Please stand by for real-time captions.

Welcome and thank you for standing by. All lines will be on listen only
for today\'s presentation. Today\'s presentation is being recorded. If
you have any objections you may disconnect at this time. I will turn the
meeting over to Angela Smith.

Welcome to this second Webinar in our FFEL loan purchase program series.
My name is Angela Smith and I\'ll be moderating this session. This will
be in lecture only mode, if you have questions during the Webinar you
will need to click on the Q&A button at the top of your screen. Click in
the top field and then click the ask button. All questions will be held
until the end of the presentation and then we will answer them at that
point. I\'ll turn it over to Jeff to begin today\'s Webinar.

Thank you Angela. Thank you for everyone coming to join us for a couple
hours talking about these very important programs. We met on Tuesday and
talked about the loan participation program and we\'re going to talk
about the loan purchase program and go through the master loans sales
agreement. I\'m here. We have a replacement. We have Fred in our office
of general counsel that\'s going to join us in the presentation and
respond to the questions.

The next couple of slides were on the call on Tuesday and I included
them and won\'t go into a lot of detail. We wanted to have each
presentation stand on its own. Make sure you are on the right flight.
This is the Webinar to discuss the master loan sales agreement as part
of the loan purchase commitment program. If you haven\'t figured out
already you have to login to the URL and call in on the 888 information
number. The information on this programs is available at the website at
the bottom. You will need to look at that as we post additional
information about the programs. The target audience is what we had on
Tuesday. It\'s about the sales process and not the participation
process. There are some limitations. I switched the slide here as you
can tell. Which talked about that a couple days ago. We are going to
talk about the agreement so we won\'t talk about the operational
details; however, we have schedules and there\'s an announcement posted
to that website, another Webinar on the operational process and some
level of detail on the participation interest program. That will be a
week from tomorrow, Friday, August 1st, from 2-4. If you registered for
Tuesday and today\'s, you\'re automatically registered for it and you
will get the reminders that the system kicks out to you. If you or a
colleague, if you are sitting at someone else\'s machine and would like
to log in, you go to the website and see instructions for registering
for the whole series. We are also developing an operational Webinar on
the purchase program, the one we\'re talking about today. We haven\'t
scheduled that yet and we\'ll announce that as quickly as we can. We do
have the one scheduled for a week from this Friday.

The problem is lack of liquidity in the student loan programs. We talked
about that in other Webinars. The legal authority to create those
programs. The statutories we noted on the screen. This presentation will
be posted to our website including voice recording and a written
transcript. Again, in response to the problem and under the authority of
the legislation we developed two programs. We\'re going to talk about
the first one noted here which is the loan purchase commitment program
for short the \"put\" program. The note at the bottom is important. We
don\'t have the authority, the secretary was not given the authority to
advance lenders loan money. We have to purchase. We are purchasing loans
or purchasing participation interest that we talked about on Tuesday.
Let's get into it with more detail.

We did post this master loan sales agreement to our website on the 10th
of July. As Dennis mentioned the other day, we are probably going to
repost with some changes. Some are very technical. We had a couple of
references that pointed the wrong way. Some are a little more
substantive because of comments from the community. We appreciate that.
We don\'t have an exact date but hope it won\'t be too many more days.
We will announce that we posted it and include the list of changes so
you don\'t have to read all 25 pages or whatever to pick up these
things. The basic program has not changed and the basic responsibilities
of all the parties in this case, the department and seller of loans,
will not change.

Again this program requires a notice of intent to be filed and the same
rules apply in terms of the date that the department receives the notice
of., will be the earliest date in terms of loans. So when we receive
your notice of intent, loans made on or after that date, the first
disbursement on or after that date, are the only ones eligible to be
sold to the department to be put to the department except we have a
provision if the notice of intent is filed by the 31st, a week from
today, then we can retro actively allow loans to go back to the first of
May.

I did a little cheating and moved some slides from the other
presentation. This bullet, interest in loans first disbursed \-- loans
first disbursed may be sold.

We wanted to make sure we didn\'t have this on the slide the other day,
but we are processing as we receive these notices of intent, emailed to
us, further instructions. We are reviewing them as quickly as we can and
either sending an official response back to the submitter, acknowledging
we received it, acknowledging the date because that sets the dates for
the loans, or getting back to the submitter with some additional
requests because something might have been missing. If a notice of
intent is sent and the submitter does not receive something from the
department within two days, you need to call this number 202-377-4401 to
find out what may have happened. Occasionally based upon I don\'t know
what, messages get sent, get put into trash or spam files. So if you
send one in and you don\'t hear from us in a couple of days, give us a
call and we\'ll track it down for you. The notice of intent is the date.
It does not require anyone in this case to sell loans to us. It just
leaves the option open and the eligibility of those loans.

You will remember if you were on the call or had read our materials on
the participation, there is a 50 million-dollar minimum. There is no
minimum on the ability of a holder of FFEL loan to sell us loans.
Someone could offer to sell us one loan and we\'d buy it. We don\'t
think that would ever happen. But there is no minimum. The smaller
holders don\'t have to work through aggregators or any other process.

Going through \-- Fred\'s going to jump in here when it\'s appropriate,
when he wants to clarify something, or correct me on something. Going
through the master loan sales agreement, section by section as we did
the other day and Dennis noted the other day, the agreements are not
necessarily in linear order. The program is more complex than that.
We\'re going to talk about them as we go through the agreement starting
with section one, which are the terms. Again, you\'ll see the terms. It
does require that a lender or holder or seller, the work we\'re going to
use has to provide a bill of sale. There\'s a form for that, exhibit B,
in the master loan sales agreement. Going be sold to us with a fair
amount of detail because we\'re going to take the loans, pay for them.
We'll talk about sales price in a moment and we\'re going to be
responsible for making sure those loans remain enforceable loans. This
bullet here is a little out of context but it is in the front end of the
terms. It relates to the fact in a couple of slides later, that one of
the conditions that the seller provide the department with 45 days
notice before it intends to sell loans to the department, before the
purchase date. So if you work backward that this whole program ends on
the 30th of September, 2009. Next year. Let's not get the years mixed
up.

Section two is the commitment to lend. I won\'t go into a lot of detail.
Didn\'t necessary spent a lot of time on this statutory requirement.
It\'s about intending to participate and we\'ll look into changing some
wording in the agreement. But it\'s about the intent. Participating in
the 08-09 year, you wouldn\'t be talking to us if you weren\'t
participating in the 08-09 year. Issuing participations which satisfy
this requirement. There is no intent that this requirement commits a
lender to be in the FFEL program. This would be an impossible thing to
ask of anyone. But this agreement does have this provision.

We get the definitions. These definitions are the same we saw the other
day We only picked just a few here that we think are important. One of
course, is this eligible borrower benefits. We will not purchase loans
upon which the lender or subsequent holder has made promises of benefits
to the borrower with two exceptions. One, anything that was up front,
like the lender paying on behalf of the borrower. The borrow origination
fee or default fee. That\'s fine because that\'s going to be before we
get the loan. The lender offered to borrow up 25 \-- .25% reduction of
interest rate paying when they move into continue paying. That\'s okay.
Not because we pick up the lender\'s obligation but because it\'s a
benefit we\'ll provide as well. So there\'s no need to make that
restrictive and not have the loan be able to come into our portfolio
because we\'re going to offer the same benefit anyway.

Eligible lender. That is the same as you see in the other document.

