Mandatory and Judgment Assignments

Rich LentschEducational Credit Management Corporation

Sandra McCulloughU. S. Department of Education

Thomas WantuckKentucky Higher Education Assistance Authority

MANDATORY ASSIGNMENT

• Part 1 – FFEL Assignment Formats

• Part 2 – Documentation Requirements

PART 1 FFEL ASSIGNMENT FORMATS

NEW FIELDS / BOXES TO FFEL ASSIGNMENT FORMATS

Outstanding Capitalized Interest:

Definition: REQUIRED. Amt. of capitalized interest that is included in the "Current Principal Balance" field. Do not include any amounts that were previously satisfied by payments and reported to the borrower and the IRS on a 1098-E form. Zero fill if loan was disbursed prior to Sept.1, 2004, or if the amount in the "Current Principal Balance" field does not contain any outstanding capitalized interest.

Outstanding Loan Origination Fee:

Definition: REQUIRED. Amount of loan origination fee that is included in the "Current Principal Balance" field. Do not include any amount that was previously satisfied by payments and reported to the borrower and the IRS on a 1098-E form. Zero fill if loan was disbursed prior to September 1, 2004, or if the amount in the "Current Principal Balance" field does not contain any outstanding loan origination fees.

Ineligible Borrower Indicator:

Definition: REQUIRED. Enter “I" if the borrower is an ineligible borrower—for example, because the student withdrew, or was expelled, prior to the first day of classes, or failed to attend classes, and the borrower did not repay the loan proceeds. Enter "F" if your agency was notified that the borrower was convicted of Title IV fraud, and the loan was requested for assignment by the Office of Inspector General or by the Department on behalf of the Office of Inspector General. Space fill if not applicable.

 

Rehabilitation Indicator:

Definition: REQUIRED. Enter "Y" if loan was previously rehabilitated; otherwise, enter "N".

Electronically Signed Note Indicator:

Definition: REQUIRED. Enter “Y” if loan was made under an electronically signed promissory note or Master Promissory Note (MPN). Enter “N” if loan was not made under an electronically signed promissory note or MPN.

Originating Lender of the Electronic Note:

Definition: REQUIRED if loan was made under an electronically signed promissory note ("Y" in Electronically Signed Note Indicator, File Position 1430). Valid six-digit identification number of lender that originated the electronically signed promissory note or MPN, followed by two zeroes. Space fill if loan was not made under an electronically signed promissory note or MPN ("N" in Electronically Signed Note Indicator, Position 1430).

NEW FIELDS ASSIGNMENT FILE TRAILER

RECORD

Assignment File Trailer Record

Outstanding Capitalized Interest-Grand Total: The grand total of the Outstanding Capitalized Interest fields for all detail records on the file.

Outstanding Loan Origination Fee-Grand Total: The grand total of the Outstanding Loan Origination Fee fields for all detail records on the file.

EXISTING FIELDS/BOXES ON FFEL ASSIGNMENT

FORMATS

Current Collection Fees:File Positions 331-341/Box 80

The “Current Collection Fees” field/box, should not include any amount based on contingency fees that were not incurred as a result of payments recovered by a contingent fee contractor collecting that debt.

Date of Default File Positions 427-434/Box 56

In the Mandatory Assignment process, a valid date is required. In the Total and Permanent Disability Assignment process, if a loan is not in default, guaranty agencies should zero fill Positions 427-434 (or leave Box 56 blank on the Assignment Form).

Current Interest BalanceFile Positions 309-319/Box 78

Current Balance DateFile Positions 383-390/Box 71

• The “Current Interest Balance” field/box should be populated with the total interest amount outstanding as of the Current Balance Date.

• The “Current Balance Date” field/box should be populated with the date up to which interest was last accrued by the guaranty agency.

PART 2 DOCMENTATION REQUIREMENTS

Hard Copy Files

• Loan Application• Promissory Note • Guaranty agency Payment History• If litigation of any kind was commenced

(including bankruptcy proceedings), include documentation in connection with the litigation, in particular any documents that show the disposition of the suit.

Amendment to RegulationsEffective July 1, 2008

Added Additional Documentation Requirements:

• The record of the lender’s disbursement of Stafford and PLUS loan funds to the school for delivery to the borrower

• If the MPN or promissory note was signed electronically, the name and location of the entity in possession of the original electronic MPN or promissory note.

