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Common Review Initiative _____. Mike Hawkes, ECMC Brent Dove, USA Funds Penny Hagan, MOHELA. CRI – A One-Year Update. Mike Hawkes Educational Credit Management Corporation. CRI Concept. Guarantors are combining resources to conduct a single review of large lenders and servicers

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Common Review Initiative_____

Mike Hawkes, ECMC

Brent Dove, USA Funds

Penny Hagan, MOHELA


CRI – A One-Year Update

Mike Hawkes

Educational Credit Management Corporation


CRI Concept

  • Guarantors are combining resources to conduct a single review of large lenders and servicers

  • These CRI reviews will go toward meeting the requirements of 682.410(c)(1) for each participating CRI guarantor


CRI Goals

  • Improve the quality of lender program reviews conducted by guarantors (including non-CRI reviews)

  • Reduce redundancy of reviews by guarantors


CRI Approval

  • In March, ED approved CRI as a pilot project.

  • Pilot runs from January 1, 2004 through December 31, 2005.

  • Working on measurements of effectiveness to evaluate whether CRI should be permanent


Participating CRI Guarantors

  • 33 guarantors have signed CRI participation agreements

  • Non-participants currently are:

    • Alaska

    • CSAC/EdFund

    • New Hampshire

    • North Carolina


CRI Administration

  • Formed a CRI Council – meets monthly via conference call

  • Formally adopted a CRI review guide and workbooks for attribute testing

  • Adopted an administrative guide


CRI Leadership

  • Leaders are:

    • Aaron Cook – NELA Chair for 2004-05

    • Rick Buckingham – USA Funds Chair for 2006-07

    • Jim Elvekrog – Great Lakes Secretary

    • Carol Lindsey – TG Treasurer


CRI On-site Reviews

  • CRI review teams have conducted five on-site reviews in 2004:

    • CFS/Suntech

    • MOHELA

    • Wells Fargo

    • ACS

    • AES


Edfinancial Services

KHESLC

Nelnet

Sallie Mae

Educaid

Citicorp

Regions Bank

Potential for two additional reviews

2005 CRI Reviews


October 26-27 face-to-face meeting

Topics on agenda included:

Review scheduling and preparation

Workbook review and practice

Preparing and sending the report

IDEA software potential

CRI website

CRI Training


Public Site

www.nchelp.org

Click on “Initiatives”

Select “Common Review Initiative”

CRI Web Presence


CRI Public Site


Private site

Facilitate review team preparation

Storage of review files, workpapers

Security for each folder customized

CRI Private Site


CRI Private Site


CRI Private Site


CRI Private Site


CRI Private Site


Questions?

Mike Hawkes

804-267-7101

[email protected]


CRI – A Reviewer’s Perspective_____

Brent Dove, USA Funds


Review Scheduling

  • Contact lender/servicer to confirm dates are acceptable

  • Contact team members to ensure no conflicts exist

  • Contact ED lead reviewer

  • Obtain list of required reviews from CRI Review Scheduling & Lender Selection Workgroup


Review Planning

  • Contact guarantors with required reviews

    • Ensure list of lender codes is correct

    • Request error rate percentages for NSLDS

  • At least 75 days before the review, contact the lender/servicer

    • Verify review dates

    • Collect contact information

    • Send and discuss electronic questionnaire


Engagement Letter

  • List all guarantor names and corresponding code in body of letter

  • Specify period of review scope

  • Include list of data elements to be provided

  • Attach list of lender codes to be reviewed

  • Specify a “need by date” for data elements


Engagement Letter

  • Send 60 days before on-site review

  • Send courtesy copy of letter to all lenders for which the CRI review is being conducted at the servicer

  • Send courtesy copy of letter to ED lead reviewer


Engagement Letter

  • Questionnaire

  • Sample copies of due diligence notices

  • Copies of audits and program reviews completed within last two federal fiscal years

  • Data file containing all data elements


Data File

  • Borrower name and SSN

  • Lender ID

  • Servicer ID

  • Guarantor ID

  • Unique loan ID

  • Guarantee date

  • Loan type

  • Subsidy indicator


Data File

  • Loan period begin and end dates

  • 1st disbursement date and amount

  • Current loan status

  • Loan status date

  • Cancellation date and amount

  • Refund date and amount

  • Out-of-school date


Data File

  • Interest rate

  • Current principal balance

  • Capitalized interest balance

  • Deferment begin and end dates

  • Forbearance begin and end dates

  • Date entered repayment


Data File

  • Total payments

  • Days delinquent

  • Claim paid date

  • Loan purchase date

  • Loan sale date

  • Loan transfer date


School as Lender

  • Send letter to school, requesting the following documentation:

    • Organizational chart

    • Financial statements

    • Description of how I & SA payments were used for need-based grant programs


Random Samples

  • Run servicer’s data files through IDEA software to select a random sample

  • A sample of 179 accounts is selected for each CRI chapter

  • At least 30 days before the review, send a core sample of 29 accounts for each testing area