Eligible loan, the same set of requirements to what makes a loan
eligible to be sold to us the law provides us to purchase loans up to
the 08-09 year. The law uses the terms academic year, that\'s really not
a term of ours in the loan programs. What this means in our agreements
it\'s a loan where the payment period includes or begins on or after
July 2008 and the first disbursement is on or after May 1st, 2008. And
the loan will be fully disbursed by the 30th of September in 2009 and
we\'re talking about Stafford subsidized loans, Stafford unsubsidized
loans and Plus loans only. No other loans including consolidation loans.
These initiatives are out to make sure students get student loans for
the 2008- 2009 academic year and not have an opportunity to consolidate
prior loans. The loan has to come either free of any servicing
requirements or those servicing agreements have to be terminable with no
more than 30 days notice. If you are going to sell us a loan, you have
to give us 45 days notice, by that time, you would have known from us or
within those 15 days we would have told you whether we\'re going to take
the servicing or not. If we are going to take the servicing you have to
implement your termination agreement so that those loans can, once sold
to us be serviced by us.

There was a question about being in both programs. A loan that was
placed in the participation interest in the other program can be in
participation once. But if it\'s in a participation and the holder wants
to sell it to us. That\'s fine. Two different programs. Taken out and
back to the lender and later in the year decided to sell it to us. That
would be okay. Two separate programs you can only play in each of them
once.

The seller, we\'re going to use throughout the presentation is an
eligible lender or holder, and the holder of beneficial interest in
eligible loans. That would be under an ELT relationship. Although we
have responsibilities included in all, the eligible lender has the
ultimate responsibility for ensuring that the loan is properly
administered and meets requirements of the program.

The purchase price. Our objective here is to encourage FFEL lenders to
make loans for the 08-09 year. ... Indiscernible ... We will pay for
each loan the outstanding principal balance on the loan as of the
purchase date. These will be the original amount lent. Reductions
adjustments. Outstanding principal balance as of the purchase date, plus
the accrued interest, borrower interest on an unsubsidized loan or plus
loan. Will include that in the purchase price because that will be value
to us. We will be collecting that outstanding balance and the accrued
interest from the borrower. The lender fee that was paid when the loan
was made. We\'ll reimburse under 438(d).

It\'s a fee paid by the lender in having income streams that are
reasonable and profitable for the loan and in fact, if they sell it to
us within this year they\'re not going to have those streams. We\'ll
reimburse the 1% plus \$75 for each loan. Because we know that the
lender spent some money originating the loan, having it serviced for
whatever number of days it was serviced before it was ultimately sold to
us. In any event there was any deconversion fee by the servicer. We have
a lot of information from servicers and lenders. \$75 per loan. By the
way, for a set of loans, a sub and unsub coming in together being sold
to us each is a separate loan for the 75-dollar purpose so we would give
\$150 for that. If the borrower would have three loans it would be three
loans there for this 75-dollar price.

Now we move to \-- there are other definitions but those are the key
ones. This is for the sale agreement. We must have 45 day notice of your
intent to sell loans. When you provide us with that notice, we expect
those loans to be sold to us. We understand that there might be
adjustments during the 45 day period. A loan might have got cancelled or
funds returned by the school or other kinds of adjustments. These loans
get sold to us. No loans can be taken out and replaced by another loan.
45 day schedule.

The loans \-- the sale is consummated on each loan when you the seller
satisfies all the closing conditions in the agreement. We receive the
bill of sale that was mentioned with the schedules and we\'ll make sure
these loans are eligible to be \"put\" with us. Related documentation to
support the enforceability because we\'re going to be collecting on
these loans and enforcing them if need be through the courts. Finally of
course, it\'s not consummated until we pay. Until we pay. There\'s
processes are one of the things we\'ll be talking about in subsequent
Webinars. These four things in summary form are what has to occur before
the sale is considered consummated and the purchase date is when all
these things are done, most specifically when we pay. That\'s the date
when things change in terms of ownership and responsibility and 799
filings and those kinds of things.

Also in section four we proposed in the agreement that a seller can only
sell loans to us no more often than once a week. We just felt that was
reasonable and for a work flow and funding flows with the Department of
Treasury and for the sellers as well. We didn\'t see any real need that
they would sell us ... Indiscernible ... on Tuesday and Friday. Most
likely assign a day of the week to receive agreements that lenders want
to or consider participating in this \"put\" program. Obviously
servicing rights to the loan haves to be released. This relates back to
the terminable within 30 days. We will direct as I mentioned how
servicing is to continue. It\'s possible we would ask the seller to \--
if they wanted to, maintain servicing under contract with us. It\'s
possible that we would go to some place else. Those decisions have not
totally been made. They will be made on an ongoing basis as we look at
the market, see what the demand is and make other decisions. If we were
to purchase loans to that we would take servicing away from the current
servicer. But we leave those options open and it\'s important for us to
let lenders know what our plans are.

Any holder can sell loans. Originating lenders will make loans for this
year. Sell them to someone else, secondary market or someone else. They
may want to sell it to us. That would be fine \-- that entity \--

Proper papers. We have the agreements and other kinds of documentation.
It\'s through the purchase date. That probably should be capitalized
purchase date, when all the conditions of consummation have been met. Up
until and including that date, the holding lender when it comes time to
file 799 for special allowance payments would include the loan on the
799 for that quarter up to that date and would not include it after that
date. They don\'t own it any more, we do. Ends upon sale of the loan to
the department because we don\'t need a guarantee any more to FFEL
lender because we now own the loan.

We look to conditions precedent in the agreement. This is summarized
quite a bit. We mentioned the 45 days but we need to make sure we have
your agreement. The master loan agreement. Has to be agreed to. The way
it gets agreed to is by the seller and if applicable, the trustee or
ELT, executing the adoption agreement which is attachment A to the
master loan sales agreement. In addition, the seller would have to
provide these two exhibits C and D which are office certifications about
the entity and that everything is proper and so on\-- The opinion of the
seller's legal counsel, as to the accuracy of all the information. Now
this slide says at least ten business days prior to the first purchase.
In order to make sure that we do not put you folks in terms of selling
loans because we know behind your decision to sell loans is some serious
financing determinations and agreements that you\'ve made, we don\'t
want to be in a situation where ten days is not enough time for us to do
our review and so on. So we\'re going to change this in the agreement to
be at least 20 days, 20 business days prior to your first purchase date.
You have to get these documents in. It is possible that you sent the 45
day notice in simultaneously with this. In fact, practically speaking,
we expect most entities would submit these documents way early even if
they had the slightest hint that they want to sell us loans or start
getting serious about it. In practicality we probably would be getting
and expect if it hadn\'t been sent to us on or about the same time you
send the 45 days. Legally speaking, you have to get it in and we will
hold you to \-- it has to be at least 20 days. We\'ll change that as we
post this Webinar.

It might be useful to note that as it\'s currently \-- you saw the July
10 version, unlike the participation purchase agreement, there\'s no
deadline as such for executing the adoption agreement. Practically
speaking, because all the sales have to be completed, no later than
September 30 and you have to give 45 days notice. At least 20 days prior
to the first purchase, that does build in some practical deadlines for
getting activity. We will only purchase fully disbursed loans. Although
there\'s not the kind of deadline established for the master
participation agreement, there are practically is a deadline of sometime
in August of \'09 for the executing sales agreement.

\'09 is a long time and we will make some attempts as we approach that
to remind people that we\'re running out of the year. So if you need to
file documents you need to start doing that in June, July and part of
August of next year.

Fred also made a point, I\'m not sure if I made it clear. These loans
have to be fully disbursed and I want to avoid the confusion. In the
participation program, place the loan in the participation interest,
those can be and expect those would be placed upon the first
disbursement by the first dollar being disbursed and we catch up with
subsequent disbursements. They can\'t be sold to us until they are fully
disbursed. That is the norm in the industry of selling loans among
yourselves. For the obvious reasons it makes it hard for the new holder
to make subsequent disbursements and servicing issues. Selling of a loan
putting a loan to us, the loan has to be fully disbursed. As noted
earlier, as you get to the point of the 45 day notice that alone would
be included there at the time you issued the notice, was not fully
disbursed but will be fully disbursed by the 45th day. We\'re not
playing games here. The whole idea here is financing and you may need to
get your financing very quickly after you make it. You don\'t want to
wait another 45 days after that. I suspect we\'ll have questions on this
as we get toward the end.