Disbursement Records

The Department requires disbursement records for Stafford and PLUS loans made under an electronically signed promissory note and for all Stafford and PLUS loans made under an MPN, regardless of whether the MPN was signed electronically.

Disbursement Records

Guaranty agencies may submit one of the following documents that reflects the date and amount of each disbursement:

1. Copy of a roster from the lender to the school that reflects the date and amount of each disbursement. The agency must obliterate information that does not pertain to the account being assigned.

Disbursement Records2. Copy of a screen print from the lender’s database

reflecting the date and amount of each disbursement.

3. Copy of a screen print from the guaranty agency’s database reflecting the date and amount of each disbursement.

4. Copy of the Notice of Loan Guarantee and Disclosure Statement that reflects the date and amount of each disbursement.

5. Copy of the NSLDS Loan Summary Page(s).

Name/Location Entity Information

This information is required for all electronically signed promissory notes/MPNs.

Name/Location Entity Information

• In the assignment process, we are looking for the name and address of the lender that originated the electronically signed promissory note/MPN.

• Guaranty agencies should include a sheet of paper with the copy of an electronically signed promissory note/MPN with the certification and, below the certification, provide the name and address of the lender that originated the note.

• As discussed in Part 1 of this presentation, once the revised assignment formats are implemented, guaranty agencies will not have to include the name and address of the lender that originated the promissory note/MPN with a copy of the note, as they will be providing this information in the assignment formats.

Name/Location Entity Information

In the meantime, if a guaranty agency has a screen print that contains the name and address of the lender that originated the electronically signed note, a guaranty agency may submit the screen print, instead of providing this information on a sheet of paper. The agency must, however, send a letter to the Department.

Name/Location Entity Information

The letter must state that the name and address indicated on the (Name of Screen) , accompanying an electronically signed promissory note or MPN, will always be the lender that originated the electronically signed promissory note or MPN.

Name/Location Entity Information

Mandatory AssignmentContact InformationIf you have any questions regarding the Mandatory Assignment process, please contact:

Larry Graeber(415) 486-5648Lawrence.Graeber@ed.gov

Thank you for attending this presentation.Sandra McCullough

Judgment Assignments

Judgment Assignments• Voluntary participation• Initiated by the Department of Education (ED)• Provides guarantors with a solution for loans in

their portfolio with active judgments that cannot currently be subrogated via the mandatory assignment process

• ECMC is holding and processing on the behalf of ED until they can accept judgments

Process Overview• Memorandum of Understanding (MOU)

– MOU between ECMC and the transferring guarantor

• Guarantor relinquishes and assigns all right, title and interest in and to the judgment account

• ECMC reserves the right to request additional documentation as necessary

• Rejection if documentation is not provided• Loans will be free of any encumbrance

Process Overview

• Power of Attorney (POA)– Gives ECMC the power to act on behalf of the

transferring guarantor to obtain a release of the judgment

Process Overview

• File transmission– File follows encryption protocol and should be

sent via FTP – Closely follows the bankruptcy transfer layout

which closely follows the mandatory assignment layout

– If the judgment information is held online, ECMC can work with the guarantor to eliminate or reduce the documentation requirement

Process Overview• Manual submission

– Closely follows the manual bankruptcy transfer process which closely follows the manual mandatory assignment process

• Documentation– Documentation should be sent when the file is

submitted – Judgments are assigned in mass by the

assignment letter and manifest – Original copy of the judgment document is

required if the guarantor does not provide the judgment information in an electronic format

Process Overview

• Schedule– Guarantor driven– Per agreement, have to be completed by

October 2009– Maximum of 20,000 loans per submission

Process Overview

• Eligible loans– Minimum balance of $100.00 principal per loan– Only loans where a judgment has been

obtained and a copy of the judgment can be provided

• Rejects– As with bankruptcy transfers, there is no

threshold for rejects– Handled case by case

Process Overview

• Transferred in error– Process to reverse transfer

Process Overview

• Acknowledgment– FTP

• System generated file including loans that are accepted

• Loans transferred and not yet processed will be acknowledged on a subsequent file

