transcript

Event ID: 1085778

Event Started: 8/1/2008 1:53:48 PM ET

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Please stand by. The conference will begin shortly. Please stand by. The
session

will begin in about three minutes. Please stand by.The conference will
begin in

about two minutes. Please stand by.

Welcome and thank you for standing by. If you have any objectives to
this

meeting being recorded you may disconnect at this time. I will turn the
meeting

over to Mark Gerhard.

Thanks and welcome. I will be your moderator. A couple of items, like to
point

out a couple features, primarily that which is listed as in his
questions. If

you look at the top left corner of your screen you will see attendee and
the

Q&A. That is where you would ask your question. We might not get to use
and we

might condense questions. With that I will turn the meeting over to Jeff
baker.

Thank you for joining us for yet another of our webinars. This one is
moving

into some operational issues as we approached full implementation of
these

programs will give you sent it to the information and \[ indiscernible
\] with the

key to the rest of the presentation explaining the forms and procedures
that

will be used as we implement the participation part. Many of these
slides you

have seen before, and I just want to do them so that each of these is a
complete

set. There is a logistics if you have already logged in. If you
registered as

you did for their earlier webinars you automatically register for any
subsequent

ones. If you have not registered yet been go to our web site and it will
be

instructions about how to register for this. A walk to remind everyone
of our

objectives. It\'s to be at a high level. A professional rather than the
policy

and legal implications we have done in previous sessions. The target
audience is

a little bit different people who are actually going to have to make the

decisions and to develop the procedures and to the implementation. In
two

directions, we will have a session next week where we get into more
details

about the reporting and auditing and winding down. This is beginning and
how all

\-- the documents that must be submitted and files that must be
submitted and how

funding will work. Also in terms of limitations we are not going to go
back and

talk about the big policy issues here or the legal issues related to
these

programs. In that regard I make a request. If you submit questions,
please try

to limit them to the materials that this session is starting, and not
questions

from the others. We will try to get to all the questions, but we end up
not be

able to talk to everyone. As I mentioned last Friday on the eighth of
August

will be part two of this participation operation webinar. Legal
authority, won\'t

go through them. The objectives of the programs, I did what to add that
the

legal authorities do not allow the department to make advances to
lenders or

secondary markets nor can be loaned money to those parties. Our stance
toward

the petitions are to purchase loans were to purchase participation
interest

which is the part we will talk about today. There are two programs. The
loan

purchase commitment program. There is the loan participation program. We
were up

more details on the upper easily throw the rest of the summer. The
implications

as well we will talk about that. We will purchase about a dozen oil
interests

made through September 09. This will provide liquidity for the clone
market. The

best liquidity we could provide a the end of the loans will be redeemed.
It

looked like a little bit more about that and a lot more in subsequent of
ours.

We wanted to have it little bit of an average of about custodians. Those
of you

on the earlier sessions or paid attention to understand that the
participation

per right today\'s sponsor which includes a letter or holder who enters
into an

agreement with a custodian of the ridge the lender will \-- the sponsor
will

place loans with the custodian. The custodian of the issues a
certificate, and

that the certificates sold to the department\'s for the amount of those
lungs. We

provide those funds to the custodian and then provides an to the sponsor
and

lender and that is how we provide liquidity. But the custodian must be
approved

by EDS and the master participation agreement. There are conditions of

eligibility for a custodian. Much like an information that will be
talked about

today and would be posted this morning they will be an approval process
where

custodians\' will put together a packet of information including
information on

this slide and submit them and provide instructions. We will review them
and

perhaps follow up. At some point we will lay a dissemination as to
whether we

conservatives \-- determined the custodian eligible. Once we have one or
more per

custodians we will post a list of approved custodians to the website.
Sponsors

who wish to enter into an agreement to participate in to this program
can either

choose one of those custodians or after contacting another entity that
indicates

that might want to be a custodian and could include in their submission
the

name. If not we will go back to the sponsor who was recommended and
suggests

that fines and what else. This is kind of late breaking news. We wanted
to

include this. Now I\'ll turn it over to Jay.

Good afternoon. What I will do is for the agenda most of the work or the

description or discussing today will be about the process descriptions.
I will

explain how the process overview fits into what the process below
example is to

talk through dates and see how it all fits together briefly highlight
some

winding down that will further discuss later and then take questions.
Process

overview, is a silly there are new processes that I want to lay out and
some

existing processes. The initial approval package, we just this warning
posted

announcement number 10 that describes how to submit the national bureau
packets.

Of go into more detail as we go further into the slides. Jeff just
discussed the

custodian approval that is also required with approval of the sponsors

participation agreement. Both of those will be required for approval
before

participation of funding requests. Then I am also going to discuss pre
approval

steps, these are things we can immediately start on upon receiving your
approval

packages. But we can work on, kind of, at the same time concurrently as
our

approval process to try to make things happen a bit faster. Then he will
talk

about funding requests. I would like to spend a dozen more time. This is
where I

would get into more detail. There is another place where I just finished

submitting electronic submission number 12 to the Web site. It has a
great bit

of detail and is the one place or we will look for a file to come in and
be

processed as opposed to manual procedures and e-mails. Then for feature
webinars

we have the last two topics which are at the monthly reporting and
process and

then the audit. We will talk about the details and process these.
Finally they

existing process these. What do it in God\'s the impact on 799 billing.
799

billing will be best explained through the actual process examples. We
have let

them in there. That is the best way for me to explain what type of
impact this

new program will have on 799 Billing. And Form 2000, to be honest we see
no

significant change. I will explain that as well in the process examples.
As I

just said there is electronic announcement number 10 that details the
initial

approval package. It provides instructions and explanations of the forms
that

need to be completed. Okay. This matrix is the \-- is it is the matrix
that

details all forms associated with the initial approval package and a
subsequent

form. Let me walk through this. The first line is an office of intent to

participate. These are things that you should have already been looking
at,

hopefully all races and then. If not it is required to have a notice of
intent

to participate before we can accept the adoption agreement. That details
are

self-explanatory and hopefully we have had enough around that. The next
package

is the Cecily the next three lines which is exhibit A, E, and F. About
go into a

lot of detail. That was covered in previous sessions and can be
referenced. For

the purpose of our discussions these will be submitted once. Cents \--
there are

specific instructions about where to send it, how to send its. Some of
the

process flow is describe on the right there. The key is when we actually
receive

it we will fireback and acknowledgements received e-mail that will have
\--

initiate the pre approval steps which I will talk about in a minute.
Then

finally the last line on this pre approval package is an initial monthly
rolling

forecast. It is not required that it come in with the approval package,
but it\'s

required to have that monthly rolling forecast before our first funding
request.

This is where we are basically going to ask some details, some
aggregate\'s

summaries about things, how you expect to actually take advantage of the

programs. We need to be able to forecast cash flows. The details around
that

monthly rolling forecast will be in future webinars and featured
electronic

announcements. So we have gone through the first step of the initial
approval

package. It has come in and we will send a couple things. First you get
an

acknowledgement that we received it. And the acknowledgement we initiate
steps.