Also conditions precedent. We have to get a security release if these
loan have been pledged to anything. Between and among itself and
there\'s \-- formats for those kinds of releases so we are confident
that the loans we are purchasing don\'t have any kind of claims on them
that they\'re not going to come to us and say that\'s my property.

Fred that might be a point to talk about the financing warehouse\'s
options in placing loans to us.

The form of security release is going to have the entity that\'s
extending the initial financing to the FFEL lender, name itself, give
its address, so it can control this. It will say that it is
relinquishing its interest as of the date in time that it receives
payment on the loans. It will not mention the date of payment of the
loans but the wire transmitting the payment will establish that date.
That will need to be filed by the seller to clear the interest.

We\'re giving a good bit of thought to make sure that the entities that
provide the initial financing the warehouse advancer, whatever is able
to rely on the existence of the federal \"put\" as a solid assurance of
extending that financing. In that regard, rights of ownership on them,
it will be able to in effect step into the shoes of the seller if the
agreement has been signed. The warehouse lender can\'t get greater
rights there than the party it finances. Put loans by the seller under
the terms of the agreement. It will need to have and present to the
department a power of attorney that presents it to do that and it will
have to endorse or affirm the warrantees as to the loans that it seeks
to put. It will also need to give us the same amount of advanced
warning. It does not need to sign the master loan sales agreement or
adoption agreement but the party whose rights it\'s exercising on those
loans have to have. So it may be \-- it would be an element of it\'s
preparation or care in making the warehousing advance to the party
advancing to have executed a master loan sales agreement without that
the warehouse will not be able to exercise these rights.

The warehouse lender would also not have to file a notice of intent to
participate because it\'s again, relying on the party, the performance
of these preconditions by the party that acquired the rights in the
first place. But if it intends to put the loans it would have to provide
the advanced warning notice that Jeff just described.

What Fred just went through is a situation that doesn\'t happen that a
lender defaults on a financing debt. This whole program is about
ensuring the markets that there are opportunities for financing after
the fact and so we\'re hopeful with this kind of guidance the warehouse
lenders and others would feel comfortable with entering into an
agreement. Knowing that if there is a default on that financing
agreement, they on their own without having to ... Indiscernible ... the
lender, can put these loans if they have a proper document.

Going through the slides very quickly. Obviously if the loan is sold
there are requirements in our regulations about notifications to the
borrowers. They apply to both the old and the new owners and has to do
with servicing and we\'ll work with the seller as we are the new owner
to determine the best way the borrowers are aware of the sale and most
importantly, as the regs contemplate, where they\'re supposed to send
their payments and have any other documentation. The seller must also
give us differently an irrevocable power of attorney so we can enforce
the debt and not have a borrower raise the defense that he made a deal
with someone else. The borrower is agreed upon procedures report from a
certified public accountant \-- independent public accountant to make
sure all these terms and conditions of this agreement and related
documents have been complied with.

We move to representations and warrantees. These are of the seller.
These are included in the agreement in the adoption. As they will be
attested to and attested to in the officer certificate that the seller
among other things is dually organized and in good standing in its
state. Beneficial holder and you see how that\'s been in compliance. Has
the power to sell them. Not held by someone else and not just playing
operator or administrator functions. We\'ll know whether they did or
not. But more importantly, they are attesting at the time that they have
not violated the condition of this agreement we are talking about today.

More represents and warrantees, of course. That on the books of the
seller, this will be reported as a sale, so that \-- we\'re going to
report it on our books as we purchase them and we want to make sure
these assets don\'t get counted twice in a couple places. The seller is
solvent and so on and have internal controls to verify that you have the
right documents, accurate and had those control in place in the
origination of the loan and through the sale and what\'s required beyond
the sale based on audits and reviews.

Note that the adoption agreement if there is an eligible lender trustee
in the relationship, the adoption agreement is a three-way agreement \--
or between the department, the seller, and the eligible lender trustee.
The opinion of counsel and official officers certification are merely
those of the seller, which of course, may or may not be an eligible
lender in it\'s own right. But if there is, it must sign the adoption
agreement and some of the \-- we tried to include in the sales
agreement, certain recognition that some of the representations or
warrantees or some of the actions that are required, require exercise
eligible by the trustee. There\'s reference, transfer reacquire. That\'s
the kind of thing that the agreement not surprisingly is going to say.
Or the ELT together are recognizing that they have their respective
roles and authorities under the transaction.

So we understand and appreciate it is an extra step in the process in
terms of the eligible lender trustee but it is important the beneficial
holders participate in the FFEL through the eligible trustee
relationship in Participation program as well as the loan sale program.

Of course there\'s more reps and warrantees because this is a contract
and this is at the loan level. The seller is warranting representing for
sure that the loan has been scheduled for repayment, fully amortized
during the maturity. We have more than enough payment plans, but we want
to make sure that the loan is in the proper land and will be \-- plan
and will be amortized appropriately. Applied to principal interest or
fees or other responsibilities. That there has been \-- attesting due
diligence in making the loan as is required, and in the servicing and
maintaining of documents beyond that through the sale date. Of course
the borrowers were eligible for the loan. Non of these are surprises
because you shouldn\'t be making a FFEL loan or maintaining one if these
things are not met.

And that fees were paid. Actually, were paid or in the case of loan fees
are scheduled to be paid as part of the 799 agreement, and that once
sold, there is no residual benefit. That goes back to the seller.
Relates to bankruptcies. When these loans are sold to us we don\'t have
someone coming in later in the unfortunate event that the seller faces
some kind of bankruptcy or kind of procedure that the loans that were
sold to us someone is going to try to claim. If there was \-- if the
note \-- the loan was signed with an electronic promissory note it is
compliance with the law and regulations. Let\'s take a second to talk
about this. Dennis went through it on Tuesday. We are modifying here,
again, this is when the modifications in these agreements you\'ll see
when we repost this is a direct response to the communities asking
questions and concerns. Many of you know we established back in 2001 for
e signing of loan documents and particular emphasis of master promissory
notes. What we provided there is E signatures are fine. The law allows
for it. The E sign provides explicitly and the higher education about
does not prohibit it in anyway. If the lender\'s process by which it had
a borrower sign electronically if it complied with the standards. There
were like 20 or fewer pages. Hopefully the unlikely event that that loan
was challenged and successfully challenged in a court, made a
determination that the loan was unenforceable solely based on the way it
was signed electronically. If that happened if our standards were used,
we would continue to support that loan and provide insurance and any
other benefits. However, if that happened, and again, hope it\'s
unlikely and the lender, originating lender, did not while they used the
E sign process, consistent with law, but not to our standards, we could
choose to say to that lender, you took a chance and the judge threw it
out and we\'re not going to back up that loan and we\'re not going to
provide benefits. For the participation program and the put program the
same applicant standards apply. Signed by a process not up to our
standards, however, if down the road there was a challenge I just
described the App. likeability would allow us to make a decision to have
the lender cover the damaged cased to the government by that decision of
a court and the operations of the E sign process.

I think we addressed the concerns. We had discussions with folks. The
loan should be eligible to play in either of these games but they could
have some problems on the other end. We hope not.

... Indiscernible ...

Unless it\'s released. A release process that we\'ve talked about. They
could have \-- this is important. They could have had a pledge or lean
on them. But they have to be released at the latest at the time they\'re
sold to us.