– Paper• If the guarantor cannot accept an automated

acknowledgement• Loans will be acknowledged at a submission

level

Guarantor ContactsDepartment of Education

Dwight Vigna – 202.377.3436

Dwight.Vigna@ed.gov

Guarantor Contacts

ECMC

• IT-set up, testing etc.Rich Lentsch – 651.325.3332rlentsch@ecmc.org

• LegalDan Fisher – 651.325.3042dfisher@ecmc.org

Guarantor Contacts

ECMC

• Balance AdjustmentsAttention: Payment Processing UnitP.O. Box 64909St. Paul, MN 55164-0909

Borrower Contacts

• Phone InquiriesTelephone 800.780.7997Fax 651.325.3359Email collections@ecmc.org

• Written InquiriesECMCAttention: Account ServicingP.O. Box 8809Richmond, VA 23225

Borrower Contacts

• Payment SubmissionECMCLock Box 8639P.O. Box 75848St. Paul, MN 55175-0848

Bankruptcy Transfer

• New fields can be sent– Outstanding Capitalized Interest

• Field position 1406-1416

– Outstanding Loan Origination Fee• Field position 1417-1427

– Ineligible Borrower Indicator• Field position 1428

Bankruptcy Transfer

• New fields can be sent– Rehabilitation Indicator

• Field position 1429

– Electronically Signed Note Indicator• Field position 1430

– Originating Lender of the Electronic Note• Field position 1431-1438

Assignment of Judgments

• Agreement between FSA and ED authorizing ECMC to handle collections

• GA’s authorized to remove judgment amounts from beginning inventory reported to FSA for FY 2008-2009

• Beginning in FY 2010, GA’s inventory must include unassigned judgment balances in FSA recovery reports

Assignment of Judgments

• Assigned Balances are reported on Line MR-29 of monthly GAFR

• MOU requirement between GA and ECMC to transfer ownership of judgments through September 30, 2009

• ECMC Legal Counsel: Dan Fisher 651-325-3042

File Transfer Process

Performed file testing for:• 2000 accounts-Initial MOU required just for this test

– 1,000 accounts.– 5,000 accounts.– 20,000 accounts for a stress test– Testing was performed on samples of accounts with

verified accurate judgment data.– Testing was performed on a loan level basis-to ensure

ECMC could handle more than 5,000 loans records based on ED’s mandatory limit.

File Transfer Process

• KHEAA tested about 50 records but our total population was much less than HESC.

File Transfer Process • ECMC Bankruptcy File transfer layout used for

Judgment Transfer (similar to ED file layout)

• At time of initial transfer, ECMC does not require hard copy judgments, only files

• Four new assignment flags were added to existing programs to track status of transfer; Pre-selected, Pending, Accepted and Rejected Accounts

File Transfer Process

• KHEAA did not add any flags but did manipulate loan status within our programs to select correct judgment records.

File Transfer Process

• Excel spreadsheet is used to prepare a file with the judgment information for each borrower SSN and name and is then electronically transferred to ECMC:– Judgment Date– Judgment Amount– Index Number– Court Name– Court County– Court State

File Transfer Process

• HESC transmits 2 files for ECMC to update to their system:– Excel spreadsheet is used to prepare a file with

the judgment account information for each borrower and then transferred to ECMC.

– ECMC Bankruptcy File used to transfer loan level data. Changes were incorporated into programs for the Header Record and various litigation fields on the file

File Transfer Process

• KHEAA transmits 1 file for ECMC to update to their system.

• Flat file transmitted via FTP using PGP encryption.

• Sent hard copy of judgments to ECMC

File Transfer Process

• ECMC Primary Contacts for testing & production files:

– Rich Lentsch-Senior Business Analyst: rlentsch@ecmc.org 651-325-3332

– Doug Hunter-Developer IT: dhunter@ecmc.org 612-221-0566 x 5149

– Sue Rehak-Supervisor Merge Processing: srehak@ecmc.org 651-325-3301

Selection Criteria• Criteria for selection of accounts:

– Principal balance > 100.00– Judgment containing only FFELP loans (no

state loans) – NYS judgment– Judgment information is complete & accurate– February 09, added criteria for balance > 3,000

in efforts to allow for Tax offset processing during the busy tax season

Selection Criteria• KY state judgments

– Removed judgments that were currently paying and within $500.00 of paying in full.

