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

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Presentation on theme: "Participation Operations – Part 2 1 FFEL Loan Participation Program Participation Operations – Part 2 August 8, 2008."— Presentation transcript:

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

2 Participation Operations – Part 2 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 Participation Operations – Part 2 3 Introduction Jeff Baker Director Policy Liaison & Implementation Federal Student Aid U.S. Department of Education

4 Participation Operations – Part 2 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 ; and Dial in to Confirmation number: MGERHARD Additional information on the Loan Purchase Programs at:

5 Participation Operations – Part 2 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 Participation Operations – Part 2 6 Legal Authorities Ensuring Continuing Access to Student Loans Act of 2008 (P.L ) 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 Participation Operations – Part 2 7 Program Objectives Ensure that eligible students and parents receive federal student loans for the academic year Support the FFEL Program as a successful private/public partnership Ensure no net cost to the federal government

8 Participation Operations – Part 2 8 Two Programmatic Components Loan Purchase Commitment Program Commitment by ED to purchase eligible 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 Participation Operations – Part 2 9 Two Programmatic Components Loan Participation Purchase Program Commitment by ED to purchase participation interests in eligible 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 Participation Operations – Part 2 10 Loan Participation Purchase Program Process Overview Jay Hurt Chief Financial Officer Federal Student Aid U.S. Department of Education

11 Participation Operations – Part 2 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 Participation Operations – Part 2 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 Participation Operations – Part 2 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 Participation Operations – Part 2 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 Participation Operations – Part 2 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 Participation Operations – Part 2 16 Monthly Reporting - Matrix Form Exhibit Who ExecutesFrequencyWhen DueProcess Flow Monthly Settlement Date Report Section 8b(1) CustodianMonthly7 Business Days after the 1 st of the month The two reports must be sent as Excel files via to FSA web address. Loan Schedule will be sent as an electronic file via SAIG. ED will send acknowledgement of receipt to Custodian. ED to verify Monthly Rolling Forecast aggregates to more than $50mm over the life of the Participation Agreement. ED to verify that all three pieces to the submission are as of the same date. ED to initiate Monthly Reconciliation procedures * Ending Balances to current Loan Schedule * Beginning Balances to previous Loan Schedule * No loans delinquent over 255 days. * Reconcile the custodians calculation of Participation Principal and Participation Yield to EDs. Monthly Rolling Forecast Section 8a(1) Loan Schedule as part of the Monthly Settlement Report In support of the above

17 Participation Operations – Part 2 17 Monthly Rolling Forecast - Example AS OF DATE: August 30, 2008 MonthLoan TypeOriginationsDisbursements Loans RedeemedLoans Put August 2008 $ Amount Loan Count$ Amount Stafford/Undergraduate $ Stafford/Graduate Unsubsidized Stafford PLUS/Parents PLUS/Graduate Students Total Monthly rolling forecast covers May 2008 through September 2009 Disbursements, Loans Redeemed, and Loans Put information will also include unit counts

18 Participation Operations – Part 2 18 Monthly Rolling Forecast - Example AS OF DATE: August 30, 2008 MonthLoan TypeOriginationsDisbursements Loans RedeemedLoans Put September 2008 $ Amount Loan Count$ Amount Stafford/Undergraduate $2500 Stafford/Graduate Unsubsidized Stafford PLUS/Parents PLUS/Graduate Students Total Monthly rolling forecast covers May 2008 through September 2009 Disbursements, Loans Redeemed, and Loans Put information will also include unit counts

19 Participation Operations – Part 2 19 Monthly Rolling Forecast - Example AS OF DATE: August 30, 2008 MonthLoan TypeOriginationsDisbursements Loans RedeemedLoans Put January 2009 $ Amount Loan Count$ Amount Stafford/Undergraduate $2500 Stafford/Graduate Unsubsidized Stafford PLUS/Parents PLUS/Graduate Students Total Monthly rolling forecast covers May 2008 through September 2009 Disbursements, Loans Redeemed, and Loans Put information will also include unit counts

20 Participation Operations – Part 2 20 Monthly Rolling Forecast - Example AS OF DATE: August 30, 2008 MonthLoan TypeOriginationsDisbursements Loans RedeemedLoans Put September 2009 $ Amount Loan Count$ Amount Stafford/Undergraduate $5000 Stafford/Graduate Unsubsidized Stafford PLUS/Parents PLUS/Graduate Students Total Monthly rolling forecast covers May 2008 through September 2009 Disbursements, Loans Redeemed, and Loans Put information will also include unit counts

21 Participation Operations – Part 2 21 Monthly Rolling Forecast - Example AS OF DATE: September 30, 2008 MonthLoan TypeOriginationsDisbursements Loans RedeemedLoans Put September 2009 $ Amount Loan Count$ Amount Stafford/Undergraduate $5000 Stafford/Graduate Unsubsidized Stafford PLUS/Parents PLUS/Graduate Students Total Monthly rolling forecast covers May 2008 through September 2009 Disbursements, Loans Redeemed, and Loans Put information will also include unit counts

22 Participation Operations – Part 2 22 Monthly Rolling Forecast Historical information will replace projections as factual information overrides forecasts as each month passes.

23 Participation Operations – Part 2 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 Participation Operations – Part 2 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 – EA#13 –File vs. Transaction Edits –Hard vs. Soft Edits

25 Participation Operations – Part 2 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 Participation Operations – Part 2 26 Loan Participation Purchase Program Previous Questions/Issues

27 Participation Operations – Part 2 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 Participation Operations – Part 2 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 Participation Operations – Part 2 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 Participation Operations – Part 2 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 Participation Operations – Part 2 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 Participation Operations – Part 2 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 Participation Operations – Part 2 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 Participation Operations – Part 2 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

35 Participation Operations – Part 2 35 Questions Questions may be asked now or submitted to the following address, starting Monday, for consideration in next weeks webinar


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