Right.

Moving on the rescind the purchase. Very unlikely to do that for any
number of reasons including the fact that the purpose of this is to
assure the FFEL community and the capital markets we\'ll be there. The
purchase of a loan is going to be very minimal and it would be the
obvious things that the lender was incorrect in what was provided to us.
We\'re not going to buy a consolidation loan. We\'re not going to buy a
loan that there\'s no promissory note for. These kinds of things. The
other circumstances that could occur before we actually consummate the
sale. This is a legal protection to the taxpayer but we don\'t expect it
to happen. We\'re going to live up to our commitment to purchase
eligible loans if they meet the requirements of this agreement.

Couple of sections here, the obligation to remit payment. This should be
obvious but the agreement states very clearly that once a loan is sold,
if any payments come in or any other funds relate to that loan they will
be forwarded to us per our inboxes and any communications. This is
typical to what happens in any loan sale agreement between FFEL
partners.

Section nine continuing obligation in the vent we need more
documentation down the line, you\'re committing to providing us that.
This relates to E signature description processes or loan payment
details. All of the things that you normally would expect. I believe we
covered this. You can\'t wash your hands of it if we need additional
information.

Indemnities us against any taxes. We don\'t expect this to be an issue.
Any other claims that were the result of the sellers Willful malfeasance
or bad Faith in a loan sale.

Just want to jump in here. This is comparable in scope to the sponsor
liability or similar in scope to the sponsor liability under the
participation agreement. So in addition to liability arising from what
we\'ve termed bad acts, willfulness fees, negligence, also
indemnification to the department for damages that arise from breech of
a rep warrantee covenant or duty under the agreement. In the in the
section \-- in the section on rescission there may be specific costs
that are incurred because of defending a claim that the loan is not
enforceable because of an act that occurred before we ought it. The
indemnification would incur costs by that defense. This is not unlike
the indemnification provision in the participation agreement.

Thank you.

Section 11 transfer of services. You are agreeing by adopting the
agreement that you\'re releasing loans to us on a service release with a
30 day termination possibility and make it clear once we purchase the
loans, we will obtain all the rights of servicing at our discretion that
the loans be deconverted to the servicer of our choosing and we will
inform people how to do that. As part of the operational Webinars and
other documentation we\'ll be putting out is how that\'s going to work
and we\'ll talk about file lay out. We have worked with the community as
much as we can regarding this process of loans being moved from one
servicer to another. Currently when a loan is moved from one servicer to
another. Trying to maintain that same process.

Merger ... Indiscernible ...

This is not going to happen a lot we don\'t think and should not be big
surprise that is planning a merger or acquisition. This would be no
different and it\'s limited to just these documents.

Make it clear we pay our expenses, you pay yours. In fact, including the
conversion and in fact, that\'s part of the reason or maybe the reason
the \$75 is added to each loan. It is for the origination and cost
related to the selling of the loans to us including deconversion at a
servicer but also the general cost you have of putting the files
together and getting legal counsel. \$75 per loan. I should note, if \--
I mentioned that if a borrower has a sub and unsub loan and is selling
both loans each gets the \$75. Beyond that, they have to be sold
together. You cannot sell us a sub and keep the unsub or the other way
around. Again, that should be pretty obvious for servicing reasons and
not to confuse borrower. If the you hold two loans, they both have to be
sold or neither. That does not hold to a plus loan. You may end up
offering to sell us all three loans. That\'s fine but you could decide
to keep the plus loan out or sell the plus and keep the Staffords out.

Survival of the covenants any acquisition everything survives. The
acquisition of loans if there\'s any changes. Communications notices
very brief in there. Unless we tell you otherwise, how you contact us
our address is in the agreement as are our emails and phone numbers. We
will change that when we move operationally. Fax this document here or
mail this document here. But the official legal addresses are included
in the agreement.

These are legal things, which if I don\'t get quite right, Fred will
jump in. The instrument shall be the ones in the attachment. You see
about waivers our modifications have to be consistent with the law and
in writing. Nothing too amazing there I hope for our legal friends are
listening and viewing.

Audits. Must give access to all the materials needed in an audit. The
process, you already have all of this because you made loans and sold
them to us. Should a problem with providing us the department and any
other agency to take a look at the documents. Provide access to those
documents. If, one part of the agreement for some reason is ruled
invalid by a court, then that does not affect the rest of it. The
agreement. We have a provision in here that one part of the agreement is
ruled invalid and that loss of validity would be an economic
disadvantage to one of the parties we would attempt to restructure that
provision or parts of it to try to do everything we can to make sure no
one is hurt economically. That could be the government or the seller or
eligible lender. Fairly standard here.

Governing law, if federal law doesn\'t cover a provision, New York state
law would prevail \-- in case federal law doesn\'t cover a situation,
New York state law would apply. The exhibits the one we\'ve spoken to,
they oh, A-F integral part of this agreement and have to be filed
according to the instructions in the agreement.

Interpretive principles others are terms that are included in the HEA or
regulations or terms of the FFEL program. No concern on how to interpret
the words, we hope. We hope we won\'t get into a disagreement to what
the words mean. Both parties will be admissible as evidence. I will
acknowledge that here so you don\'t have to go running around with
originals unless of course the court says we do. Under the agreement we
do not.

The seller would agree if there are any documents we need to make sure
the services are met, we would be able to do that. This is another
point. It\'s not as strong here. Some of the people reviewed the
documents we posted in July, early July, they pointed out there were a
couple of places that the department could change its mind
...indiscernible\... We never intended that. It was the normal language
because we were putting this program together in fairly short order,
that if we missed something we could always come back and ask for it.
Joke with your boss - duties as assigned. But we take it very seriously
the suggestions because this is about the FFEL community and the
financial world market, where we there if the Ts are crossed and the Is
are dotted appropriately. Other things required by the department and
attempt where we can to mitigate those than. We fully intend to purchase
loans if they meet all these conditions and not going to say \-- we
don\'t feel like doing it now because we think the markets are
different. That\'s not the deal here and the same with the
participation.

The adoption, the execution or adoption is the last date signed and on
the adoption agreement, which is exhibit A. That will be the effective
agreement. The sales impact of that is that we obviously cannot purchase
a loan, you can\'t sell us a loan, until the agreement has been
executed. That\'s the reason why if \-- we\'re serious about the
possibility of selling loans to us you need to execute the agreements
sooner rather than later and it does not commit you to anything. The
notice of intent does not exit you to anything. Putting these agreements
together, sending us the adoption and other documents gets you all set
if you want to sell us the loan.

These are the exhibits. A-F we talked about them. Fred unless you have
something right now \-- Angela, we can take some questions.

Okay. Let me pull that up. If you interested in asking questions you\'ll
need to go to the Q&A link on the menu bar at the top of the page. Type
the question on the top blank field and then select the ask feature.

First question is, does the originating lender have to have filed a
notice of intent with Ed for a loan to be eligible for the \"put\" or is
it enough for a party that acquired the loan be able to utilize the put
and sell the loan?

It\'s a good question to emphasize a very important point. It has to be
the originating lender because the originating lender has no intention
of selling us the loan. Their plan is to sell them to somebody else. The
reason for that is the notice of intent sets the date to determine which
loans are eligible to be sold to us. So the notice of intent would have
to come from the eligible lender and that date would drive the eligible
loans. But the selling \-- the second party in this question would also
have to file a notice of intent but that\'s not going to be enough to
set the loan. It has to be the originating lender. Any originating
lender, there\'s no size problem here. This is a one page thing just to
fill out, sign and PDF it and send it to us. Should do that in my
opinion, to reserve the right for not only it to sell us loan some time
between we start this and next summer but also any subsequent holder at
this point not going to be a subsequent sell.