First we provide a custodian. That is a new lead that represents their

relationship between the custodian and sponsor for a specific
participation

agreement. We will also provide some instructions around of the student
aid

Internet gateway, the mechanism by which you will send us the loans is
will

file. A lot of folks out there, some services already have an
understanding of

the student aid gateway, but will send that anyway. The bank account
information

will be started through a park flow. So when we establish your lead,
your new

you need with, it will be \-- the bank account information will be
requested

through the process. Then we will also establish a funding requests day
of the

week. I will explain this more when we get into our next slide about
funding

requests. In order does without operations we are providing a day of the
week

when each custodian for each file would be sent to us. Then we are right
to talk

about file transmission testing. We have our own process these to test
our

process in general, but once we have the established we will offer the

opportunity for you to send as a transmission file that test that you
are

producing the file accurate the. Then finally we will have a monthly
rolling

forecast. This is what we regard to make sure has to occur before we can
accept

over First funding requests. And to reiterate I will say this over and
over. It

is to the of the specifics are out there on the announcement number 10
for the

initial print package. The next slide is about the funding request
matrix. Here

we are backing for essentially one package. Let me explain. The first
line item,

participation certificates Class A and B. Class A is A test Certificate
you

provide to us. Providing the us to represent our interests. Class B is
the

participation certificates that exists that is the agreement between the
sponsor

and the custodian. We would look for a PDF version of both of them.
However,

Class A, we look for a pen and ink signature to follow that we would
then keep

track of. This would have to happen once \-- only once at the beginning
of the

funding \-- the first funding request. But it has to happen before we
can

actually execute your First funding request. Then the next bundle, the
bundle of

information is a participation Purchase request. The loan scandal and
custodial

certificates certification and the security police certificate. He did
no more

than weekly on the day that you are assigned we would look for you to be
sending

us APT of formats.The participation Purchase request which provides
essentially

a request for the funding. We will send an acknowledgement with the
reference

number. Then the loan schedule is actually going to be a flat file. The
loan

scandal, by the actual submission it is your custodial certification. It
will

come and through our mailbox. We will run the ball at its and then you
will

start receiving some automated workflow Tessie where things are. I will
follow

up in a couple slides and explain and did little more detail about the
above

schedule. I will also follow up a the bet about the bond scandal itself
and that

it. We will be sharing these edits with you early next week so that you
can

prepare the files using these edits as well. Finally if any of the loans
that

you are providing with the loans schedule have \-- requires security
release

schedule, we will look for that as well. That will be \[ indiscernible
\]. That is

our funding request matrix. Moving forward to reiterate the specifics
around all

of this is out on electronic announcement number 12 on our website.
Beakers you

to go out there and review this. I am pouring to walk through the bonds
fizzled

out in a couple slides. But what I think we will do is after I get
through this

I guess it will get a number of questions at the end. At our next
session when

we talk about things like the monthly report we build more than likely
follow up

on additional details on additional clarification around the launch
schedule and

around any other restrictions we may have put out. I don\'t want to give
anyone

the impression that these two sides are all your point to get. He will
have the

announcement and people certainly have an opportunity to review all
questions

that come and and answer any outstanding issues at our next session.
With that

said we will have a header and loan level detail. The header will be
what makes

it a unique record which is the custodian IC, a servicer ID, a badge and
ID. So

when a custodian will still have the servicer reporting on their behalf.
They

made use to do that or the bases to have a master servicer actually
aggravate

them. That is up to the community. He stuck a submission is sent and we
are

looking for a unique patch ID. This is how we uniquely identify each and
every

suggestion. Within the submissions we are going to look for certain data

elements, things like the PC funding request and the cash collections.
These are

total amounts that are being asked for or requested for funding for
their Class

A participation certificate. And cash collection, as we stated before,
all cash

will be swept back from the collection account back to the department.
This is

where those will be reported. They will be aggregated. Then each detail
will

provide disbursement requests or cash collections. I can explain that a
little

more in the next slide as well. Finally there is a limitation on the
amounts

being requested. If a fund the request comes and for anything 100
million or

larger we are actually requesting that the custodians servicer
combination break

it into multiple unique batch IDs. So for any given week if they can
study and

servicer is sending aid disbursement request that is over 100 million
deal have

to break that down into multiple batch IDs. The second slide on loan
schedule is

basically a discussion about the edits. These are summary version. We
plan on

sending out in \-- that next electronic announcement or one of the next
will be

the specific added. So we are hoping that the custodian or servicer will
be able

to run these edits prior to the Senate as the gloves good will. With
that said

there are two types of edits in general. One is a file rejection is. If
we get

of violin with an invalid custodian ID we will reject the file and
entirety. Or

if we get a file that has either the piece that has the PC funding
request, the

amount be requested unsubstantiated by the low level detail, the
disbursement

about on the loan level detail. And upon rejection we will send
notification

back and look for a brief submission either that day. If we can\'t
resubmit that

day we will have to resubmit its at the next window which is the
following week.

Finally wants the edits have gone through the file for rejection or
acceptance

that it will go through each loan transaction and run certain types of
edits,

things like, for example, is the Social Security number a valid? If not
we will

I accept that love with and the participation principal. People actually
read

its to an error and produce that and send it to you and remove it from
that we

submissions. We don\'t find it that be. You certainly can submits \-- in
fact it

can be resubmitted and we will run it through the same bed. So that was
the loan

schedule at a high level. Beyond that there is a little bit about loan

reporting. What I am going to do is keep it brief knowing that there
will be

every submission. There will be another session to discuss monthly
reporting and

cash. So what we\'d be looking for is that monthly rolling forecast, the
one

where we did the initial monthly rolling forecast before the First
funding.

Every single month on the monthly settlement date we would be looking
for an

update on that monthly rolling forecast and will provide through the
electronic

announcement a lot more detail about exactly what it looks like, a
template of

what is to be filled out, and definitions of all the fields. In
addition, to the

bleak forecast we will have a monthly settlement date report. This is
where you

report all activity on the loans or the participation, balances. Then
there will

be a the schedule that goes to support it. It is important to notice
that the

above schedule and Buckley settlement date are as of the execs and dates
and

times of that date 100 percent support the aggregate amounts. Finally on
a

monthly reporting, cash will be swapped back. Coke has will be swept
from the

collection accounts applied first to yield and then to the certificate
balance.

That was pretty much the process overview. There are the announcements
out there

to provide more detail. What I\'d like to do battle is to walk through a
process

flow example. And would be have done, we have tried to make it a battle

user-friendly. Hopefully we don\'t confuse you through the. We have
color-coded

different places throughout the process. Everything that is to read it
relates

to the initial approval process. Okay. So to work through Ed \-- and of
what the

big sure there is a bell at the bottom. All of the dates here are just
for

illustration purposes only. This isn\'t making any requirements or
promises. It

is a rough idea of how the process much work. The first step has already

happened. You will have to submit a notice of intent to, you be the
originating

lender. Hopefully that has already happened. If not it is required
before we

will process an agreement. Then we will send it falling the e-mail
confirmation

that we cut your notice of intent. Then there is a step three. For
illustrative

purposes we are saying it is Monday. The rigid the lender and to study
of is

going to submit a float initial approval package which includes the
adoption

agreement, as exhibit A, an exhibit F. These will be the pre approval
steps.

They are detailed. They are more specifically detail that the
presentations was

earlier, but they are summarized here as well to some extent. Before we
even get

your approval we are working through some pre approval activities. That
does not

mean it is approved. So the lid does not represent approval. Then August
11th we

are making an assumption that that is when the approval process may be
complete.

