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FFEL Loan Participation Program

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New proposed custodian, who must submit an approval package. 14 ... ED will withhold approval of subsequent Participation Purchase Requests until ... – PowerPoint PPT presentation

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Title: FFEL Loan Participation Program


1
FFEL Loan Participation Program
  • Participation Operations Part 2
  • August 8, 2008

2
Presenters
  • Jeff Baker
  • Director Policy Liaison Implementation
  • Federal Student Aid
  • U.S. Department of Education
  • Jay Hurt
  • Chief Financial Officer
  • Federal Student Aid
  • U.S. Department of Education

3
  • Introduction
  • Jeff Baker
  • Director Policy Liaison Implementation
  • Federal Student Aid
  • U.S. Department of Education

4
Logistics
  • Title Loan Participation Program
  • Participation Operations Part 2
  • Date August 8, 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

5
Webinar Objectives
  • Purpose To provide a high level overview of the
    operational processes involved in monthly
    reporting and to answer questions from
    Participation Operations Webinar Part 1
  • Target Audience Personnel at servicers, lenders
    and custodians who are responsible for record
    keeping
  • Limitations Will not include operational
    details of the Auditing requirements or winding
    down the participation, specifics regarding legal
    documents or any matters concerning the Loan
    Purchase (PUT) Commitment Program. This
    information will be provided in other formats,
    including in subsequent Webinars
  • Loan Participation Operations Webinar - Part 3
    will be held on August 15, 2008

6
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

7
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

8
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

9
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 re-purchased by lender
  • Loans can be sold (put) to ED

10
  • Loan Participation Purchase Program Process
    Overview
  • Jay Hurt
  • Chief Financial Officer
  • Federal Student Aid
  • U.S. Department of Education

11
Agenda
  • Custodian Approval Process
  • Changes to Funding Request Process
  • Monthly Reporting
  • Monthly Rolling Forecast
  • Monthly Settlement Date Report
  • Monthly Loan Schedule
  • Change Control Procedures
  • Previous Questions/Issues
  • New Questions

12
Process Overview
  • New Processes
  • Initial Approval Package EA 10
  • Custodian Approval Process EA 14
  • Pre-Approval Steps
  • Funding Requests EA 16 13
  • Monthly Reporting Cash Sweep
  • EA 15, 17, 18
  • Audits
  • Existing Processes
  • 799 Billing
  • Form 2000 Reporting

13
Custodian Approval Process
  • Custodian Approval Submission Process posted to
    website as EA 14
  • Added the address and delivery instructions
  • List of ED-approved custodians posted today by
    4PM and updates added everyday by 4PM
  • Sponsor submission may include
  • Previously approved custodian
  • New proposed custodian, who must submit an
    approval package.

14
Changes to Funding Request Process
  • No weekday assignments
  • Still only one submission allowed per week
  • Will process in order that Loan Schedule is
    received in SAIG mailbox
  • Rejected files may not need to wait until the
    next week for re-submission, at the discretion of
    the Department operations staff
  • Transactions with hard edits still excluded from
    submission and must be re-submitted following
    week.
  • New Security Release Certification form and
    process in EA 16
  • Header Field 6 (Form799PaymentReceived) has been
    deleted
  • Loan Level Field definitions have been clarified

15
Monthly Reporting Cash Sweep
  • Monthly Rolling Forecast in EA 15
  • Treasury cash flow planning helps to reduce
    risk of payment delays
  • Credit Reform Act accounting
  • Must provide prior to first funding request
    payment
  • Monthly Settlement Date Report in EA 17
  • Reconciles to Loan Schedule
  • Supports reconciliation of Departments Yield
    and Class A Participation Certificate balance by
    ED
  • Use Participant Yield Rate through 9/30/2008 as
    published in EA 18 3.25
  • Provides status of delinquency/default
  • Supports cash activity relating to loans
  • Monthly Loan Schedule supporting Monthly
    Settlement Date Report
  • All cash is swept from the Collection Account and
    applied first to the Departments Yield and then
    to the Class A Certificate Balance
  • May be swept via Pay.Gov more frequently if
    Settlement Date Report Loan Schedule is
    provided as of that date

16
Monthly Reporting - Matrix
17
Monthly Rolling Forecast - Example
Monthly rolling forecast covers May 2008 through
September 2009 Disbursements, Loans Redeemed, and
Loans Put information will also include unit
counts
18
Monthly Rolling Forecast - Example
Monthly rolling forecast covers May 2008 through
September 2009 Disbursements, Loans Redeemed, and
Loans Put information will also include unit
counts
19
Monthly Rolling Forecast - Example
Monthly rolling forecast covers May 2008 through
September 2009 Disbursements, Loans Redeemed, and
Loans Put information will also include unit
counts
20
Monthly Rolling Forecast - Example
Monthly rolling forecast covers May 2008 through
September 2009 Disbursements, Loans Redeemed, and
Loans Put information will also include unit
counts
21
Monthly Rolling Forecast - Example
Monthly rolling forecast covers May 2008 through
September 2009 Disbursements, Loans Redeemed, and
Loans Put information will also include unit
counts
22
Monthly Rolling Forecast
  • Historical information will replace projections
    as factual information overrides forecasts as
    each month passes.