Part of the rational for this is memorializing but for the federal
\"put\" and the funds that will flow into the lending scheme from that
\"put\" the loan would not have been made. Unless we have the filing of
the notice of intent to participate by the originating lender
memorializes whether it puts the loan or somebody else puts the loan it
wouldn\'t have made the loan, but for the existence of a take out by the
federal government either directly or through the secondary market and
that helps us demonstrate how we\'re operating the program to provide
new money this year.

As a reminder, it sets the day we receive the notice of the originating
lenders, that\'s the date. Loans on or after that date can be sold
unless they get it in by next Thursday. Loans go back as early as the
first of May.

Angela?

If loans have been put to Ed but not deconverted from the sponsor's
servicer. Who pays the deconversion fee?

Let\'s try to clarify, if they\'re \"put\" reached the purchase date,
then they will be at this point in time, decision might be made later,
at this point in time, they will be upon the purchase date moved to our
servicer. They will be. So there is no such thing as what if they\'re
kept with the servicer. The deconversion fee as we mentioned \-- it\'s
not the department\'s responsibility. Whatever is in the agreement
between the current holder, however they work that out, that\'s why we
set for example, the \$75 should partially or totally cover that. But
we\'re not paying deconversion fees. It comes to our servicer when we
purchase the loan.

Is it correct that in the sale option, no custodian is necessary? Yep.
That\'s correct. It\'s just a two party agreement but originating lender
or subsequent holder, everything else \-- papers have been filed. Send
us the schedules and requests and all that. If everything works out,
we\'ll send you money.

The person who asked the question was accurately reading the agreement.
It does use the word custodian partly because we were doing this as
quickly as possible. We borrowed from the master participation
agreement. It\'s purely a passive recipient so in short it\'s like a
Contractor. It has none of the responsibilities as to the seller or ELT
that the custodian under the master participation agreement has it.
It\'s a totally separate \-- strike the word custodian and add
contractor and it will clarify matters.

As a reminder, the seller can be the originating lender, or subsequent
holder, even if there are two or three subsequent holders, whoever is
holding it at the time. Both of those groups could get the proper
signatures from the trustee lender. Finally, the last group I think I
have this right Fred, we hope this doesn\'t happen, would be the
financing entity the warehouse that unfortunately because of a default
on debt to the financier had to exercise its power of attorney and put
these loans to you guys. There\'s paper work as Fred went through.
Related out four or different entities that have this ability to sell
loans to the department.

If the sponsor is a state agency with auditing and reports provided by
the state auditor, can the auditor provide the agreed upon procedures
report?

Well, first thing is it\'s not a sponsor. We\'ll change that to the
seller. A state agency.

I understand that we have not allowed that in other circumstances and we
would not likely do it here. We\'ll look into that though, but the
precedent is not for doing that where there were special purpose
requirements.

Not with any sense of disrespect to the state auditors it has to do with
the independence that the auditors have.

Will the specific form and substance requirement for the AUP letter for
the sale be posted somewhere?

The agreed up procedures. Yes. I\'m not sure where we are in the
formalization process. But obviously yes, they will be provided.

In fact, the reason we hesitate is the experts on the auditing world are
not in the room. I know there were a couple of meetings and calls on
setting up those standards.

Who will determine the independent procedures to be included in
independent auditors report -the department or the entity?

The same answer. We\'ll work on what\'s provided for the agreed upon
procedures and any other audit information, working with our folks and
other places to find out the best way to do it, expedite the
requirements.

If the guarantee is being terminated by the department relate today
transfer ability on the guarantee required? Do I need to read that
again?

Read it again please.

If the guarantee is being terminated upon purchase by the department,
why are representations and warrantees relating to transfer ability of
the guarantee required?

I think we want to make sure there\'s nothing \-- take a shot here \--
part of it has to make sure that there\'s nothing in the agreement
between the holder and the guarantee agency that say you can\'t get us
out of here. You can\'t release us from our guarantee. It\'s probably
language that makes a lot more sense when there\'s a possibility of a
loan being transferred from one guarantee agency to another. We\'ll take
a look at it to see fit\'s overkill or had a different meaning and
clarify that. Not sure we thought it through that well.

One of the eligibility criteria, clause 1606 the eligible loan requires
all of borrowers other Stafford loans to be transferred. How would this
work? Be originated before the cut off period to be purchased?

It\'s supposed to mean, just the loans \-- the eligible loans for 8-9
the sub and unsub together. If we overstated or under simplified it \--
what number did they say it was?

16\.

16\. Okay. So if we overstated or need clarify, we will do that.
Obviously only the loans that are eligible.

The actual text talks about if the loan that you pick up is a subsidized
Stafford then that loan is being sold, loans that are eligible loans.
Well by saying that eligible loans and held by the eligible lender one
of the loans is that it\'s a loan for the \'08-\'09 year. ...
Indiscernible ... It\'s an eligible loan that meets the requirements.

Do large public companies really need to have a corporate Board of
Directors resolution to sell loans to the Department of Education.
Wouldn\'t an SVP or higher be sufficient?

Can you say that again?

Do large public companies really need to have a corporate Board of
Directors resolution to sell loans to the department? Wouldn\'t an SVP
or higher be sufficient?

It\'s an interesting question. This is a pretty serious deal here. We
are breaking \-- breaking is the wrong word. We are doing something that
has not been done for programs that have not been around. For us to
purchase loans. It\'s a whole new thing here. It\'s only once. We\'re
not sure that it\'s inappropriate that the highest level of the
organization. It\'s a good question. If we look at it, if it\'s
appropriate to change it, we will. Not sure. This is a big deal for a
company to decide to sell loans to us.

And we are trying to use forms and procedures that should come as no
surprise in the financing scheme and we relied on experienced
participants to model this on what was common place. So we didn\'t
expect that anything that we\'re asking for would be uncommon. Whether
it was necessarily be something expected in every transaction or not is
another matter. We continually asked if this is common place and we
understand that it was.

I think we also in pursuing the line that I\'ve taken here. One of the
things we\'re doing is trying to ensure the capital markets. It strikes
me at least as a commitment of the board level of an entity that has
more standing that a vice president\'s statement which could be changed
by that board very quickly. It has lots of value and don\'t think it\'s
too onerous.

Okay. If a lender sells a loan to Ed via the hard put option, does it
satisfy any requirement in the master agreement to deliver to Ed or
it\'s designee promissory notes or MPNs for the sold loans by following
these existing commercial practices?

Well, that\'s what we\'re building. We understand particularly with
electronic notes and master promissory notes it\'s not as simple as
shipping a piece of paper to Washington. We have agreements and
operationally as to what evidence of enforceability of the loan will be
acceptable. We make a distinction between a loan that\'s supported by a
promissory note under which that is the only loan versus a promissory
note under which there are other notes electronics and so on. With that
said, we model that after what we believe to be with a lot of input from
the community and we will continue to get that input at the Webinars,
the one on this, to see if we\'ve got it right, but we believe it should
not be a process that\'s very much different than what happens in the
FFEL community, not just a FFEL lender. It\'s a United States
Government. ... Indiscernible ... It may be that we require more rigor.

Do the proceeds real requirements in recognition of lenders replace the
requirements under the assignment of claims act or are there
requirements that will need to be satisfied?

Sounds like we have a lawyer on the phone.

I don\'t think this falls within the assignment of claims act but I
haven\'t looked at that in a year or two. So let us look further into
that. What we are not doing is providing financing. Jeff said the only
place we provide \-- the government provides financing is lender of last
resort of federal advances. This is not what we\'re talking about here.
Generally what the assignment of claims is intended to promote, but
let\'s look into that and get an answer for you.

Will the agreements be modified to adjust the standard of any way
relating to or arising out of that agreement. That would make the
sponsor liable.

