The Future of Private Loans

1
The Future of Private Loans

• Migration from prime to LIBOR
• In-school interest payments
• Tight credit markets/TALF
• Increased collection efforts
• Increased credit regulation

2
Migration from Prime to LIBOR

• Matching loan pricing with funding costs
• Minimum and maximum rates on variable loans
  increasing
• Only three major lenders using prime rate as
  their index
• Other indices may develop

3
In-School Interest Payments

• Costs increasing index and margin
• Provides in-school revenue stream for investors
• Trains the borrower to repay a portion of the
  loan when in school
• Deterrent effect on future borrowing?

4
Credit Market Challenges

• Securitizations may require more collateral and
  income streams
• TALF offers a 3 year term but most private loans
  have a 12 year maturity
• Pricing and allocation of risk important
• What if the law changes after the securitization
  takes place?

5
Increased Collection Efforts

• Proving Undue Hardship in a Ch. 13
• Challenges based on holder status
• Challenging electronic signature based on failed
  or inadequate security process
• New Reg. Z violation claims

6
Increased Credit Regulation

• Implementation of Reg. Z
• State regulation of lending process and new
  consumer disclosures (e.g., Iowa)

7
Questions Answers