# Presentation: 040083

## FFEL Loan PurchaseCommitment Program

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

- Master Loan Sales Agreement and  Operations Webinar
- August 22, 2008

## 
Introduction

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

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

## Logistics

- Title:  Loan Purchase Program
- Purchase Operations
- Date:  August 22, 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.
Loans can be redeemed by lender
Loans can be sold to ED 

- 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.
- Loans can be redeemed by lender
- Loans can be sold to ED

- Two Programmatic Components

## Two Programmatic Components

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

## Webinar Objectives

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

## Agenda

- Initial Approval Package – Loan Purchase Request
- Sales Process
- Eligible Loans
- 45-Day Notice of Intent to Sell Loans
- Conversion Transfer File
- Pre-Sale/Bill of Sale
- Settlement at Purchase Date
- Post-Settlement Reconciliation
- Loan Transfer Reporting
- Process Flow Example
- Questions

## Loan Purchase Instruction Package

- 	Instructions for submission of documents are available in Electronic Announcement #23 at _[www.federalstudentaid.ed.gov/ffelp](http://www.federalstudentaid.ed.gov/ffelp)_

## Initial Approval Package Matrix

| Form  | Exhibit | Who Executes | Frequency | When Due | Process Flow |
| --- | --- | --- | --- | --- | --- |
| Notice of Intent to Participate | F | Eligible Lender | Once | For loans as of 5/1/08, execute NOI as of 
7/31/08 |  Eligible Lender sends via pdf format in email to ED web email address (ffel.agreementprocess@ed.gov).
 ED sends acknowledgement of receipt email to Eligible Lender, acknowledging official receipt date. |
| Adoption Agreement | A | Seller, (ELT),
ED | Seller will submit to the Department once | Not less than twenty (20) Business Days prior to the first purchase date |  Exhibits A, C, and D submitted together.
 Seller sends hardcopy original with pen/ink signature.
 ED sends acknowledgement of receipt email to Seller. |
| Seller’s Officer's Certificate (including): | C | Seller |  |  |  |
| Attachment I:  Certificate of Incorporation and by-laws; certificate of limited partnership and limited partnership agreement; certificate of formation and limited liability company operating agreement |  |  |  |  |  |
| Attachment II:  "Resolutions" |  |  |  |  |  |
| Attachment III:  Certificate of Good Standing of the Seller |  |  |  |  |  |
| Opinion of Counsel to the Seller | D | Counsel to Seller |  |  |  |

## Loan Purchase Commitment Program 
Margaret Ayanian

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

- Loan Purchase Commitment Program
- Margaret Ayanian
- Business Operations
- Federal Student Aid
- U.S. Department of Education

## Loan Purchase Request Matrix

| Form  | Exhibit | Who
Executes | When Due | Process Flow |
| --- | --- | --- | --- | --- |
| 45-Day Notice of 
Intent to Sell Loans and Projected Loan Summary Schedule | Form – EA23 | Seller | 45 days before the 
Purchase Date |  Seller sends completed form to ED Servicer via pdf format.
 ED Servicer sends acknowledgement of receipt email to Seller, acknowledging receipt date and requests contact information to begin transfer conversion process.
 ED Servicer contacts Seller’s Servicer to coordinate sale dates including File Transfer Date and Sale Closing Date.
 ED Servicer works with Seller’s Servicer to coordinate data file transfer for the sale; if first time purchase from this Seller, ED Servicer will coordinate intersystem test of the first data file.
 ED Servicer works with Seller’s Servicer to coordinate collateral transfer. |
| Bill of Sale, Loan 
Schedule Summary, 
and optional Notice 
of Assignment and 
Designation of Payee 
Financial Institution | B 
Forms – EA# | Seller, 
ED | 5 Business Days 
before the
Purchase Date |  Seller sends completed documents to ED via pdf format.
 ED sends acknowledgement of receipt email to Seller. |
| Security Release 
Certificate, if needed | E | Seller | Attached to
Ex B, if any Loans 
are subject to a
Security interest. |  Seller sends completed form to ED via pdf format.
 Security Release Certificate only applies to loan purchases outside a Participation Interest with ED. |