Again. There\'s no sponsor here. We assume they mean the seller. hold
on. Read it again please?

Okay. ... Indiscernible ... be modified to adjust the standard of any
way relating to or arising out of this agreement. That language would
make the sponsor liable if there was no fault or activity on the
response for.

I think that is an accurate quote from the master participation
agreement and that\'s what we intend on the master participation
agreement. The indemnification provision in the master sales agreement,
which is what this Webinar is about, is predicated on losses, claims
damages arising from Willful misfeasance bad Faith obligation which is a
difference standard. I don\'t see that language in the master loan sales
agreement.

Next one.

The notice of intent to sell that is delivered 45 days prior to the
configuration of the sale have to be in specific form or format or a
letter on seller letterhead suffice?

The notice of \-- we actually have and we will hopefully include in the
Webinar the draft of the notification. It will be format such that the
seller is identified clearly, name, lender ID, address, contact person,
email, phone number and more specifically, a schedule of the amounts by
loan type and number of loans. So 142 unsub loaned, X number of
staffords, this number of amounts.

So that kind of detail is what will be provided and so we\'ve included
that in a draft document of the notification. It will be very much a
specific format. \>

One of the reasons is so that we can basically schedule cash from our
friends at treasury. They didn\'t drop off a whole bucket load of cash
for us to distribute. We need this notice so they can schedule by which
treasury gets funds. When we get the schedule of loans sold to us we can
reconcile that we are funding in those amounts or less for reasons like
I mentioned of a cancellation or pay down or adjustment.

If one loan is put, do all loans made from the same Social Security
number during the year also need to be put? We understand Stafford sub
and unsub are joined at the hip.

Exactly right. Sub and unsub you sell one you have to sell both of them.
But plus doesn\'t marry up with the sub and unsub in either direction.
Just to be clear, the most obvious case of all three loans of course
would be a grad student that got a sub, unsub and a plus. A student who
got sub and unsub and their parent got a plus. That\'s a different
Social Security number and borrower. Sub And unsubsidized Stafford. They
come together or not at all.

From a guarantee agency standpoint. If the guarantee ends on a data fail
to the department, how is that treated for purposes of the guarantee
agency?

The guarantee agency would have when the loan was made would have
received, for example, the default fee that is obligated now under the
law and would keep that, nothing would change. The guarantee agency
would have received the maintenance fee ... Indiscernible .... Up until
the point at which the guarantee agency has no responsibility for the
loan anymore. The extent that any fees are time related, much like a 799
about subsidies and sap it ends on that date. That loan would be removed
from the total portfolio in terms of how much dollars the guarantee
agency had in its portfolio. They don\'t have a loan anymore. Not only
literally have the loan but they don\'t have a guarantee responsibility.
But everything up until that point would be business as usual.

On an MPN if the loan ... Indiscernible ... and owned by a trust and
does not qualify for this program if the subsequent loan is disbursed on
the same MPN and put under this program.

Same thing as any other loan sale, a copy of the MPN would serve as the
new out year original and that would be assigned and transferred as any
other original.

The rule \-- there\'s a number of situations where there\'s more than
one loan under master note and they\'re not all going be put to us. Not
eligible to be put because there\'s a trust or lean that can\'t be
released. It\'s a prior year loan prior to 2008- 2009. It failed some
other requirements. But it might simply be that the lender doesn\'t want
to sell the loan. In any of those circumstances if the master promissory
note covers more than the loan sold to us, there are the copy business
and the process that\'s normally used and that we use and we have loans
assigned to us in different processes because of defaults.

On slide 19, you said any holder of a student loan could exercise the
put. How does that square with the requirement of filing the intent to
participate?

Well any holder who wants to sell the loans should file the notice to
participate as well as the originating lender. If subsequent holder \--
well that\'s all it could be, that could be a secondary market, that
would be a FFEL lender. Any of them could have been a beneficial holder.
Whatever it is, the entity that\'s going to sell us the loan other than
the defaulted financier, power of attorney, everybody else has to file
the notice of intent to participate and some other documents.

When a loan is put and guarantee ends what type of notification will
need to be made to a guarantor and borrower. Who will make that
notification?

As to the borrower and notification speak to the conditions under which
a borrower should be notified language. In there about the selling
lender and receiving lender can work together and we will work out that
and provide that kind of information as we move forward as to what we
expect responsibility of the seller be and what our responsibilities
will be. It may turn out that only one of us need to take an action.
We\'ll get to that. Who had a loan and the guarantee was moving. In this
case it\'s not moving, it\'s moving out would have responsibility to
notify the guaranteed agency. A responsibility about any change in the
loan. Loan amount, value, status, accrued interest, everything.

If we have an agreement to sell with a secondary market, it is my
understanding that from them \-- For them to be able to sell, we also
need to be able to execute the NOI. If they are unable to buy our loans
would we have to execute the actual loan purchase agreement?

No. Let\'s repeat this again. The filing of a notice of intent to
participate does not obligate the filer to do anything. It sets their
option and subsequent holder options to participate in either of these
two perhaps. Similarly, the execution of the agreement, either of the
agreements, by the adoption exhibit A for each of those, while that is
clearly the next step that would be required, it does not obligate
anybody to do it. As you trade agreements it\'s written in the sense
that by entering into it, you\'re not agreeing to sell us loans,
committing to sell us loans, we\'re making the stronger commitment, if
you make the offer to us and meet the requirements we\'ll buy them. You
entered this agreement, send us a bunch of loans Or don\'t do it if you
don\'t want to.

If the party asking the question is an originating lender and if their
question is if they will be stuck with the loans that take out those
loans backs out of the deal and again, on that both parties \-- each
party that wishes to have it\'s loan end up with the department has to
file the notice to participate. Posed that question would have to have a
master loan sales agreement in affect with the department if it wanted
to put the loan to the department if it\'s secondary market was unable
to fulfill it\'s purchase commitment. It would need to have both filed a
notice to participate and it\'s own master loan sales agreement, which
again does not commit it to sell anything but both are prerequisites to
sell anything. It would need a notice and agreement.

Yeah. As would it\'s take out lender.

We can\'t encourage enough that originating lender even if this is the
furthest thing from their mind should file a notice of intent because
things change quickly. A secondary market, I believe, should do
everything it can for the parties from whom it expects to purchase loans
to make sure that that party had filed a notice of intent even if the
secondary market thinking they will not want to play in our games you
never know what will happen between now and next summer. It\'s a piece
of paper, a couple of signatures and that\'s taken care of.

Will the department require the original paper promissory note as part
of the sale or will an image or copy suffice.

A true and accurate copy will suffice.

Regarding servicing. What steps are the department taking to potential
impact to students that will occur when the original lender servicer is
putting their loan to the department.

We are very aware of course, that changing servicers is a process that
could have the potential to confuse borrowers. Worse, get them into some
financial difficulty. We will do everything we can to avoid that both in
terms of the cut over dates, the communications, how we tell the
borrowers or the borrower is informed this change has occurred and their
loan is now owned by X and that servicing is to be done in this way and
so on. We\'re using processes that are fairly typical and similar to
what occurs in the FFEL industry. We want to ensure everyone that we\'re
not unaware or uninterested in making sure we minimize disruption to the
borrowers as much as possible. The good news these loans are not in
repayment status. Like I mailed a check to one address the first of
October and another one is supposed to go the first of November. We have
provisions in here about payments and so on. These loans are entirely
going to be in school status for good part of the year. That said, we
are working very hard to communicate as best as anyone can think of and
willing to take any suggestions from anyone how we should do this to the
borrowers both students and parents and to the school. We\'ll point out
this to remind people that if a borrower may then in the following year,
in the 09-10 year be able to take out a loan with the original lender
the promissory note is still valid even though we now hold the loan. In
that case and assuming we\'re not in this situation after 09-10, that
borrower will have in this example two loans with two different lenders
and two different servicers. That\'s not unheard of in FFEL and
depending on how much of necessary \"puts\" are done. Both servicers and
both owners of the loans keep the student informed that these are two
separate obligations and remind them of consolidation opportunities.

