# Presentation: 488595

## FFEL Loan PurchaseCommitment Program

**FFEL Loan Purchase****Commitment Program**

- Master Loan Sales Agreement and  Operations Webinar
- September 12, 2008

## 
Presenters

Jeff Baker
Director Policy Liaison & Implementation
Federal Student Aid
U.S. Department of Education

Margaret Ayanian
Business Operations
Federal Student Aid
U.S. Department of Education

**Presenters**
- Jeff Baker
- Director Policy Liaison & Implementation
- Federal Student Aid
- U.S. Department of Education
- Margaret Ayanian
- Business Operations
- Federal Student Aid
- U.S. Department of Education

## Logistics

- Title:  Loan Purchase Program
- Purchase Operations
- Date:  September 12, 2008
- To Participate You Must –
- Logon at URL provided in registration confirmation email; and
- Dial in to 1-888-324-6476 Confirmation number:  MGERHARD
- Additional information on the Loan Purchase Programs at:  www.federalstudentaid.ed.gov/ffelp

## Legal Authorities

- Ensuring Continuing Access to Student Loans Act of 2008 (P.L. 110-227)
- HR 5715
- Signed by the President on May 7, 2008
- Strengthened GA Lender of Last Resort Program
- Provided Secretary authority to purchase FFEL loans
- Cannot provide advanced funding to lenders
- Federal Register Notice
- Required by statute
- Draft Posted to IFAP on June 24, 2008
- Official Publication July 1, 2008

## Program Objectives

- Ensure that eligible students and parents receive federal student loans for the 2008-2009 academic year
- Support the FFEL Program as a successful private/public partnership
- Ensure no net cost to the federal government
- No statutory authority to provide advance funding

## Loan Participation Purchase Program

Commitment by ED to purchase “participation interests” in eligible 2008-2009 FFEL loans through September 30, 2009

ED’s purchase will provide immediate liquidity

To terminate ED’s participation interest lender repays ED with defined yield.

- Commitment by ED to purchase “participation interests” in eligible 2008-2009 FFEL loans through September 30, 2009
- ED’s purchase will provide immediate liquidity
- To terminate ED’s participation interest lender repays ED with defined yield.

- Two Programmatic Components

## Two Programmatic Components

- Loan Purchase Commitment Program
- Commitment by ED to purchase eligible 2008-2009 FFEL loans through September 30, 2009
- Any FFEL lender/holder
- Loans must be fully disbursed to be purchased
- 45 day advance notice of loans to be sold
- ED’s commitment has value in financial markets

## Webinar Objectives

- Purpose:  To provide high level overview of the operational processes involved in notification and execution of required documents for the sale of loans to the Department for the Loan Purchase Commitment Program.
- Target Audience:  Personnel at servicers and lenders responsible for loan sale operations.
- Limitations:  Will not include information on the Loan Participation Purchase Program.  This information was provided in other formats, including previous Webinars.

## Agenda

- Walkthrough of Sales Process in Detail
- 45 Day Notice of Intent to Sell Loans
- Schedule of Available Sale Dates
- Loan Transfer/Conversion File Requirements
- Pre-Sale Reporting to Selling Lender
- Preparation of Bill of Sale documents
- Settlement at Purchase Date and Funding
- Multiple Sale Transactions - Example
- Post-Settlement Reconciliation
- Loan Transfer Reporting
- Collateral Documentation Requirements
- Questions

## Loan Purchase Instruction Package

- 	Instructions for submission of Loan Purchase documents described during this webinar are available at _[www.federalstudentaid.ed.gov/ffelp](http://www.federalstudentaid.ed.gov/ffelp)__ _
- 	Electronic Announcements:
- #23 Initial Document Submission Instructions;
- #26 Bill of Sale Submission Instructions; and
- #27 Loan Transfer Conversion File Layout Submission Instructions

## 45-Day Notice

- See Electronic Announcement #23 for:
- 45-Day Notice of Intent to Sell Loans form; and
- Instructions for submission of the form and related schedule
- 45-Day Notice of Intent to Sell Loans includes a Projected Loan Schedule Summary of Loans to be Sold.
- Only “Eligible Loans”
- 45-Day Notice of Intent to Sell is sent as a PDF attachment to an email addressed to _[ED.Servicer@ed.gov](mailto:ED.Servicer@ed.gov)__.  Subject line should say “45-Day Notice of Intent to Sell”._

## 45-Day Notice

- 45-Day Notice must be received by the Department not less than 45 Days before the Requested Sale Date.
- Separate 45-Day notices (may be for the same Purchase Date) for:
- Straight PUT
- PUT from a Participation Interest
- Loans for each third party lien holder
- ED will schedule the Purchase Date. If requested Purchase Date during ED blackout period, next available Purchase Date will be used.  High volume on a day may result in a change to the requested Purchase Date.