## Eligible Loans

- Section 3.I Eligible Loan – Master Loan Sale Agreement
- Only Stafford and PLUS loans made for a loan period that includes, or begins on or after, July 1, 2008 and for which the first disbursement is made on or after May 1, 2008 and no later than July 1, 2009.
- Loans must be fully disbursed prior to purchase date for loan sale.
- To include loans for sale with first disbursements made between May 1 and June 30, 2008, the Department must have received a Notice of Intent to Participate from the originating lender by July 31, 2008.
- The date the Notice of Intent was received by the Department determines the first disbursement date for loan eligibility.

## Eligible Loans (continued)

- Section 3.I Eligible Loan – Master Loan Sale Agreement
- Loans may not have any borrower benefits, except –
-  An upfront borrower fee reduction;
- .25% interest rate reduction for automatic repayment.
- Loans to be sold must include all subsidized and unsubsidized 2008-2009 loans for the borrower.

## Eligible Loans (continued)

- Section 3.I Eligible Loan – Master Loan Sale Agreement
- Servicing agreement must be able to be terminated with no more than 30 days notice for loans to be sold.
- Loans may be sold even if in, or previously in, the Participation Program.
- Loan not eligible if a defaulted or bankruptcy loan.
- Loan not eligible if Consolidation Loan.
- Loan not eligible if Lender of Last Resort loan.

## 45-Day Notice

- Section 4.A Sale/Purchase - Master Loan Sale Agreement
- Lender submits a 45-Day Notice of Intent to Sell Loans along with a Projected Loan Schedule Summary of Loans to Be Sold.
- 45-Day Notice of Intent to Sell includes name of selling lender, requested date of sale, total purchase price, and includes certifications made by the selling lender for the loan sale.
- 45-Day Notice of Intent to Sell is completed, signed and dated and sent as a PDF attachment to an email addressed to _[ED.servicer@ed.gov](mailto:ED.servicer@ed.gov)__._

## Projected Loan Schedule Summary

## Projected Loan Schedule Summary

- Section 3.R Loan Schedule – Master Loan Sale Agreement
- Projected Loan Schedule Summary of Loans to Be Sold provides high level summary data for the loans included in the sale:
- Requested Purchase Date;
- List of Originating Lender ID’s and date NOI’s to participate for Loans included in the Sale were received by ED;
- Totals of Loans to be Sold by Loan Type including number of loans, original amount disbursed, estimated principal balance and accrued borrower interest at purchase date; and
- Projected Final Purchase Price for the Loan Sale includes Total Outstanding Principal Balance and Accrued Borrower Interest at Purchase Date, Reimbursement of 1% Lender Fee, and $75 Purchase Fee per loan.

## Conversion Transfer File

- If first time sale to the Department, the ED Servicer will work with Selling Lender’s Servicer to coordinate intersystem test of the first data file.
- Prior to Purchase Date the Selling Lender will provide the ED Servicer a conversion transfer file of the loans to be included in the sale.  Must be consistent with data from 45-Day Notice.
- Conversion transfer file will be in a standard format as provided by ED.
- Upon receipt, the ED Servicer will perform eligibility and data integrity edits on the loans included in the conversion transfer file.
- Loan eligibility and data exceptions will be reported to the Selling Lender for correction and/or exclusion from the loan sale.

## Pre-Sale/Bill of Sale

- Just prior to Purchase Date the ED Servicer will prepare Final Pre-Sale Reporting for the loan sale.
- Pre-Sale Reports will include a calculation of the final sale purchase price and will include a detailed listing of loans included in the sale.
- Pre-Sale Reports will be provided to the Selling Lender.
- Selling Lender will review the Pre-Sale Reports to confirm loans included in the sale and final purchase price. Must be consistent with data from 45-Day Notice.
- Selling Lender will prepare the Bill of Sale documents.

