# Presentation: 040106

## Session GA-06

**Operational Flows & Reporting for New Loan Programs**
- Katrina Turner
- Pam Eliadis
- U.S. Department of Education

## Agenda

- Program Goals and Background
- Operational Flows
- Loan Participation Program
- Loan Purchase Program
- Lender of Last Resort
- Compliance Audit
- Operational Reporting
- Resources
- Questions

## Program Goals and Background

- Ensuring Continuing Access to Student Loans Act of 2008 (ECASLA)
- Signed May 7, 2008
- Federal Register July 1, 2008
- Provided Secretary authority to purchase FFEL loans
- Strengthened GA Lender of Last Resort Program

**Notes:**
Under HR 5715
Can only purchase loans – cannot provide advance funding
Federal Register is required by statue.
Draft posted on ifap June 24 and final on July 1

## Program Goals and Background

- ECASLA Objectives
- Ensure that eligible students and parents receive federal student loans for the 2008-2009 academic year
- Support the FFEL Program
- Ensure no net cost to the federal government

**Notes:**
Support the FFEL Program as a successful private/public partnership

## Program Goals and Background 	

- Loan Participation Purchase Program
- ED to purchase “participation interests” in eligible loans
- ED provides liquidity
- Participation interest terminates 9/30/09 via
- Redemption by Lender
- Sold to ED

**Notes:**
ED commits to purchase participation interests in eligible 2008-2009 FFEL loans through Sept  30 2009

Termination occurs when lender repays ED with defined yield through redemption or loan is sold to ED

FOR BOTH PROGRAMS
Eligible loans = FFL sub/ unsub / PLUS.  Loan periods that include or begin on or after July 1, 2008.  First disbursed on or after May , 2008 but no later than July 1, 2009  (NON ELIGIBLE LOANS = CL, LLR, loans with a default claim filed, loans with borrower benefits other than updrom borrower fee payments, off of .25% interest rate reduction for  automatic repayment)

Sponsor must commit to participation at least $50 mm.  Smaller lenders may aggregate with each other or larger lender by transferring title

## Program Goals and Background 	

- Loan Purchase Commitment Program
- ED to purchase eligible loans
- Called “put”
- Must be fully disbursed
- 45-day advance notice

## Program Goals and Background

- Lender of Last Resort Program
- Strengthen current LLR Program
- Types:
- Lender
- GA
- Funded by GA
- Federal Advances

## Operational Flows:  Approval of Custodian

- Officer’s Certificate
- List of Key Personnel, Title, Years of Service and Credentials
- Bank’s Most recent SAS70
- Copy of the SEC Regulation AB reports
- Description of current trust activities
- Copies of the Bank’s Errors and omissions policy and its fidelity bond
- Description of Disaster Recovery

**Notes:**
Electronic Announcement #14 
List of Approved Custodian Electronic Announcement #19

## Operational Flows:  Approval of Custodian

- List of EIN and all affiliates names and CEO’s  phone number
- List of all existing LIDs
- Most recent audited Financial Statement

## Operational Flows:  Loan Participation Purchase Program (LPPP)

**Operational Flows:  Loan Participation Purchase Program (LPPP)**

- To participate, each Eligible Lender must have a Notice of Intent to Participate on file with the Department of Education (ED),
- Submit their Master Participation Agreement and
-  Receive approval from ED

## Operational Flows:  Master Participation Agreement (LPPP)	

**Operational Flows:  Master Participation Agreement (LPPP)****	**

- Notice of Intent to Participate
- Adoption Agreement (Exhibit A)
- Officer’s Certificate (Exhibit E) which includes the following:
- Incorporation and by-laws (Attachment I)
- Resolutions (Attachment II)
- Good Standing of the Sponsor (Attachment III)

**Notes:**
Notice of Intent to Participate is submitted by an eligible lender once.  For loans as of 5/1/08, the Department must have a receipt date of the NOI no later than 7/31/08.  VERIFY SUBMISSION
Form can be submitted via a PDF format to ffel.agreementprocess@ed.gov
All documents/exhibits can be found in Announcement #10.
Adoption Agreement – Executed by the following Sponsor, Trustee Lender, Custodian and ED.   Submission type Hardcopy originals with pen/ink sign.  May submit in PDF format with hardcopy originals to follow.
In lieu of the Certificate of Good Standing of the Sponsor the Sponsor can submit State Stature (if a state entity).