A reporting question that came up earlier about who was going to notify
the guarantee of the assignment. There is a provision in the closing
conditions that provides that the seller provide notice to the borrower
notice, the seller agrees that the department can use the bill of sale
with the loan schedule as official notice to the guarantor of the
assignment by the seller and ELT if applicable to the department. So
provision is made there that we\'re being in effect deputized or we\'re
getting consent from the seller for us to take care of that notice
obligation to the guarantor on behalf of the seller.

That takes one burden away.

What is the Earliest date Ed anticipates a loan to be put?

It can\'t be put until it\'s fully disbursed. Since it\'s an 08-09 loan
because the notice of intent can go back to May first, a summer loan,
that\'s fully disbursed or some other rare thing. So that\'s a
possibility. But more generally, the 08-09 loans, they\'re not going to
be fully disbursed until much later in the fall. That said, we are
working so that we are in place to purchase loans. That might already be
or fully disbursed in the next few weeks. I don\'t know if we set a time
yet. We will announce for sure when we\'re able to begin to purchase
loans and actually the first thing that would happen is we\'ll announce
we\'re available to accept 45 day notice from holders. So again, we
don\'t expect a lot of volume early just because of the requirement that
they\'ll be fully disbursed but we\'ll be prepared very shortly to
announce that the documents can be filed and turn on the 45 day clock
and where that ends up some time in September or October conceivably.

You have indicated that the notice of sale can include loans that are
not yet but are scheduled to be fully disbursed by the purchase date.
What if an anticipated disbursement gets postponed so it's no longer
disbursed by the 45th day. Do we extract that loan from the sale?

We won\'t buy a loan that\'s not fully disbursed so it\'ll have to be
removed. We would hope that would not happen but we know that things
happen out in the world with schools and students. That would be another
example of why while the amount that was submitted in the 45 day notice,
the actual sale will be less because that loan would have been pulled
out. When it\'s fully disbursed if the lender wants to sell it, it shows
up on another 45 day notice and we try again.

You stated that an organization filing their NOI should get a
confirmation of that filing within two business days. If we already
filed our NOI some time ago and heard nothing what should our next steps
be.

Call that number tomorrow morning. Because this is exactly what we\'re a
little bit concerned about. I want to make sure that when the notice of
intent was filed to us, it was sent through email and we returned to
that email address, you want to make sure that that person or who ever
that accessed that address didn\'t receive anything. Technology could
have hiccupped along the way including the fact the original request
could have gone into our trash bucket or our response could have gone
into yours. I hope you don\'t have the United States Government where
your trash goes. After the person checks it out a little bit, if you\'re
pretty confident you should call that number that we put on the screen.
I will repeat it again as soon as I find it. 202-377-4401.

.

Are delinquent loans eligible loans?

Yes. But defaulted loans are not.

Again, we don\'t expect there to be too many delinquent loans here
because to be delinquent you have to have reentered payment and
repayment in most cases you have to be getting Grace. You have to drop
out of school so there could be a borrower who doesn't have a grace
because they are in in-school deferment then leave school and somehow
gets delinquent a month or two or three. Could happen on a plus loan.
Delinquent loans can be but not defaulted loans.

What happens to the default fee paid by the guarantor upon sale?

Well, the default fee wasn\'t paid by the guarantor it was paid to
borrower or someone on her behalf and it\'s just there. It does not get
returned. I think the question is does it have to be returned? No.

We played around with this a little. The loans never going to default on
your watch, it didn\'t make any sense to us. It stays.

As a bridge lender after the bank had been repaid on advances for
participation from the Department of Education does the bank have any
liabilities to the notes? Are we required to make sure that the notes
are refinanced or put to Ed before August 2009 deadline?

Why don\'t you read it once again.

As a bridge lender after the bank has been repaid on advances from
participation from the department, does the bank have any potential
liabilities to the note?

The only thing I can think of is if the bank would have made reps and
warrantees about the loans in order to place them in the participation
facility. If, and by virtual of making those reps and warrantees
purchased participation in that. If the rep or warrantee were not shown
to have been correct there might be exposure there and the bank would be
responsible \-- on the rep or warrantee that it issued, but that looks
to be \-- of course if there were a claim. If the department were faced
with a claim by an individual or a borrower or some other entity arising
out of that \-- call it the bank sponsor because that\'s the role it has
in the participation. If there was a claim against the department
because of something that the sponsor was bound to indemnify it for, yes
that would be exposure but other than those two, I don\'t know what
obligation the financed bank/sponsor would have with regard to the loans
after they\'re redeemed from the participation.

Not clear to me what the question was. That\'s exactly right what Fred
said. When switched to the banks the funding bank not the sponsor,
they\'d provide a bridge financing, Lender sponsor paid from us. That\'s
a contract we didn\'t have any part of.

We\'re taking them, it\'s okay, these are questions related to the
participation program, not the master loan sales program and want to
make sure that we get through the questions having to do with this
program and not as much on the participation one. If we can we\'re more
than happy to try to answer them.

If the guarantee agency pays the default fee on behalf of the student
and never charges the default fee, what happens to the default fee if
that loan is sold to Ed.

As I said earlier it doesn\'t matter who paid \-- this is the example
the guarantee agency is taking rather than charging the borrower. It
doesn\'t matter it\'s over and done with. That preceded the sale. It has
nothing to do with this. ... Indiscernible ... If the question is now we
don\'t have this loan anymore can we take it out of the federal fund and
pay ourselves back and use it for something else? No. Under the statute
the 1% fee goes into the federal fund for those purchases that federal
fund monies can be used for. How it got there and what happened to the
loan is no reason paid in full or moved to another guarantor.

When a loan is put to Ed, what should the lender\'s report to guarantors
and how should that be reported and on forms 2000.

There will be a transfer of ownership. We would have \-- let people know
we are going to basically assign ourselves an LID, lender ID so just
like if a loan was sold from one lender to another reporting to
guarantee agencies would go from one lenders LID to another lenders LID,
it would go to the new owners LID, the department and we\'ll have a
special lender ID for us. Reported the same way and show in everybody\'s
record that transferred on this date or sold or whatever the proper word
is on this date. The new holder is the United States Department of
Education.

Will we have to get the agreed upon procedures report for each sale or
each loan?

The agreed upon procedures would be for the first sale of loans and
thereafter but not more frequently than monthly. Take in the volume and
frequency of sales. It would be an examination of loans, would certainly
be required with the first sale and thereafter but not more frequently
than monthly as we will spell out in some audit guidance that we\'ll be
articulating.

I\'m not sure we made it clear just so everyone understanding we did
talk about no more frequently than weekly. Everybody understands that we
expect that folks are going to sell us loans intermittently throughout
the year. We don\'t require that and you might want to see what the
markets look like in our next deadlines. I want to sell these loans, I
only have one shot at this. You have as many shots once a week when we
bring this thing up shortly to the deadlines that occur next August.

When will deconversion file lay out and data dictionary be available.
How will Ed consult with the lenders with developing these standards?

We are consulting with them as we speak almost. We have had
conversations, conference calls and continue with servicers and
representatives of lenders and guarantee agencies and so on. Do we have
an idea folks when \-- I\'m asking our colleagues when we\'ll have some
file lay outs.

We have the file lay outs we\'re taking them to a community review this
week and then have a subsequent Webinar where we\'ll go over the file
lay outs.