We are right to send out the notification. Folks will be assigned at
which they

can send that weekly funding request. That will probably occur during
the pre

approval process. To kind of follow up the next part of the example is
related

to funding requests. These are in green. Let\'s say on the second of
September

the originating lender makes a disbursement. The borrower are September
4th the

sponsor requests that the custodian cells that participation owed to the
it

department. They follow up and actually do. They do it through
submitting the

participation request. In this case if we assume they were assigned
there for a

this is the Friday that they can submit. They submitted on Friday. It
includes

loan details that are necessary on the schedule. Then on September 10th
we are

assuming \-- we make an assumption that we have been saying there are
seven days

for processing the payment, seven business days. We are working to
reduce that.

Let\'s assume we can get that out on September 10th. We send the funding
request

to Treasury. At that time we informed of the sponsor and the custodian
that the

expected funding date will be the following day. And living on to step
11,

assuming that the Treasury \-- the Treasury Department will then
actually follow

up on the request and provide funding. This is when the sponsor and
custodian

flag their record to show that legal title has been transferred as of
this date,

September 11. And on September 12th the fund could study and action
leverage the

fund back to the sponsor. And the date on this is depending on the
sponsor and

to study an agreement for. These are for it \-- illustration purposes.
Step 14 is

just a step to demonstrate that the original team under is reporting
that they

disbursed the loan. That is essentially the steps to demonstrate the
report. And

then in any subsequent client and not reporting on the Form 2000 would
report it

on their form 2000 as well. Step 15 him, there is. That is Step 15 where
there

are reporting. This might not be the actual date, but they are
demonstrating

that they are reporting and the loan was originated and held by the
lender. The

blue represents as a reminder the about the reporting. Everything at the
end of

every month, this is and as of date, September 30th. We will specify how
long

after the end of what we will look where report, but we will specify
that in the

instructions in future sessions. This is as of September 30 if we are
looking

for the monthly for roughly forecast, the settlement date and the cash
to be

reported as of that date. The missteps 17 and 18, these relates to the
799

reporting. This is the quarter ending September 30th that is reported in

October. The sponsor is going to be the lender fee, the origination fee,

interest subsidies that occurred up to and through September 11th. So
they will

be recording of the entire vendor fee, the origination fee, and the
balance is

for interest subsidy up through September 11th. Then from September 12th
through

the end of the quarter that 799 would be reported under attack a study
in the

lead of 4564 enter subsidies. The Lynn their fee and a bar or initiation
fee has

already been included, therefore the custodian is not reporting it. Then
we have

stepped 19 which is just another step toward making of. Every month we
are

looking for that. There will be able of the settlement date report for
arch

over, November, December. Step 20, now we are back to 799 reporting. In
this

case the blood that has been disbursed has held by the custodian. On the
799

Billing the custodian is reporting the entire quarter interest subsidy
and asap.

The sponsor would not be reporting this loan on the 799 Billing for the
quarter

ending December 31 in this example. Moving on which is the second
disbursement.

On January 12th we assume that there is a second and final disbursement
on the

lung. The borrower and school loans showed the lenders school as one
through

three. The disbursement is made by one NDTAC on behalf of custody and
456. Since

the custodian is the legal holder the bar and school records show the
lender as

123\. The request is sent. The custodian wilt can sell this and to the

participation agreement which happens on January 14th when they submit
the

participation request and the loan details for the \[ indiscernible \]
to actually

find. September15th we had the sponsor reporting the loan. This one, the
report

said dispersed. It is still reported as the lender. Report to NSLDS. And
the

form 2000 \-- any reporting on Form 2000 would continue as normal. Step
26, still

in the orange. We are still in second disbursement. The Department of
Education

we will have received the requests. We are assuming by a January 21st
that the

department has completed its review. It will send the funding request to
its

proper Department of treasury. The same day it will live by the sponsor
and

custodian at the expected funding date will be the next day when in fact
the

Department of Treasury actually sends of bonds via ACH. On Step 29 we
see the

flags records \-- the flag records \-- all disbursements of the loan are

transferred from the sponsor to the lid. This is where we transfer
ownership and

demonstrate that. The custodian sends funds to set a sponsor that were

distributed. The blue is monthly reporting period this is just January.
Step 32,

this is where the sponsor is showing that the loan is now held by a
custodian

456\. Having been fully dispersed it is showing ownership under the
custodian

lead. Then under step 33 we are also showing that it is police dispersed
and the

loan is now held by the custodian lead to 456. It is showing movement
from the

sponsor to the custodian. Okay. The last examples there are back to 799

reporting. Such steps 34336. If this is the reporting for March 31st.
All has

occurred under the custodian lead 456 which includes the lender and
borrower

origination fees, interest, subsidy, and ASAP. That is all to be
reported under

799\. The sponsor will not include any of it on their 799. Step 35, from
then on

step 35 and 36 are just demonstrating reporting. From here out custodian
is

reporting it and the sponsor does not. Throughout the whole time we will

continue to have monthly reporting that will occur all the way through
the

program. So that is the process flow example. Then as a note here that
we\'ll go

into a lot more detail, the winding down. There are two options for
redemption.

It is when the sponsor actually buys back the loans at redemption price
as

defined or the sponsor puts them the us for the bastard loan sale
agreement.

Either way once the loan is reported to us as redeemed it may then be
removed

from the above schedule that is reported to us. Once they reported was
that it

has been redeemed it can be removed from the scandal. And that is all of
our

presentation. I guess we should open for questions.

Mark, let\'s see if we have any questions.

Surprisingly, we have questions. Let\'s start with the first one. Let me
hop back

up to it. There is some confusion and inconsistency regarding what the

Department of Education is purchasing under the participation agreement.
Isn\'t

the Department of Educational in purchasing its participation interest
the

specific disbursements under a loan rather than a participation interest
in the

entire loan? It goes on to say, wouldn\'t any security release from a
third-party

vendor be a partial release with respect to a specific \[ indiscernible
\] and

subsequent releases would be given for each disbursement?

Not withstanding what I said earlier that we wanted to avoid legal and
policy

questions the way this is established upon the \-- \[ indiscernible \].
At that

with the consent and sell the interest and the value of the loan at the
time and

increase value later. So since title has to share transfer and under the
master

participation has to be clear title. It is not as described.

Okay. If the proposed custodian does not is to asset security under
regulation

AB they will not have an SEC regulation AB report. Will this document

requirement be waived for prospective custodians who do not issue assets
back

security under Reg AB. I think this question falls in that same realm.

It is based upon is what we put up. When we put more details about the

submission package hopefully we will cover all of the if you don\'t do
this you

do this. If we miss one of those then certainly we can be contacted. We
have

folks here who almost as we speak are looking at all of those
alternatives

because we understand that different sponsors have different
opportunities to

finance their loans both resulted from legal requirements and investment

choices. We will obviously not require something that isn\'t there. We
will have

an alternative or save a particular situation is not required.

We\'re those of you asking how we can get a copy of this presentation
there are

two ways. One is directly from this session. If you look directly above
or

approximately directly above where the little red ball is on your screen
you

will see three documents. If you click on that you can download this

presentation directly from there just by selecting the presentation you
want. By

today\'s date and then select the prior presentations which are also
there for

you\'re downloading pleasure. With that said you can also download it
from

www.federalstudentaid.ed.gov/ffe lp. Okay. And my next question. Hang
on.

Someone is asking us to restate the information you provided, you being
Jeff,

provided in the beginning of your discussion regarding custodian.