## 45-Day Notice

- Within 48 hours of receipt of the 45-Day Notice of Intent to Sell Loans, the Seller will receive an acknowledgement of receipt from ED with the scheduled Purchase Date.
- Seller will be requested to provide:
- Servicer contact information;
- Secured Lender (Lien Holder) information, if applicable;
-  Third party payment instructions, if applicable.

## Schedule of Available Purchase Dates

| Month | Last Date for Funding / “Purchase” | 45-Day Notice Due to "Put" by last “Purchase Date” |
| --- | --- | --- |
| Sep-08 | 9/26/2008 | 8/12/2008 |
| Oct-08 | 10/31/2008 | 9/16/2008 |
| Nov-08 | 11/24/2008 | 10/10/2008 |
| Dec-08 | 12/31/2008 | 11/16/2008 |
| Jan-09 | 1/30/2009 | 12/16/2008 |
| Feb-09 | 2/27/2009 | 1/13/2009 |
| Mar-09 | 3/31/2009 | 2/14/2009 |
| Apr-09 | 4/30/2009 | 3/16/2009 |
| May-09 | 5/29/2008 | 4/14/2008 |
| Jun-09 | 6/30/2009 | 5/16/2009 |
| Jul-09 | 7/31/2009 | 6/16/2009 |

- Selling Lenders are encouraged to schedule sale dates throughout the month

## Schedule of Available Sale Dates - Example

| Step | Date | Entity | Activity |
| --- | --- | --- | --- |
| 1 | 10/10/2008  
 | Seller
(FFEL Lender/Holder) | Submits 45-Day Notice of Intent to Sell to ED Servicer. Scheduled Purchase Date is 11/24/2008.
 |
| 2 | 10/13/2008 
 | ED Servicer | Coordinates with Seller’s Servicer to perform intersystem test of conversion transfer file (applies to 1st sale only).
 |
| 3 | 11/11/2008 | Seller’s Servicer | On scheduled file transfer date, sends the conversion file to the ED Servicer.
 |
| 4 | 11/11/2008 -
11/14/2008 | Seller’s Servicer
ED Servicer | Work to resolve any data file exceptions and edits, including loan eligibility issues.
 |
| 5 | 11/14/2008 | ED Servicer | Creates Pre-sale Loan Schedule with totals and sends to Seller’s Servicer.
 |
| 6 | 11/17/2008 | Seller
 | Submits Bill of Sale to ED Servicer with:
Final Loan Schedule Summary;
Final Loan Schedule;
Security Release Certification, if applicable;
Notice of Assignment and Designation of Payee Financial Institution form, if applicable. |
| 7 | 11/24/2008 | Department of Education | Executes Bill of Sale and purchase funds are transferred on the Purchase Date. |

## Conversion Transfer File Requirements

- If first time sale to the Department, ED Servicer will work with Seller’s Servicer to coordinate intersystem test of the first data file.
- Nine (9) Business Days prior to Purchase Date, Seller’s Servicer will provide ED Servicer the Loan Transfer/Conversion File in the required format.
- Loans in detail report must be same loans as reported with data from the 45-Day Notice of Intent to Sell.
- Loan Transfer/Conversion File specifications are attached to Electronic Announcement #27.

## Conversion Transfer File

- ED Servicer will perform eligibility and data integrity edits on the loan data in the conversion file.
- Seller’s Servicer will be contacted by phone and email, during the three (3) business days after receipt of the conversion file.
- ED Servicer will work with the Seller’s Servicer to resolve any loan eligibility and data exceptions.  In eligible loans will will be removed from the conversion file.
- Revised sales totals (if needed) will be calculated by the ED Servicer and reported on standard Pre-Sale Reports.

## Pre-sale Reporting to Selling Lender

- Six (6) business days prior to sale, ED Servicer will deliver Final Pre-Sale Reports to the Seller.
- Pre-Sale Reports will include a calculation of the final sale purchase price including principal and interest outstanding through sale date, return of the 1% origination fee, and $75.00 per loan.
- Pre-Sale Reports will also include a detailed listing of loans included in the sale.