Selection of Accounts• Order we submitted judgments:

– HESC transferred judgments from Court with heaviest volume and accurate judgment data upon initial assignment. The volume of inventory required 2 separate submissions. HESC had obtained a file of these judgments from the court which HESC used to update the data to the system.

Selection of Accounts– We then selected the other courts by size:

• NYC civil courts• Other NY courts

– HESC then selected accounts from a variety of courts on all the other submissions.

Selection of Accounts

• Accounts without complete judgment information on HESC system:– Order the judgments from HESC micro-files– Use various fields to update HESC system– If the judgment copy not clear enough to read,

HESC contacts the court (if this could be determined) and obtains the information

Selection of Accounts

• Accounts without complete judgment information on KHEAA system:– Order the judgments from KHEAA micro-files– Use various fields to update KHEAA system– Were able to locate all judgment information

without contacting courts.

Selection of Accounts

• Accounts without complete judgment information on HESC system:– If the judgment taken from an OCA and copy

not legible for system updating, attempt to contact the OCA (if this could be determined and vendor is still a HESC vendor) and obtain the information

Selection of Accounts

• Frequency of submissions:– Initial submissions weekly: (November &

December 08, January 09).– Evolve into monthly submissions in February

2009 – the number of accounts assigned decreasing throughout tax offset season – in an effort to reduce judgment assignments in process of tax offsets

Selection of Accounts

• KHEAA was able to submit entire judgment portfolio in one file transfer. – Exceptions were minimal and redone then

submitted via manual paper forms.

Accounts Selected HESC Reports• HESC’s system generates reports for:

– Manifest – List of accounts sent to Sue Rehak along with Letter assigning all rights and titles to judgment accounts on the manifest

– List of accounts that are being recalled from HESC Outside Collection Agencies for assignment – Recall Report (by OCA).

Accounts Selected HESC Reports• HESC’s system generates reports for:

– Threshold errors – accounts selected but failed HESC edits. (worked internally)

– List of accounts selected and sent to ECMC. Converted to Excel for HESC records & analysis

Accounts Not Selected Due to HESC System Edits• Accounts that error at HESC and were not sent to

ECMC:– Errors are worked and HESC staff updates

internal Collection System.– Once corrected, selection program will select

and transmit account in a future run if the account continues to meet the selection criteria and is error free.

Accept File

• ECMC Return File used for Acceptance and updating HESC system– File could contain both judgments and

bankruptcies.– Program established that splits file into a

separate judgment file and a bankruptcy file.– Receive e-mail identifying types of accounts

from accept file.– Judgment update program is run prior to

bankruptcy updates.

Accept File

• ECMC Return File used for Acceptance and updating KHEAA system.

• Receive e-mail identifying types of accounts from accept file.

• KHEAA files only contained judgments.

Accept File-HESC Reports• Lists accounts and financial transactions

performed on each account.• Converted to Excel for HESC records &

analysis.• Systematically places comments on each

account indicating “transferred to ECMC”

Accept File-HESC Reports• List provided to KHEAA accounting to update loan

status in system of record. – Clear the balance.

Rejection Process

• Accounts that Error for ECMC processing:– ECMC use NSLDS and other resources

available to them to locate file errors for disbursal, guarantee, and withdrawal dates.

– ECMC faxes spreadsheet to HESC for school codes, lender codes.

– HESC to research and update the spreadsheet with the information requested.

Rejection Process

• KHEAA had minimal errors that were handled via manual process.

Rejection Process

• Accounts that Error for ECMC processing:– No accounts reject electronically from ECMC –

ECMC works with HESC to obtain any corrected information.

– No manual resubmissions required by HESC at this time.

Additional Work after ECMC Acceptance and Pitfalls• Need to report payments, tax offsets & reversals

received by HESC during transmission & after acceptance

• ECMC (post transfer) requests for:– P-Notes– Judgments– Pre & post judgment pay histories– Legal correspondence– Bankruptcy, etc. documentation

Recalls

• Recall occurrences of accounts for various reasons:– Payments & tax offsets that pay the account in

full during the transition time from selected to acceptance.

– False certification & disability applications pending review. HESC has since initiated a flag to prevent these from being selected.

– HESC receives official vacate of Judgment from Court

Questions?