Well, let me summarize. And let ahead at the the comeback. As staged by
the

initial submission package which includes exhibits the, and a. But a is
the

innocent will read and understand that lesser participation Agreement
and the

list and it does about some form. It is their requests for but the
burden to

execute the provisions of the lesser participation agreement. That form
as a

place for the lender who will become a sponsor was this program is
established

for our main title and signature. Name, title, and signature Co the
sponsor

participates their relationship as a beneficial holder. The sponsor
you\'re

putting together would have either blood that are list was we have one,
approved

custodian fund, we will provide contact information. We will work with
that

decision to see if he is willing to be the custodian for the sponsor.
They will

have to work out their of \[ indiscernible \] up here with these and
process

flows. We quite appropriately are not getting to get involved in that.
Is that

the student agrees this time off. If that is the case when we get this
of isn\'t

process we make sure that the study and is on our approved list and we
will \--

and they would have been because they submitted their custodial package
earlier.

We will have to follow up with one bit of information because, as I hope
you all

know, that a study and recommended by the sponsor cannot have a
relationship

with the sponsor. You can be a custodian for yourself or subsidiary or
anything

like that. This will happen early on I suspect where the sponsor does
not have a

custodian that has been approved. That is either because we have not
approved

one or the are interested in working with someone else. They would have
spoken

with someone to figure out whether the custody and is willing to do it
under

what terms and would include that custodians named on our adoption
agreement.

That could study and \-- potential custodian, proposed a study in good
sign on it

and in effect they are saying if I get approved as a custodian in this

relationship I will do all these things. At the same time if they have
not

already submitted their baggage to us they both began. That\'s the part.
The

question might have been able different. We will put together a
custodial

approval submission package and put that on our road said, electronic

announcement number would never the next opprobrious one will be. It
will

hopefully be as clear as possible about what the custodian is to
provide. As

things are on the slide and as the earlier question, we will provide as
much

information as we can. Most importantly the if you have any questions
call this

number.

Okay. So we have another question. Can the servicer of the loans on
behalf of

the custodian? Section 18 of the master participation agreement says
that the

custody cannot delegate this function.

No, the bonds fizzled \-- yes, in fact when you look in the details I
know we

just put them out. When you look we allow the custodian ID, a service
ID, and a

batch ID. So we fully expect and allow for servicers to submit on behalf
of

custodians. They have to uniquely identified themselves in their
submission.

Okay. Next question. Currently your timeline contemplates providing
custodians

their LID on August 11th. If a custodian does not already have a full
set of

guaranteed agreements in its own name not as an ELT will \-- will it
need to get

all the new guaranteed agreements?

There are two questions. I will answer one. Jeff will answer the other.
When a

request comes in \-- when an adoption comes in we are agreed to
immediately just

decided and id. Because what it represents is a relationship between the

custodian and the sponsor. Meanwhile there is a second party that
question

around the custodian approval and the guarantees related to that. I will
let

Jeff speak to that.

And keep in mind you must be careful the custodian by definition will be
an

entity that is already an eligible when there and our program. So they
will have

there for their own Lynn their ID. We will assign is a new lender ID,
brand new,

that will be used by that study and only for purposes related to the
custodial

relationship with a particular sponsor. It\'s different from the
entities \-- the

custodial entities regular ID. Also since the custodian can \-- an
entity can be

a custodian for more than one sponsor, they can have one more than one
custodial

relationship, that entity we will have multiple lender IDs, but they
must be

kept separate. If each one is for a particular custodial releases up for
one

particular sponsor and lender. Now, the guarantees that were issued by
the

original agency when the loan was made are valid and are held the route
to this

process. The latter idea that we assign to the custodian is for
reporting

purposes. As we went through this lies there was an early on reporting,
the very

first 799 Billing and a subsequent ones. And if there were only two
dispersants.

Of course there can be more than two. After the final disbursement the
reporting

of the holder of the loan to the guarantee agency and ultimately to
NSLDS. What

will they to be done and we have had some correspondence with some
agencies. The

sponsor, Linder, together because they become a team once this is
approved, this

is one of the steps to take in advance. They would be in contact with
the

guarantee agency and in effect say it we are entering this relationship
that the

feds have set up. They have assigned as this ID. At some point in the
process we

will be reporting loans as the Lockerbie held by one to three, but the
new

number, 456. They guarantee agency will have to make some system changes
to

allow for 56 and this example to come in. Each security agency will have
to

determine how much and what kind of paperwork is point to be needed. We
do not

\-- we absolutely do not see any need for a separate guarantee that
agency under

grit. We are pretty tell them how to do their business. And certainly
some of

them have state requirements. But we do not have any need to have a
separate

agreement. I obviously they have to make changes to their system to
allow the

new number. The maybe a bit of paperwork that is to be done. We hope
they would

keep it to a.

The next question is a confirmation question that I\'m pretty sure you
answered

already. You can just say yes or no. The question is, it\'s custodian we
will

have an LIB for each sponsor. The custodian of will have LID 416 for the

sponsor. However, if custody and access is also a custodian for a second
lender

the custodian sponsor will have a different LID than 456.

Everyone in the room is are you assuming that the sponsor will file the
monthly

statements on behalf of the custodian? Evident Lee the person got
several

questions about servicers about this.

Virtually all of the reporting and the sub mission and files and so on,
while

the responsibility at some point in the process as Jay explained, the
custodian

can be delegated to another entity. We fully expect in conversations we
have had

with entities since we are talking about grabbing loan information and
details

about loan information, it will come from \-- probably be produced by
the sponsor

lender and actually by the sponsor or lender servicer and that includes
the

purchase request file schedules that we posted some details on today in

announcement number 12 but also the creation of the 799s. While Jay\'s
example

clearly pointed out times when we get two 7 \# 9s one on behalf of
lender sponsor

123 and custodial relationship 456 and later just 456. We fully expect
the way

business operations that these would have been produced as they are now
by the

servicer who holds these loans and knows all the details.

That question specifically also is around the monthly reporting. Can it
be

aggregated \-- we are allowing the weekly \-- the purchase participation
funding

request to be sent by servicer. That\'s something we will have to
contemplate and

make sure we are clear in our next webinar about monthly reporting.
Whether or

not we will allow monthly reporting at the servicer level or whether we
will

look by aggregation by the custodian. We will answer that in our next
webinar.

Next question:will the GA report a loan transfer from LID if, to LID456.
To

perform the sponsor by the sponsor or the custodian?

It will \-- yes, they will report it to NSLDS. They will report it \--
this is

based upon request of the community. We were going a different way
earlier but

the community pointed out that we should wait until the loan is fully
dispersed

and that\'s why in the example Jay had while 799s had to be split upon
the first

dispersement for the quarter in which that occurred, we kept the numbers
the

same. But the guarantee agency will have to switch from 123, to 456 in
the next

feed following the final dispersement. We will leave that process up to
the fell

community\'s normal process of when a loan is sold or otherwise
transferred from

one eligible lender to another one because in affect that\'s what is
going on

here and we think that may be something that is part of the agreement
between

the custodian and the sponsor with approval from the guarantee agency to
make

sure they are comfortable with how change of ownership of the loan is
reported.

Okay. Next question:as I understand it, if you are functioning through
an

aggregate tore, you can do with a power of attorney rather than the
lenders

participating transferring their loans to the sponsor. For process
purposes, if

you are \-- if you aggregate using a power of attorney rather than a
transfer, if

in all of the places on the process flow where you have noted that the
loan is

under the sponsor LID does the originate lender\'s aggregating company
\--

Let me interrupt because there was some early discussion and maybe
frankly even

in one of our webinar, the earlier one about the possibility of the
aggregation

being done through power of attorney. As they say upon further review
and

looking at the legal tees of this participation, so on, that\'s not
possible. It

is kind of regretable because it makes it just another more difficult
step for

smaller lenders to participate but since the loan actually has to be

transferred, the power of attorney between the small lender and the
larger one

is just not an option.