23
Monthly Settlement Date Report
  • Information for each Servicer ID
  • Borrower Principal and Accrued Interest balances
  • Information aggregated for the Custodian ID
  • Delinquency status ( and )
  • Participant (i.e., Departments) Yield
    Calculation
  • Using Yield Rate as published in EA 18 3.25
  • Collection Activity
  • Ties to CashCollections field on Loan Schedule
  • 799 Payments
  • Investment Income
  • Distribution Summary
  • Pay Participant Yield, Participant Principal,
    then Sponsor
  • Class A Participant Principal Rollforward

24
Monthly Loan Schedule
  • Loan Schedule in the same form as submitted on
    the Participation Purchase Request
  • See EA 16 for updated details on Loan Schedule
    preparation/submission
  • Must support information included in the Monthly
    Settlement Date Report
  • Loan Schedule Edits EA13
  • File vs. Transaction Edits
  • Hard vs. Soft Edits

25
Change Control Procedures
  • Forms and instructions will be updated via
    Electronic Announcement (EA) postings.
  • Loan Schedule changes will be coordinated with
    you
  • Proposed Loan Schedule layout edit
    modifications will be announced via EA
  • EAs will include schedule for implementation
  • Schedule will allow for testing with the
    Department
  • Schedule will specify mandatory cutover date
  • First change to occur within next 30 days

26
  • Loan Participation Purchase Program
  • Previous Questions/Issues

27
Loan Guaranty
  • Loan Guaranty and Agency - the guaranty that was
    granted to the lender (now the Sponsor) remains
    in effect while the loan is in the Participation
    Facility, without regard to the transfer of title
    to the Custodian.
  • Sponsor-Guaranty Agency relationship is
    maintained.
  • When removed via a repurchase by the Sponsor, the
    guaranty remains
  • When removed by a put to ED, the guaranty ends.

28
Loan Defaults
  • No defaulted loans may be placed in the facility.
  • When a loan becomes 255 days past due, it must be
    removed by the Sponsor from the facility, either
    by re-purchase or put to ED.
  • If loan then defaults
  • Normal school CDR calculation will apply.
  • If loan had been repurchased normal GA CDR will
    apply.
  • If loan had been put, no GA CDR.

29
Security Release
  • What happens if substantiation of security
    release upon settlement of first Participation
    Purchase Request is not provided to ED?
  • ED will withhold approval of subsequent
    Participation Purchase Requests until security
    release is demonstrated (i.e., custodian provides
    Security Release Certification form)

30
Consolidation of Loan
  • What happens if the borrower includes a loan that
    is in the participation program in a new
    consolidation loan?
  • The loan must treated as if it were repaid by the
    borrower. When funds from the consolidating
    lender (including the DL Program) are received by
    the Sponsor, they must be remitted to the
    Custodian for deposit in the Collections
    Account.
  • Custodian will make appropriate adjustments to
    loan balance.

31
Legal Title and 799
  • When does 799 reporting change in relation to the
    date title in the loan goes from Sponsor to
    Custodian?
  • Title transfers on the same day that funding
    transfers
  • Sponsor reports through date of title transfer
  • Custodian reports beginning day after title
    transfer
  • Note Slides from previous webinar were
    incorrect.

32
Eligible Loans
  • Under clause (xv) of Eligible Loan in the MPA,
    all of the Borrowers other Stafford Loans must
    be transferred, how will this work for loans
    originated before the May 1, 2008 cut-off period?
  • Per clause (xv), only the Borrowers other
    Eligible Loans are required to be participated.
    Originations before May 1, 2008 are not Eligible
    Loans and may not be participated.

33
Notice of Intent
  • Suppose there are 3 holders of a loan, both the
    originating lender and current holder timely
    filed Notices of Intent to Participate but the
    intermediate holder did not. Is this loan an
    Eligible Loan?
  • Yes, only the original lender and current holder
    must file the Notice of Intent to Participate in
    order to establish loan eligibility.

34
Notice of Intent
  • Participation Operations Webinar 1 indicated a
    confirmation of a Notice of Intent to Participate
    would be sent within 2 business days. If I have
    submitted my Notice of Intent to Participate, but
    have not received confirmation from ED, what
    should I do?
  • You should contact the FFEL Agreement Process
    Team at ffel.agreementprocess_at_ed.gov

35
Questions
  • Questions may be asked now or submitted to the
    following e-mail address, starting Monday, for
    consideration in next weeks webinar
  • Loan.Participation_at_ed.gov
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