## Operational Flows:  Master Participation Agreement  (LPPP)

- Opinion of Counsel to the Sponsor (Exhibit F
- Initial Monthly Forecasting Report (Optional)
- Date of Initial Funding Request and Amount

## Operational Flows: Loan Purchase Commitment Program (LPCP)

- To participate, each Eligible Lender must have a Notice of Intent to Participate on file with the Department of Education (ED),
- Submit their Master Loan Sales Agreement and
-  Receive approval from ED

## Operational Flows:  Master Loan Sales Agreement (LPCP)

- Notice of Intent to Participate
- Adoption Agreement (Exhibit A)
- Officer’s Certificate (Exhibit C) which includes the following:
- Incorporation and by-laws (Attachment I)
- Resolutions (Attachment II)
- Good Standing of the Seller
-    (Attachment III)
- Opinion of Counsel to the Seller
-    (Exhibit D)

## Operational Flows:  Intake and Approval Process of the Custodian  and Agreements

- Intake Process
- Verification of submission of all required documents.
- Request for additional documents
-   (if applicable)
- Issuance of Custodian LID

**Notes:**
Custodian LID are issued based on a one to one ratio. (Entity based)
Sponsor Name (ie Bank ABC) XXXXXX Approved Custodian Name (ie Bank of USA) 

## Operational Flows:  Intake and Approval Process of the Custodian and Agreements

- Email to Sponsor, Custodian and Seller of the Department’s approval of their agreement package.
- Signed executed Adoption agreement is sent via FEDEX to Sponsor, Custodian and or Seller

## Operational Flows:  Operational Flows:  Lender of Last Resort (LLR) for GA’s

- To participate each GA must submit an LLR Agreement to ED Agency
- GA may request an LLR LID

## Compliance Audit:  Lenders Participating in the Loan Participation Purchase Program

- Authority: Section 8(a)(5) of the Master Participation Agreement (MPA)
- Audit Type: Due Diligence Audit
- Audit Guide: Agreed Upon Procedures Attestation Engagement Guide issued October 17, 2008 by ED OIG

## Operational Reporting 	

- Loan Participation Program
- Weekly Loan Schedule
- Month-End Loan Schedule
- Pay.gov Remittance Activity
- NSLDS Reporting

**Notes:**
-- Weekly Loan Schedule File submitted for Participation Purchase Funding Requests

## Operational Reporting

- Loan Purchase Program
- 45 Day Notice of Intent to Sell
- Loan Transfer/Conversion File
- Final Pre-Sale Report
- Bill of Sale and Documentation
- Lenders/Sponsors in Loan Participation
- Directly from Lender
- ED Servicer report to Guaranty Agencies
- NSLDS Reporting

**Notes:**
--45-day notice of Intent to Sell Loans includes a Projected Loan Schedule of Loans to be sold .   Needed for straight PUT, PUT from a Participation Interest, Loans for each third party lien holder
--ED will schedule Purchase Date – if doing black-out period the next date will be used or high volume could result in a different date
-- Within 48 hours of 45 day notice the seller will receive an acknowledgement of receipt with a scheduled purchase date.  Seller will be requested to give servicer contact info, secured lender info if applicable and third party pmt instructions if applicable
-- Nine Business Days prior to Purchase Date – Seller’s Servicer will provide ED Servicer the Transfer/Conversion File (EA27)  Must be same loans as reported in the 45-day notice.
--ED Servicer will perform eligibility and data integrity edits.  Will contact Seller’s servicer within 3 business days after receipt of conversion file to work out loan eligibility and data exemptions.  If needed – revised sales totals will be calculated
-ED Servicer will deliver final pre-sale report 6-days prior to Sale. Will include a calculation of final sale purchase price (P&I), return of 1% O-fee and $75 per loan.  Will include detail listing of loans in sale
--Seller prepare Bill of Sale Documents  5-days prior to Purchase data.  Formal Bill of Sale, Finals Loan Schedule Summary, Loan Schedule, Security Release Certification if applicable and Notice of Assignment and Designation of Payee Financial Institution Form (optional) or a subsequent notification of receipt of funds by the Secured Lender.
--Two forms of Bill of sale – those in Loan Participation and those outside a participation (EA 27) 
--Post sale – ED servicer will report to GA loan sales.  GA no longer holds Guaranty. Report to transfer to NSLDS and GAFR

## Resources	

- www.federalstudentaid.ed.gov/ffelp
- Webinars
- Q&A’s
- Electronic Announcements
- Agreement Documents
- www.ed.gov/about/offices/list/oig/nonfed/sfa.html
- OIG Audit Guide for Lenders Participating in LPPP

## Questions??

## Contact Information

- We appreciate your feedback and comments.  We can be reached at:
-  Phone:Pam 202-377-3554
-   Katrina 202-377-3311
- Email: _[Pam.Eliadis@ed.gov](mailto:Pam.Eliadis@ed.gov)_
-             _[Katrina.Turner@ed.gov](mailto:Katrina.Turner@ed.gov)_