Okay. So our next question:the department issued a letter to schools on
July

24th that stated \"we expect to finalize program agreements with those
lenders

very shortly and anticipate beginning to provide this much needed
liquidity to

participating FFLA lenders by the end of August. \" based on this letter
will the

expected implementation time line allow for lenders to receive loans
under the

loan sale program and the participation program by August 15th?

Well participation program we are geared up to move as quickly \-- we
are working

almost 24/7 to be there, I think Jay and his team and our systems people
and our

friends over at treasury. This process has \-- we are bringing this
thing up very

quickly after receiving the authorization. And it is a very, very
complicated

and a process that requires us to make sure we are very careful about
the

taxpayers money. That said, the information we posted today will begin
the

process and we would look forward to receiving on Monday morning some of
the sub

mission packages that are in announcement 10 and that Jay talked about.
We are

up to review them if they are complete and all signed properly and all
the Ts

crossed and Is dotted properly to act on them very quickly, to provide
as Jay

said the information about the preapproval step that letters and
custodians can

make and then ready to accept these funding requests and the loan
schedule file.

So, yes, by the middle of August there is now work that has to be done
by the

parties that want to participate and I don\'t \-- in any means mean to
say they

haven\'t been anxious to do it. We know they have been waiting for us
for these

forms. We had to get some O and B approvals and so on. We will be ready
to go as

we stated in the letter to the schools.

The next question:when will the approved custodian list be posted?

As soon as we have at least one. \[ laughter \]

That\'s a dodge, Jeff. Come on.

No. As soon as we have at least one we will put the list up with that
one. We

don\'t have any yet. We have a couple \-- to be fair \-- even without
this posting

without all the details we have had conversations with two or three
custodians.

They have provided us some information. Our legal folks are looking at
it and it

is likely that within a week or so we will have the first one, maybe in
shorter

time but as soon as we have one that has been officially approved and
again not

to over state this too much but if you think about this slow, and even
the kind

of dollars Jay was talking about if a request is over a hundred million
dollars,

that\'s the kind of dollars we are talking about here. We need to make
sure that

the custodians to whom we are going to ask our treasury friends to send
money,

that we are absolutely positively confident of their abilities to handle
their

responsibilities.

As a taxpayer I\'m reassured. The next question. Please clarify the
requirements

of permitted investments will AAA rated treasury only money market funds
be

allowed?

I think we have plenty of questions and that\'s the kind of question
that is not

part of this webinar. We are talking about the operations. We already
veered off

a little bit more than we should have at the expense of people who have
asked

questions about the participation. So \--

Let me find a question about that. They come in in order and I have to
find

them.

Right.

For the person who asked me to down load \-- about the down load for
today, I

will point you back to the down load point on the screen, somewhere back
here,

if you look above that. Today\'s session is there. It is EBD and it has
today\'s

date on it.

Is there \-- this is an interesting spelling. I will say it and then
spell it. Is

there L a, sex reportingARS reporting lag time from the second custodian
from

dispersement.

The LARS \-- I don\'t know if there is a lag time. There is a point at
which \-- in

fact, let me see if \-- for the second dispersement. The second
dispersement will

all occur under the custodian lid. The second dispersement , all the
fees and

all the balances for the interest subsidies and the SAPP all that gets
reported

on the custodian. If the question ask related to the first, there is a
point at

which it is reported. The balances are reported up to the point of
transfer of

title or payment. In our example it was September 12th I think. That\'s
the point

at where the sponsor stops reporting on it in the 799 or the balance has
stopped

there for 799 reporting and custodian balances start for lid 456. For
the second

dispersement it is all reported under custodian lid 456.

That concept is a an extension of a regular concept of a loan that is

transferred within the FELD community from one lender to another and
I\'m sure

the transfers don\'t wait until the last day of a quarter. Lenders
should be very

comfortable \-- even with the same servicer of producing the reports of
having

one large 799 report under one lender ID and another under another. The

difference here is we will have second disbursements under the new
holder.

That\'s kind of unusual. The concept of splitting a quarter just plays
out.

Okay. I think you may have just answered this but I will ask this
question

anyway to make sure. Given your response to the question about
aggregation and

the power of attorney, are usage then that the subsequent disbursement
must be

made under the sponsor\'s lid and not under the originating lender\'s
lid?

Not really. Not really. What we said is that \-- Jay mentioned it \--
technical

Lee speaking in a very literal way once the first disbursement is made
and the

loan is transferred to the custodian and we have purchased our interest,
the

custodian owns the loan. We are moving in the direction that therefore
the

second disbursement has to be made under the custodian\'s LID. We used
it would

probably be made by the sponsor\'s origination system. After
conversations with

the community and the disruptions that would cause to a number of
systems and

confusion for schools and students, as Jay\'s presentation went through,

subsequent disbursements can be made under the sponsor\'s LID. Even
though we all

know and we have ways \-- another process \-- we will know about all of
the loans

that we have participation in, we can track them all. So even though it
will

look like to the school and students and frankly to the guarantee
agencies that

it is still lender 123, there is ways to maintain it. So the smaller
lender

could make those disbursements assuming that their agreement of selling
their

loan to the bigger lender handled this partially loan \-- partially
disbursed

loan and that gets complicated. We will stay out of that. If that
relationship

between the smaller lender and the aggregating lender can handle all of
that,

that would be fine.

I have several questions related to where the custodian list will be
posted,

where other information is being posted as it becomes available?

Everything we have is on our slides www. federal student aide dot ED dot

GOV/FFELP. Everything about this program is posted there including as we

mentioned a couple of times the last couple of electronic announcements
that

include some of the details of what we have talked about today and
that\'s where

we will post the list of approved custodians. We will clearly indicate
where to

\-- this is a list of approved custodians as of and we will put the
date.

This sounds policy but I will ask it. The issue regarding guarantee
agreements

that the custodian doesn\'t have an existing guarantee agreement as an
eligible

lender. It has an existing agreement with as-LID. Does it need an
existing \--

I don\'t understand a question where an eligible lender does not have an

agreement with a guarantee agency. Under an ELT relationship where a
beneficial

holder looks like it is the lender. It is really the eligible lender
trustee

that is behind that loan and in order for the guarantee to be valid, it
had to

be made with an eligible lender. There must be an agreement. It may not
be an

agreement with every guarantee agency, but just because an entity
participates

as a trustee lender doesn\'t mean they don\'t have GA agreements at
least as far

as I know.

Based on Jay\'s saying for the second disbursement reporting will all
happen

under the custodian\'s LID. How does that match with Jeff saying the
second

disbursement cannot be made \-- can be made under the sponsor\'s LID. We
don\'t

mean to start a fight.

I\'m sorry. Let me clarify. There are two directions of reporting. There
is

reporting on the 799 and there is reporting to NSLDS and ultimately to
form 2000

as well. For the second disbursement, we would expect all of the fees
and all

interest subsidy and SAP to be reported on the 799 under the custodian
LID for

the second disbursement we would expect everything to school, to
students to

NSLDS and to the GA would be reported under the sponsor\'s LID. That was

discussions with the industry that where we heard it will be a
substantial issue

or problem trying to report to the NSLDS and to the school under a new
lid and

we didn\'t want to cause any description. Again, it is two \--
disruption. It is

two September separate streams of reporting. Under 799 the second
disbursement

it is under the new lid, the custodian lid. For all other reports to
schools and

students and NSLDS it happens under the old or sponsors ID.