On-site Review

  • Entrance conference

  • Remain in constant contact with lender/servicer staff

  • Attend scheduled meetings

  • Exit conference


CRI Chapters

  • Chapter 1 - Origination and Disbursement

  • Chapter 2 – Conversion to Repayment

  • Chapter 3 - Deferments

  • Chapter 4 – Forbearances

  • Chapter 5 – Collection and Claims


CRI Chapters

  • Chapter 6 – Payment Application & Rate Changes

  • Chapter 8 – Credit Bureau Reporting

  • Chapter 9 – Purchase/Sale/Transfer

  • Chapter 10 – Consolidation Loans

  • Chapter 11 – NSLDS Reporting


CRI Chapter 1Origination and Disbursement

  • Verify each loan is supported by valid prom note

  • Verify correct interest rate determined

  • Verify lender provided required disclosure info

  • Verify lender obtained credit history for PLUS credit check


CRI Chapter 1Origination and Disbursement

  • Verify PLUS checks made co-payable

  • Verify proper negotiation/consummation

  • Verify proper reissue of disbursement

  • Verify proper late disbursement

  • Verify cancellations/refunds applied correctly


CRI Chapter 2Conversion to Repayment

  • Review written procedures for conversion to repayment

  • Verify out-of-school date

  • Verify borrower provided timely with complete repayment information

  • Verify timely conversion

  • Verify repayment terms correct


CRI Chapter 3Deferments

  • Review deferment forms to ensure compliance

  • Review written procedures

  • Verify borrower’s eligibility for specific deferment

  • Verify length of deferment is appropriate


CRI Chapter 3Deferments

  • Verify maximum number of months for deferment type not exceeded

  • Verify proper interest accrual

  • Verify lender reported deferment to theguarantor

  • Verify next payment due date timely


CRI Chapter 4Forbearances

  • Review forbearance forms to ensure compliance

  • Review written procedures

  • Verify request documented and processed timely

  • Verify length of forbearance documented


CRI Chapter 4Forbearances

  • Verify signed forbearance agreement obtained

  • Verify borrower eligible for forbearance type granted

  • Verify timely resumption of payments


CRI Chapter 5Due Diligence/Cure/Claim

  • Review written procedures for collection due diligence

  • Review due diligence letter language

  • Verify actual dates of phone calls selected from servicing history

  • Verify timeliness of due diligence letters and phone calls

  • Verify skiptracing initiated timely


CRI Chapter 6Payment Application & Rate Changes

  • Review procedures for allocating payments between principal, interest, etc.

  • Determine how partial payments and prepayments are handled


CRI Chapter 6Payment Application & Rate Changes

  • Determine procedure for handling credit balances and write-offs of small balances

  • Verify current interest rate is correct

  • Verify correct calculation of capitalized interest


CRI Chapter 8Credit Bureau Reporting

  • Verify that lender/servicer reported FFEL loan amounts within 90 days of disbursement

  • Verify correct outstanding balance reported

  • Verify delinquency status reported

  • Verify payment in full reported


CRI Chapter 9Purchase/Sale/Transfer

  • Review borrower notification to ensure proper information indicated

  • Review written procedures for processing purchases/sales/transfers

  • Verify borrower notified timely

  • Verify guarantor notified timely


CRI Chapter 10Consolidation Loans

  • Verify all required forms completed accurately

  • Verify that LVC completed by holder of each loan consolidated

  • Verify weighted average of interest rates properly calculated

  • Verify length of repayment period correctly calculated

  • Verify first payment due date set timely


CRI Chapter 11NSLDS Reporting

  • Verify current loan status matches lender history

  • Verify outstanding principal balance amount matches lender history

  • Verify outstanding principal balance date is accurate

  • Review written procedures for NSLDS reporting

  • Review submission error summary reports

  • Review unreported loan rates


Report Writing and ReviewClose-out

  • Lender/servicer given two weeks to resolve preliminary findings discussed at exit conference

  • Reviewer will compile draft report after servicer’s response is received


Report Writing and ReviewClose-out

  • 45 days after servicer’s response deadline, program review report will be sent

  • Lender/servicer has 30 days to respond to report and each subsequent response

  • Closing letter will be sent tolender/servicer


Questions?

Brent [email protected]


CRI – A Servicer’s Perspective_____

Penny Hagan, MOHELA


CRI Concept

“What we call ‘Progress’ is the exchange of one nuisance for another nuisance.”

Havelock Ellis


Recommended Servicer Review Preparation

  • Data selection

  • Staff

  • System

  • Documents

  • Reviewer working environment


Data Selection

  • Discuss system options/limitations

  • Understand the requested criteria

  • Understand the reasoning behind the requested criteria

  • Provide data for selections well in advance


Staff Preparation

  • Questionnaire

  • Experience

  • Availability

  • Entrance Conference

  • Exit Conference


Technical

  • Discuss system needs

  • Assist reviewer in understanding proprietary system utilization

  • Assist reviewer in extracting information from the system


Documents

  • Discuss document needs

  • Discuss document layout/design

  • Have all documents ready for reviewer upon arrival


Working Environment

  • Clean, well lit, ample space, communication capabilities

  • Adequate technical accommodation

  • Access to necessary systems


Helpful Hints

  • Communicate

  • Cooperate

  • Clarify


Exit Conference

  • Attendees

  • General discussion of process

  • Discussion of collected information

  • Discussion of additional needs (if any)


Post Review

  • Continue communication with CRI lead

  • Do not hesitate to plead a case

  • Retain copies of all pertinent documents


Response

  • Response required for CRI and DE

    • DE Letter of Appeal (if necessary)

  • Discuss response with appropriate staff

  • Provide response within outlined timeframe

  • Closing letter final response from CRI team


Questions?

Penny Hagan

636-532-0600 x3362

[email protected]


Thank you for joining us!Please be sure to complete your conference evaluation form!

Mike Hawkes, ECMC

Brent Dove, USA Funds

Penny Hagan, MOHELA


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