## Pre-Sale/Bill of Sale

- Bill of Sale documents include the formal Bill of Sale, Final Loan Schedule Summary, detailed listing of loans sold (received from ED Servicer), Security Release Certification, and Notice of Assignment and Designation of Payee Financial Institution form, if applicable.
- Bill of Sale documents are completed, signed and dated and sent as a PDF attachment to an email addressed to _[ED.servicer@ed.gov](mailto:ED.servicer@ed.gov)__._

## Settlement at Purchase Date

- Section 4.B-G Sale/Purchase – Master Loan Sale Agreement
- ED Servicer will process the loan sale.  Ownership for the loans will change from the Seller to the Department as of the Purchase Date.
- ED Servicer will assume servicing for all the loans included in the loan sale as of the Purchase Date.
- Selling Lender will receive payment for the loan sale using the Seller’s existing 799 payment bank account information.
- If loans are Put from a Participation Interest, funds will be sent to the Custodian’s bank account.
- Will pay third party that has a security interest in the loans only if Seller provides a “Notice of Assignment and Designation of Payee Financial Institution” form will be required.
- By Purchase Date, the Selling Lender will send loan documents (promissory notes) to the ED Servicer.

## Post-Settlement Reconciliations

- A 3-way reconciliation will be performed between the amount paid to the Bill of Sale totals to the Final Loan Conversion Reports.
- If exceptions are noted, ED will work with the Seller.
- If any post sale adjustments are received by the Seller, such as loan cancellations, school refunds, or borrower payments, the funds must be forwarded to the ED Servicer for processing and application to the borrower accounts.

## Loan Transfer Reporting Process

- 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.

## Process Flows Example

- The following example is for illustrative purposes only and covers the following:
-  Approval Process
-  Notification of Loan Sale
-  Bill of Sale
-  Purchase Closing

## Example of Process Flows

| Step | Date | Entity | Activity |
| --- | --- | --- | --- |
| 1 | 7/31/2008 | Selling Lender | ED receives Notice of Intent (NOI) to Participate.
 |
| 2 | 8/25/2008 | Selling Lender | Completes and submits Adoption Agreement, Seller's Officer's Certificate, and an Opinion of Counsel to ED.
 |
| 3 | 9/2/2008 | Department of Education | Approves Adoption Agreement.
 |
| 4 | 9/4/2008 | Selling Lender | Notifies the Department of Education of pending loan sale by submitting a 45-Day Notice of Intent to Sell to ED Servicer. Scheduled sale date is 10/20/2008.
 |
| 5 | 9/6/2008 

 | Selling Lender | Coordinates with ED Servicer to perform intersystem test of conversion transfer file (applies to 1st time sale only).
 |
| 6 | 10/8/2008 | Selling Lender | On scheduled file transfer date, sends the conversion file to the ED Servicer.
 |

## Example of Process Flows

| Step | Date | Entity | Activity |
| --- | --- | --- | --- |
| 7 | 10/9/2008  
 | Selling Lender | Works with ED Servicer to handle any data file exceptions including loan eligibility issues.
 |
| 8 | 10/13/2008 
 | ED Servicer | Pre-sale conversion file with totals is prepared by ED Servicer and forwarded to Selling Lender.
 |
| 9 | 10/13/2008 | Selling Lender | Selling Lender prepares a Bill of Sale and submits to ED with the following attachments:
Final Loan Schedule Summary, based on totals from the conversion file;
Security Release Certification; and
Notice of Assignment and Designation of Payee Financial Institution form.
 |
| 10 | 10/20/2008 | ED Servicer | Processes sale on the sale date.  Ownership is changed by processing the loan sale transaction on the servicing system.
 |
| 11 | 10/20/2008 | Department of Education | Executes Bill of Sale and purchase funds are transferred on the Purchase Date.
 |
| 12 | 10/21/2008 | Department of Education | Funds available one Business Day after the Purchase Date.
 |

## Questions

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