When will you provide the form of custodial certificate that is required
to be

submitted?

The sub mission of the loan schedule itself \-- that is the custodial

certification. They are basically certifying by submitting. They are
certifying

that the data there is accurate and represents all of the collateral,
all of the

cash in the election account, all for this participation interest.

Okay. I have two questions and I know they are process questions because
they

actually say \"process in them\" does the federal default fee have to be
paid by

the sponsor before the puts can take place?

We are not talking about put here but the default fee that has to be
provided to

the guarantee agency, nothing has changed. The 1 percent fee \-- the
rules about

when that has to be paid and how it gets made to the guarantee agency is
the

first dispersement and for subsequent disbursements that has to be done.
We have

no way to provide financing for that. Those have to be paid through the
normal

processes.

Mark, I would like to go back and make sure I\'m clear on the sudden
ideal

certification. They are also certifying what they are presenting in the
loan

schedule that those loans are eligible for the loan participation
program. And

that they have title.

And that they have title.

All right. The next question, the process flow indicates that the final

disbursement \-- I will start over because obviously my lips just
camped. The

process flow indicates that the final disbursement must report on the
799

entirely under the custodian. What if the disbursement is scheduled and
made

before the participation interest in the first disbursement is even
funded? Is

that an exception by which both disbursements are reported partially
under the

sponsor?

The example was that shortly after I think Jay had it two or three days
after

the first disbursement, the sponsor wanted to get in line to get the
cash and

therefore shortly after the second one. Clearly, the agreement provides
that a

loan could be placed into the participation facility at any time. So it
is very

possible and maybe even likely for some lenders that they would \-- that
they

have short-term or financing that can take through the first
dispersement and

all the way through the second and they are not ready yet to sell us the
loan

but want to get some cash so they can put the entire loan into the

participation. You can take the steps that Jay laid out and if you
follow the

logic, it will just work that all of the 799s will be reported including
the

fees to the second disbursement. Everything switches when the loan is

transferred to the custodian and in this example it would be after it
was all

disbursed. The only thing that would happen in 799 for the remaining
quarters

until the loan is redeemed.

Next question:it is related after we transfer the loans to the
custodian, which

LID should we report activity that is back indicate dated to a time when
the

sponsor held the loan?

We don\'t like to use to use the word \"back dated.\" I think the \-- I
think

whoever asked the question think about if you are asking something
beyond

another look \-- we went through this presentation pretty quickly,
another look

at the flows and the documents we posted kind of answers. If not, the
question

can be submitted to us and we will try to get back to the person.

In the time line example, you used \-- in the time line example you used
to

confirm readiness by mid August you said you would be ready to accept
master

agreements from the lender sponsor on Monday. However, at this time no

custodians have been officially approved. Is it \--

Yeah,.

Actually possible for the sponsor to submit a complete master agreement
by

Monday if the custodian has not been approved.

Let me repeat this yet once again. The sub mission package does call for
the

name and signature of a custodian. If the sponsor has one in mind and
probably

has had some conversation with an entity \-- we have been talking about
this

program for several months \-- they can list that custodian. We will
move the

package along and send this information Jay mentioned about the
preactivities.

We will actually assign this lid. If everything is approved will become
the LID.

In the meantime the custodian has already submitted their materials and
we will

hopefully approve it shortly or it should. But the process \-- while
they all

have to come together at the end, one does not depend upon the other.

Okay. Couple people have pointed this out but enough people have done so
I will

point it out. Step 12, one of our slides, title is transfer on
9-11-2008. On

steps 17 and 128 through 9-10-2008 and custodian bill through 9-111-2008
and

that is the date the title transferred. I think our slide was off by a
day. We

have to add mitt that we are not sure the answer to that. There is a
convention

I\'m sure we have \--

We will follow-up. It will be standard procedure as if the loan was \--
let\'s say

the loan was actually sold and 799 reporting went from one lender to
another, we

follow the same procedure but what we will do is we will see what \-- we
will

validate what that procedure is and provide an answer next time out.

As a result of the title moving to the department before the loan is
fully

disbursed, a hundred percent participation and funded by the department,
how

will the sponsor find bridge financing if it cannot collateral lies the
loan for

which title has passed to the department.

First thing for clarification title is not passing to the department and
the

department is not funding the loan. This is a very important point
because of

the statutory authority. Title is passing to the custodian who sells us
a

participation interest in the package which is made up of individual
loans. I

don\'t know how to be polite about this but we are not given the
authority to

provide any bridge, advance, any kind of funding. So we have built and
hopefully

will implement very quickly and be able to turn money around. Jay
mentioned we

say sieve venueses business days. We are hoping to do better, shorter
period of

time once a disbursement is made and if everyone does these steps as
quickly as

possible, funding will be provided. We are not able to provide any
advanced

funding.

Okay. At this point I am out of questions. With only a half an hour to
go on our

scheduled time, Jeff. You and Jay have a lot of vamping to do.

No, I don\'t think so. Let me take maybe 40 seconds or so and maybe a
couple more

questions will come in and we will be happy to take them. Again, we
think it is

very important which is why Jay and I both mentioned please go to that
website

WWW federal student aide dot ED dot GOV/FFELP. Every item we have posted
there

since we started this is there. We did a very good job I think on the
materials.

I\'m sure we missed something here or there and maybe even misstated
something.

Go there and if you are not clear, we will have opportunities in other
webinars

and we are looking at putting together some Q&As and so onto provide
everyone

with this information. We are absolutely aware that today is August 1st.
That

these programs go back to disbursements made as early as May 1st. The
big time

is coming up in terms of students, parents and schools and we appreciate

everyone\'s patience and understanding as we develop a program that
again is

likely to put hundreds of millions of dollars of federal money, taxpayer
money

out. We expect to fully control it. We think it will do the right thing.
It will

provide liquidity and the federal taxpayer will get their money back but
we have

to be very careful about that. Mark anything else?

We have 11 seconds \-- 11 questions in the time you were speaking.

That\'s the last time they will let me do that.

First question if lender A has an agreement with began tore X and the
scope of

the agreement is explicit Lee to as ELT for a separate beneficial holder
can

that guarantee agreement be covered to use that lender B transfers to
lender A

in lender A\'s capacity for custodian under lender B under the
participation

facility?

We are taking the position that the guarantee that was initially
provided by the

guarantee agency for the loan in anticipation of it being disbursed and

certainly covered in it\'s first disbursement is valid throughout. The
guarantee

agencies will have to look at their own requirements. This example you
just read

and make a determination. We are hopeful that these agreements and
don\'t get in

the way of the objective which is getting funding as quickly as
possible. If you

put that together with the earlier question about liquidity and
short-term

financing. It is kind of an advisement for any of our agency friends who
are on

the line and so onto hopefully do everything we can to exme indict this
process.

\-- expedite this process. Jay talked about the redemption of the loans
and he

will talk about winding down at the end of next week. It is not like the
loans

are going to custodian forever. No later than September 130th, 2009 one
of two

things will happen to these loans. They will go back to the originating
lender

or sold to the department in which the guarantee all goes away. We
believe that

the less switching around of these kinds of things, the better.

