected Loan Schedule Summary of Loans to Be
  Sold provides high level summary data for the
  loans included in the sale
• Requested Purchase Date
• List of Originating Lender IDs and date NOIs to
  participate for Loans included in the Sale were
  received by ED
• Totals of Loans to be Sold by Loan Type including
  number of loans, original amount disbursed,
  estimated principal balance and accrued borrower
  interest at purchase date and
• Projected Final Purchase Price for the Loan Sale
  includes Total Outstanding Principal Balance and
  Accrued Borrower Interest at Purchase Date,
  Reimbursement of 1 Lender Fee, and 75 Purchase
  Fee per loan.

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Conversion Transfer File

• If first time sale to the Department, the ED
  Servicer will work with Selling Lenders Servicer
  to coordinate intersystem test of the first data
  file.
• Prior to Purchase Date the Selling Lender will
  provide the ED Servicer a conversion transfer
  file of the loans to be included in the sale.
  Must be consistent with data from 45-Day Notice.
• Conversion transfer file will be in a standard
  format as provided by ED.
• Upon receipt, the ED Servicer will perform
  eligibility and data integrity edits on the loans
  included in the conversion transfer file.
• Loan eligibility and data exceptions will be
  reported to the Selling Lender for correction
  and/or exclusion from the loan sale.

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Pre-Sale/Bill of Sale

• Just prior to Purchase Date the ED Servicer will
  prepare Final Pre-Sale Reporting for the loan
  sale.
• Pre-Sale Reports will include a calculation of
  the final sale purchase price and will include a
  detailed listing of loans included in the sale.
• Pre-Sale Reports will be provided to the Selling
  Lender.
• Selling Lender will review the Pre-Sale Reports
  to confirm loans included in the sale and final
  purchase price. Must be consistent with data from
  45-Day Notice.
• Selling Lender will prepare the Bill of Sale
  documents.

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Pre-Sale/Bill of Sale

• Bill of Sale documents include the formal Bill of
  Sale, Final Loan Schedule Summary, detailed
  listing of loans sold (received from ED
  Servicer), Security Release Certification, and
  Notice of Assignment and Designation of Payee
  Financial Institution form, if applicable.
• Bill of Sale documents are completed, signed and
  dated and sent as a PDF attachment to an email
  addressed to ED.servicer_at_ed.gov.

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Settlement at Purchase Date

• Section 4.B-G Sale/Purchase Master Loan Sale
  Agreement
• ED Servicer will process the loan sale.
  Ownership for the loans will change from the
  Seller to the Department as of the Purchase Date.
• ED Servicer will assume servicing for all the
  loans included in the loan sale as of the
  Purchase Date.
• Selling Lender will receive payment for the loan
  sale using the Sellers existing 799 payment bank
  account information.
• If loans are Put from a Participation Interest,
  funds will be sent to the Custodians bank
  account.
• Will pay third party that has a security interest
  in the loans only if Seller provides a Notice of
  Assignment and Designation of Payee Financial
  Institution form will be required.
• By Purchase Date, the Selling Lender will send
  loan documents (promissory notes) to the ED
  Servicer.

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Post-Settlement Reconciliations

• A 3-way reconciliation will be performed between
  the amount paid to the Bill of Sale totals to the
  Final Loan Conversion Reports.
• If exceptions are noted, ED will work with the
  Seller.
• If any post sale adjustments are received by the
  Seller, such as loan cancellations, school
  refunds, or borrower payments, the funds must be
  forwarded to the ED Servicer for processing and
  application to the borrower accounts.

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Loan Transfer Reporting Process

• 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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Process Flows Example

• The following example is for illustrative
  purposes only and covers the following
• Approval Process
• Notification of Loan Sale
• Bill of Sale
• Purchase Closing

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