I don\'t know if you heard Sue on that. We have drafted with input from
the community. We're going to run them by community group that we\'ve
established, make sure we have it right. Find out if there are any
questions and at the Webinar, we have scheduled for the 1st of August.
That will be about file lay outs and process flows for the participation
program. We will schedule one probably the next week about this
placement \-- sale program the put program and that\'s where we\'ll
share broadly the style lay out this question was about.

In the unlikely event and the guarantee was terminated especially if the
reason was not guarantee related?

You know the rescission as I mentioned language you have to have in
there because you never know what life is going to bring. Because of
that it\'s important that we do address that issue. We know \-- no one
has any expectation but life is strange that we would have to rescind
\-- we may find ourselves rejecting a sale before we pay for it and
therefore none of these things will have happened. The guarantee will
not have been lost. The rescission a day we made before \-- not sure how
we do it. We\'ll have to think that one through. It\'s a good question
because the question anticipates the event so we need to anticipate our
reaction to that.

Can this requirement be conditioned by specifying that indemnification
is extent permitted by law?

Not if they want to sign this agreement.

We don\'t want to sound like we\'re selfish but we\'re going to protect
the federal taxpayer and if that\'s a danger to the state taxpayer, this
is not a required program. It\'s an optional program.

Once a lender gives the department 45 day advance notice they need to
put the loans to the department \-- let me start over. Once a lender
gives the department 45 day advance notice need to put the loans to the
department, what is the maximum amount of time that they will make the
purchase or pay the lender?

Well once that date approaches and we get the file of the loans in the
final numbers, we\'ll talk about this at the Webinar. We appreciate how
important it is for us as the financing to keep this to a minimum number
of days. Just to be clear, we do have an obligation to assure that the
information we receive including the documentation, the notes and so on,
we\'re not going to buy a loan that we are not comfortable had met all
the requirements. There\'s going to be a review period. As well was
funding. We will expedite it as much as we can. It\'s likely that the
first ones might take a little more time than subsequent ones. Both
because bringing up a new program but also first one and subsequent ones
for any particular seller. You put a question mark in a field that was
supposed to be blank. We will have hopefully a much better answer for
you at the Webinar. We appreciate how important it is and maybe more
important it is to keep those days to a minimum. Equally as important
that you know the date that funding is going to be provided so that you
can whatever the words are liquidate the short term funding or whatever.

Release those leans and obligations because that probably has to occur
simultaneously.

At least at the financing part know that this is underway because they
have to execute the security interest release. It is stated that any
documents may be amended ... Indiscernible ... of all parties does that
mean the opinions of counsel and attorney feels the need to do so with
the approval of the department?

That\'s what it means and again you always put this language in an
agreement because you can\'t be sure you have it exactly right
particularly as we put it together in short order. I will tell you that
it will be a very, very, very rare circumstance and it will be even
rarer that it applies to just one party. It may be that the community
\-- party points out and we say oh yeah, that\'s right and we\'ll ask
everyone to amend it. That\'s very unlikely. But because one party would
like us to word something differently or have a different kind of
provision, it\'s very unlikely. But the language is in there because
this is what you do in contracts to make sure you don\'t lock yourselves
in forever.

Both of those are assertions about facts or conditions at the time the
agreement is entered into. If they need to be amended because they
become inaccurate or discovered to have been inaccurate, I don\'t think
that\'s a modification or waiver of the agreement. I think that\'s a
correction or a clarification of a party\'s status or organizational
capability and would need to be done whether anyone agreed to it. Just
if the original assertions in the seller\'s certificate or the attorney
opinion of counsel became inaccurate.

Is if irrevocable power of attorney included in the MLSA?

Yes.

There\'s not a form I believe.

Right.

The seller here by grants \-- this is the text of the agreement. ...
Indiscernible ... So that would go with by visit you of signing the
adoption agreement the seller will have given the department the power
of attorney sales agreement.

Regarding the commitment to participate in the FFEL representation, will
there be any written classification or amendment to the master loan
agreement does not extend beyond the 2008- 2009 academic year?

Probably not. We\'re looking at ways to talk about intent and so on but
we have a statutory construction that is probably not going to allow us
to do what the question is being asked.

To penless signature on the MPN quality for eligible loans considering
the requirement that the signature was collected in accordance with
applicable law?

We mentioned this, talked about the electronic standards. Loans that are
evidenced by promissory notes are not ineligible for other of our
programs but the rules about the App. likability of the standards do
apply.

Then let issued or reissue for a different amount is the original lender
able to reissue the funds after the sale?

No because we don\'t have any authority to make loans or to make
disbursements. What would happen here understand the \-- absolutely and
that would come to the new holder, our servicer so the school would
return the money to our servicer and that\'s why we have the provision
and the agreement if the money is returned to the original lender they
have to send it to us. If it needs to be reissued, they would have to be
a new loan and new certification. We know that\'s troubling. I think a
quick thing on that, we\'re building this because we\'re in some kind of
a crisis or perception of such so there\'s some pain that everyone is
going to have to feel here. If the lender feels they need to sell us the
loans as soon as they fully are disbursed there is this risk. The pain
would have to be that the school and the borrower may have to go through
paper work. They\'ll end up with the same kind of money maybe some extra
paper work. That loan could be sold us to or not or the borrower could
go to another lender. I\'m not making a recommendation unless there\'s a
strong financing reason, a lender might want to wait a bit of time after
it makes the second disbursement to see how things shake out. My
experience of course is the shake out occurs within a couple of weeks
when you find a student was not there. You find out the student was
there and you have to reissue that and that will have to be done
separately.

Given the time why don\'t we take just a couple more questions.

Okay. In section 6, capital B small Roman numeral 3 there is a
representation with the seller being authorized to reacquire the loans
and goes onto reference the reacquisition of the seller.

We\'re checking that site.

6B \-- small Roman numeral three, small little Is.

I believe that\'s referring to \-- the only time a seller would
reacquire a loan is if the sale is rescinded. There\'s no provision in
the agreement for it. It\'s saying that the seller \-- the appropriate
party is representing that it has authority both to sell and to
reacquire and the instance of reacquisition would be if there\'s a
rescission, which is dealt within section 7.

We wouldn\'t want to be in the situation where the sale is made and we
say to the lender take it back and I have no authority to do that. Well
you signed an agreement that said you do.

This should be a non-existent or very, very rare situation. One more
Angela, please.

How are the funds received for a sale?

After we receive documentation, the file \-- schedule of the loans with
the amounts and the detail and the supporting documents and finish our
review we go through some procedures here at the department to set up
the disbursement through our friends at the department of treasury. As
you expect they do checks here and there to make sure it\'s all recorded
properly in the books and then they will issue the payment to the party
we direct. That part of that process we\'ll be asking you to what bank
account do you want to be sent. The ACH automatic clearinghouse process.
To the account designated.

I think we have to wrap it up now. On our clock, it\'s 4:00. We
appreciate Angela running this and asking those questions. Thanks to
Fred and all of you who hung on for these couple of hours. We know that
there are a lot more questions. We\'re going to try to continue to
answer them through these Webinars and again look at the website. We are
running as fast as we can. This is not a program we can take a lot of
time in getting up and running. The question we had the other day how
soon we\'d have money flowing. School is already started of course but
in terms of the bulk of students beginning their classes in mid to late
August. They expect funds and we\'re going to make sure that happens. We
appreciate everyone's patience and understanding when pulling this
together. We invite you join us at the next Webinar. This is more
operational so you may want to have different folks register or come in
on your login, people who are more into the way this is going to be
operationallized in terms of data flows and file lay outs and cash flows
and so on. Thank you very much Angela, thank you again.

This concludes our Webinar for today.

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