Okay. Next question:i am envisioning difficulties at redemption for
example if

we are able to security advertise loans and use proceeds from the
securitization

for the redeposition, there will be timing issues, won\'t have the
dollars to

redeem participation interest until we security advertise and won\'t be
able to

security advertise without having legal title to the loan. Have you
considered

how this might work in reality?

Reality \--

I know \--

It is a very good question. It is actually the flip side of the earlier
question

and we know it is an issue and just frankly in terms of timing, we
haven\'t

gotten there yet. We know as I said it is the flip side. We know there
is a \--

especially the short-term funding as someone asked. Jay mentioned the
release of

the security holds the timing of that for loans coming into the
participation

and this question is about when loans are coming out of the
participation

because the lender wants to buy back but they need to get secured money
and we

will have to work with the community on what kinds of forms, assurances
we can

provide kind of like the opposite we can provide back to the sponsor and
the

funding source about the timing of our release of the title. But we
don\'t have a

lot of time on that.

Has Ed released a list of available warehousers/bridge financing?

No and we will not. I think \-- if we let someone miss understand we
apologize.

We will not \-- as a matter of fact, I remember Dennis and I talking
about, it is

absolutely inn appropriate and probably illegal for a government agency
to even

list \-- never mind,.

Excellent. As a participant in this call, I\'m glad that you said that.
Is there

a need to report the loan under the custodian ID under NSLDS. It seems
it would

be confusing to borrowers and schools.

That\'s why we said no, finally disbursed. Final disbursement. Remember,
Jay

mentioned that the LID we provide to the custodian 456 in his example is
a

specific 1 to 1 relationship with lender 123. Let\'s say that lender 123
is ABC

bank while it is reported through the guarantee agency with number 123,
it will

say the holders ABC bank and their servicer, whoever it is. When it is
reported

at 456, it will say the lender is ABC bank and we will put a little flag
or dot

or something so we know. It will still say ABC bank so the school and

opportunity and borrower won\'t be confused random crime confused \--
and the

servicer will still be the same.

Do we have to close the complete participation or pay down part of it?

That\'s the point of the last slide which we will go into more detail.
You can

redeem loans two ways. You can either buy them back and sell them out

essentially or you could put them to bed. Either way is a way to redeem
and when

you have done that, what will happen is you will report them as
redeemed.

Meanwhile the cash will come. We will pay down yield first and then
principal

balance second and we will \-- you can remove them from the loan
schedule. In

fact, the secretary and the other secretary have said and many of us as
well

that our most arrest dent hope is that loans get taken out because the
economics

have changed or the sponsor has otherwise been able to find funding and
these

loans go back into the normal FELP industry process and not hang around
the

participation as long in the end and they are not sold to us. If they
have to

stay in the participation longer, that\'s fine. If they have to be put
to us,

that\'s fine. Everybody is hoping that is an intermediate thing when
people sort

all these dollars out and these dollars bet back into the normal FELP
process.

When using the department\'s funding if the borrower is in school, the

participants don\'t collect any payment but had to pay Department of
education

excess interest. Does that mean that the participant has to come up with
their

own funds to pay for the excess interest?

Yes but keep in mind it all washes out at the end and I mentioned this
earlier.

We are not unaware of the present value and time value of money. There
will be

fees that have to be paid upon disbursements yet just like now for a
loan that

is in school, an unsubsidized loan there is no cash coming in. There is
the

accrual of interest. That accrual of interest has a significant value.
We will

collect it later. If the loan is redeemed. It is redeemed for the
original

amount we invested in it to use a word I probably shouldn\'t. It is you
too that

we can\'t solve cash problems completely. We certainly can\'t provide
advanced

funding and we can\'t provide even of this participation funding for the
fees

that have to be paid. Whether they be loan fees, default fees, negative
SAP or

whatever.

Okay. The next question appropriate enough, how should the payment of
negative

SAP be handled?

Negative SAP will be paid I think basically through the same process we
do now

with pay \-- pay.gov. The way the collections to us every time a
collection is

made, it is made via an interface where you enter into the source of the

funding. So the actual payment of money to us does not have to flow
through the

collection account. Money going out when we pay out does go through the

collection account.

If I can, I\'m not sure \-- the question I think was about that but it
may have

also included this, who is paying it. Let\'s make this clear and it
relates to my

earlier response. If the result of a 799 because of negative SAP as
relation to

entersubsidy and so on and result of fees means that the loan, that
money is

owed to the government, then it is expected to be paid through the
normal

payment process of 7999s. We would expect that the song sorry would
provide the

custodian with the money to do that. That\'s the earlier question, yes,
we know

that is cash you have to find but that\'s the deal. In the event that
money flows

the other way, the result of a 799 is money flowing from the government
back and

that would be where there was a fair number of subsidized loans and not
a lot of

negative SAP and not a lot of loan fees, we would pay through the 799
but the

money would go to the custodian which is another reason why the
custodian 799

has to be filed with their number and the money stays in the account,
this

collections account that Jay referred to. Now, I know people are not
happy with

that. We know that. The money stays in the account. Is it does not \--
it does

not go back to the sponsor. We are having it both ways. If money is owed
to us,

we want it. If money is going back, we will pay it. It goes to the
custodian. It

will get swept at the beginning of the month to reduce the sponsor\'s
debt to us.

At the end of this they would have gotten their money not as promptly as
they

would have preferred. We will make sure the debt is paid back to us as
quickly

as possible with any cash that is available.

Our next question, who does a school return funds to after a loan is
fully

disbursed and sold to add? I am thinking this is a return to title 4
question?

Or cancellation or whatever. The normal process the originating lender
would

have established with itself or servicer, we will leave it up to the son
or and

custodian, they have to end up in the custodian in the collections
account and

we will kind of stay away with that process. Among other things we want
that

cash when used to pay down the debt but the reporting, the next weekly
reporting

and certainly the monthly reporting loan by loan reporting would have to
show

those changes and it is the custodian that is providing us with that

information.

Next question, is there a specific format required for the initial
rolling

forecast?

Yes, there will be. We will provide more detail. That\'s the next
webinar and the

next electronic announcement for the website. Details on all the
requirements

and the file and field definitions.

The next question:why can\'t steps 9 and 10 be done on an inn traveling
side show

day INTRA day basis.

I\'m looking at 9 and 10 and they are on the same day. We are sending a
notice to

Department of treasury to fund and we are also informing to probably
through

electronic notification through our system that we sent the funding
request. If

the question is 9, 10 and step 11 where the actual cash is placed out of

treasury, that is a standard treasury payment process that we are
required to

follow. When we make notification to treasury, there is a certain window
of time

if we make notification then they will process it in a nightly batch.

Unfortunately, it is standard treasury payment timing, ACHS payment
timing.

Here is the question and it is long:if the originating lender sells the
loan to

a sponsor who then transfers the title of the loan to the custodian,
does the

sale of the loan between the originating lender and the sponsor need to
be

reported?

Whatever they would do normally in reporting and if there was \-- we
understand

that sometimes there is a triple sale even now and a reporting deadline
is

missed. So if it is appropriate to report that to the guarantee agency
because

of the reporting time and yet report it again later, that could occur
but I\'m

not sure it is anything different than normal sale processing.

Then they follow this with the question, just to confirm, can the
sponsor sell

loans to Ed, receive the funding out of the facility essentially
redeeming that

loan before the facility is shut down and then adjust the loan schedule?