## Pre-sale Reporting to Selling Lender

- Seller will review the Pre-Sale Reports to confirm loans included in sale and final purchase price.  Loans in detail report must be same loans as reported in conversion file – less exceptions.
- After reviewing the Pre-Sale reports, Seller will prepare the Bill of Sale and required Loan Schedule.

## Preparation of Bill of Sale Documents

- Bill of Sale documents to be submitted to ED on the fifth (5) business day prior to Purchase Date.
- Bill of Sale documents include:
- 	o    Formal Bill of Sale;
- 	o    Final Loan Schedule Summary;
- 	o    Loan Schedule (Detail Listing of Loans Sold;
- 	o    Security Release Certification (if applicable);
- 	o    Notice of Assignment and Designation of 		Payee Financial Institution Form (optional) or;
- 		a subsequent notification of receipt of funds by 	the Secured Lender

## Preparation of Bill of Sale

- Two forms of Bill of Sale (see EA #27) –
- Bill of Sale to be used by lenders/sponsors and custodians for loans in which the department holds a Participation Interest under the Loan Participation Purchase Program.
- Bill of Sale form to be used for loans that will be sold directly by the lender to the Department, outside of a participation interest.
- Will also identify of any loans subject to a security interest that are to be PUT to the Department.
- Submitted as PDF attachment to email addressed to _[ED.servicer@ed.gov](mailto:ED.servicer@ed.gov)__.  Subject line should indicate Bill of Sale and loan sale date._

## Multiple Sale Transactions - Example

- Lender wants to sell 1,000 loans
- 700 with no security interest
- 200 with a security interest from secured party #1
- 100 with a security interest from secured party #2
- Treat as 3 separate sales, with either:
- Same Purchase Date (or)
- Staggered Purchase Dates

## Document Flow Example – No Security Interest

- Sale of 700 Loans (no security interest)
- 45 Day Notice with Projected Loan Schedule Summary of Loans to be Sold
- Pre-Sale and Settlement
- Formal Bill of Sale
- Final Loan Schedule Summary of Loans Sold
- Final Loan Schedule – Loan Detail

## Document Flow Example – Security Interest

- Sale of 200 Loans with a Security Interest
- 45 Day Notice with Projected Loan Schedule Summary of Loans to be Sold
- Pre-Sale and Settlement
- Formal Bill of Sale, with named Secured Lender
- Final Loan Schedule Summary of Loans Sold
- Final Loan Schedule – Loan Detail
- Security Release Certification
- Notice of Assignment and Designation of Payee (optional) or notification that Secured Party has received funds

## Collateral Documentation

- By Purchase Date, Seller transmits loan documents to the ED Servicer.  Loan documents include –
- Original or  copy of the Master Promissory Note (MPN);
- School certification record if MPN not executed for the loan - Prior MPN used.
- Electronic “session data” if MPN was executed electronically (e-signed).  All data that demonstrates the e-sign process that was used by the borrower, including the electronic signature.  Session data must contain date and time audit trails.

## Settlement at Purchase Date

- ED Servicer will process the sale on the required loan Purchase Date.  Ownership of loans will transfer to ED as of the Purchase Date.
- ED Servicer will assume servicing for all loans included in the sale, including –
- Notifying borrower;
- Reporting to the Guaranty Agency at end of Purchase Date month;
- Reporting to NSLDS.

## Funding at Purchase Date

- Payment for the loan sale will be directed to Seller’s existing 799 payment bank account information, unless –
- Loans are from a Participation Interest, then funds will be sent directly to the Custodian.
- Seller has requested payment be made to a third party with security interest in the loans.

## Reconciliation and Adjustments

- Reconciliation will be performed by the ED Servicer comparing the final amount funded to the Bill of Sale totals and the Final Loan Conversion Reports. If exceptions are noted, ED will work with the Seller.
- Post sale adjustments received by the Seller, such as loan cancellations, school refunds, or borrower payments, must be forwarded to the ED Servicer for processing and application to the borrower accounts.

## Loan Transfer Reporting

- After loan sale, the ED Servicer will report to the Guaranty Agency the sale of loans to ED and that the GA no longer has responsibility for the loans.
- The GA will receive and process the loan sale (transfer) transactions and report such to NSLDS.
- The GA’s Forms 2000 annual reporting will show the loans transferred out.
- After loan sale, the ED Servicer will provide on-going status and update reporting to NSLDS for the ED purchased loans.

## Questions

- 	Questions may be asked now or submitted to the following e-mail address:
- 	loan.purchase@ed.gov