No, they would provide \-- when \-- basically when they are redeeming
\-- as soon

as they redeem the loan, it has to be shown. We have to see that on the
next

loan schedule to come in. If they have a weekly funding request that
they are

making or at minimum they would be once a month they would make that
loan

schedule. That\'s where they would be reporting that redemption and the
cash

would be swept.

I\'m trying to make sense of this. If you are still submitting
questions, put

commas in them. That helps me break them up. Is a loan that has been

participated but not yet redeemed or put be consolidated and if so, how
willing

the pay off work? If I put commas in the right place, that\'s how the
sentence

reads and if your question was different, submit it to me again and we
will try

again. That\'s the question I\'m reading.

Well, first of all, this is very unlikely because these are 89 loans.
You can\'t

consolidate while you are in school. I suppose the student could have
gotten a

first disbursement and dropped out of school and wants to consolidate
while they

are in the grace and so on. I don\'t think so. That may be a situation
where the

sponsor would have to redeem the loan.

That would show up as a redemption I think?

It is a sale of a loan. So it comes out of the participation agreement.

Consolidations \-- consolidation loans are not eligible to be in the

participation agreement. It shows up as a sale. We see it on the loan
schedule

as such and it wouldn\'t come back.

Right. I\'m service \-- you are right. Presumable the borrower would
have

requested \-- the consolidating lender would have requested from the
sponsor the

loan verification certificate information. That entity would complete
it. Funds

would be paid. Those would be used to pull the loan out to pay it in
full. It

will actually be paid in full. It will not be purchased \-- it ends up
for our

accounting, no different than if the borrower made a payment to pay the
thing in

full.

I don\'t know. I would have to look at the actual \-- I\'m not sure how
the

reporting \-- it would look like a redemption I think.

Okay. Very unlikely given the nature of this program.

Okay. Just to clarify, all cash is \"trapped\" in collection account to
help pay

down the facility except for the payment by Ed of principal amount of
loans for

which a participation interest was purchased/sold, correct?

Correct.

I like those answers. When the loan title is transferred to the
custodian and Ed

expects all borrower notification to be supply any money pressed how
will credit

reporting and privacy notification be handled? We may be required to
send

privacy notification on behalf of the custodian. That\'s question 1. If
in fact

that reads as a question.

We will have to try to come back on that one. Our \-- other members of
our team

in other policy folks and our lawyers may have dealt with that. I\'m not

familiar. I don\'t know if anyone in the room is.

One of the questions that I did not ask but has been asked by several
people is

for the questions and answers that we have provided so far, as well as
any we

don\'t get to, is there a place where we will be posted those questions
and

answers?

We will try to \-- as Jay mentioned \-- what we have been trying to do a
bit is

come back in the subsequent webinars but I know that is not complete and
we may

miss them occasionally. We are trying to put together a comprehensive
Q&A. I

don\'t want to mislead anybody. It is something we haven\'t been able to
get to as

of yet as we are putting together these other documents. It is useful.

Mark, it is useful, however, that the questions come in because we
really walk

through the questions and apply it as we develop our next webinar, we
will do

that. We will walk through the questions and make sure we have hit the
more

significant groups of questions. It is just that it is difficult to
implement

and answer each individual question as we go.

Okay. Our next question:what is the turn around time for the new lender
IDs

requested for sponsors and custodians?

Be the same turn around time \-- the lender ID itself, the draft will
come with

the acknowledgment. So if we get \-- let\'s say we get it on the 4th.
When we

acknowledge it, I think we are talking about doing it the day of or day
after,

we will be sending you a draft LID. Understand, it is not activated. We
provide

it for the purpose of being able to configure systems and such. It
won\'t be

Carolina varietied until we \-- activated until we approve the custodian
on the

list and the agreement itself.

There is a question, can a loan be in a participation more than once? In
other

words, can it be in a participation, sold and paid off to Ed and then
the

secondary market puts it into participation?

No.

If the sponsor has fully disbursed the loan and transferred the loan to
the

custodian LID because all funds have been transferred or paid, is the
balance of

the loan on the son or\'s servicing \-- sponsor\'s servicing system is
zero?

The servicing system is a different question. In that example the loan
should be

reported \-- the next sub mission to the guarantee agency and then NSLDS
and so

forth as now being held by the custodian 456. But the loan has to be
serviced

somewhere. So if it remains as we expect and from our conversations with
the

community \-- with the servicer of the sponsor because actually we
actually

provide for that, no, it wouldn\'t be zero, it is just being serviced by
that

servicing system. You would never want it to be zero unless it was a
dollar

amount someplace else. Every expectation we had in the agreement and in

conversations with the FELP community that this loan will continue \--
to the

extent there is much servicing that needs to be done in school \-- would
be done

by the sponsor\'s servicer acting on behalf of the custodian and the
fees for

that, if any, are part of the separate, non government agreement between
the

sponsor and the custodian.

Okay. Who\'s \-- who\'s cohort default rate will be these under for the
repayment

portion of the calculation?

These loans will never be in a cohort. They can\'t default during the
time this

program exists. They will be \-- they were originated by a particular
lender and

guaranteed by a particular guarantee agency. Those won\'t change when we

ultimately do track this loan for default rate purposes.

Okay. Using the earlier example of consolidation loans, when the sponsor
is

forced to redeem it, what happens to the proceeds? Does the sponsor get
them or

do they stay in the custodial account in will the end of the
participation

facility?

The proceeds will be swept. So any \-- any proceeds from the sale of any
loan

whether it be for son sol days purpose \-- consolidation loan or other
will be

swept. We will apply it to participant yield and then principal balance.

I\'m down to the last two questions. For a potential custodians that
would like

to talk directly with the department to discuss operational or other
matters

related to this program, who should they contact?

When we post the custodian sub mission procedures probably Monday or
Tuesday, we

will have a couple of contacts, one for \-- we will have questions about

submitting materials and one for the kinds of questions that I think
this is

getting to about \-- I need to understand a little bit more. We will
have at

least two contacts for custodians to ask depending upon the any tower of
the

question.

Our final question, will the custodian as LID be automatically set up in
LARS.

Would LARS testing be necessary under the custodian\'s ID?

Yes, the ID would be automatically established or be entered into LARS
and that

would drive \-- there is automatic notification that provides \--
organization

participation agreement, a couple other things that have to be filled
out. As

for testing. What we want to do for testing, we will provide in the

acknowledgment e-mail, we will provide a little bit of detail about how
you

either the custodian or the custodian servicer might provide us a test
file. I\'m

assuming when you say testing, I\'m assuming it means loan schedule
file. So we

will provide detail about how to for \-- give us a test file and how we
will run

it and make sure the procedure of creating the file on the servicer\'s
system is

accurate. As for LARS, it follows standard \-- it is standard
processing. For

LARS reporting and 799 reporting, once you have a LID, it is standard
799

reporting.

Mark, I think we will wrap it up. I want to remind everyone to look at
our

materials on the website and you should probably be checking that
website at

least once a day if not more often than that and next Friday, same time
and same

station and same log in. We will be talking more about the operations of
the

participation program. Hopefully have some answers to the very, very
interesting

questions that you have asked and as Jay pointed out talk more about
monthly

reporting and close out of the participation. Want to thank everyone for
your

time and Mark thank you very much.

Thank you guys aborne behalf of the sponsors of this show, the American

taxpayers, I would like to say good job gentlemen and if the presenters
can stay

on the line for a moment. Ladies and gentlemen, thank you we will talk
to you in

about a week and we look forward to seeing you then. Have a great day.
\[ event

concluded at 1:48MT \] Actions