Student Lending Analytics Blog

Fitch Report Highlights Challenges in Private Student Loan ABS Market

Here is the report, "The Student Loan Report Card."

Highlights:

• Performance of FFELP collateral stable although jump in forbearances and deferment occurred in 4Q 2008:

"Collateral performance of FFELP deals has remained stable. Losses remain low due to the
guarantee of at least 97% of defaulted principal and interest from the federal government. In
2008, negative rating actions mainly occurred due to structural features in transactions that
finance primarily auction rate debt. To date, transactions financing solely floating rate debt have had no negative rating actions. Fitch did see a spike in the deferment and forbearance indices in the fourth quarter of 2008 as borrowers took advantage of payment delay options either by returning to school or entering forbearance due to economic hardship."

Sallie Mae Provides Details on Terms For Renewal of ABCP Facility

SLM disclosed this in an 8-K filing today:

Item 1.01 Entry into a Material Definitive Agreement.

On April 24, 2009, SLM Corporation (the "Company") and the parties to the Company's asset-backed commercial paper ("ABCP") facilities (the "Facility") that provide funding for the Company's federally-guaranteed student loans agreed to extend the Facility. In connection with the extension, the Company reduced the amount of the Facility from $21.90 billion to $21.75 billion. The new scheduled maturity date of the Facility is April 23, 2010, and the new scheduled termination date is July 22, 2010. The Company paid fees of $43.5 million for the extension, exclusive of structuring fees. The usage fee for the Facility, which took effect on April 24, 2009, is 1.30 percent over the applicable funding rate. The extension features two contractual reductions over the term. The first reduction is on June 30, 2009, to $15.225 billion. The second reduction is on September 30, 2009, to $10.875 billion. If the Company fails to reduce the Facility at either trigger point, the usage fee increases to 3.00 percent over the applicable funding rate. Other terms and conditions of the Facility were materially unchanged.

Also, on April 24, 2009, the Company's Private Education Loan ABCP conduit facility with $2.7 billion outstanding was paid in full.

Finally, on April 28, 2009, the Company reduced the $2.0 billion secured FFELP loan facility (the "2008 Asset-Backed Loan Facility") to $1.5 billion and extended the maturity date from April 28, 2009, to June 26, 2009. The company does not intend to renew this facility. The company paid a $3.25 million fee in connection with this extension. The other terms of the facility remain materially unchanged.

Fitch Releases Results of Review of Student Loan ABS With Auction Rate Exposure

Here is the press release. 

I won't bore you with the details, well, OK maybe just two details:

• Here is a summary of their results of their review of these trusts, which included both FFELP and Private loan collateral:

My Rich Uncle Troubles Continue: First Chapter 7, Now Class Action Lawsuit

As if their troubles could not get any worse, My Rich Uncle, which had filed for a Chapter 7 Bankruptcy in February of 2009, now faces a class action lawsuit.  Here are the details of the complaint filed by Izard Nobel LLP:

2009 SLA Private Student Loan Series (Updated)

In case you missed it, here are recent posts focused on helping students/families make the best decisions on private student loans.  Students are encouraged to exhaust all grants, scholarships and federal loan options prior to considering a private student loan.

• Most popular post:  Shopping for Private Student Loans Makes a Difference!
  
  • Results from 6 student loan applications yields interest rates between 7% - 12%
• Before You Apply for a Private Student Loan
  
  • Provides checklist of items to complete prior to considering a private student loan
• Miss A Payment On Your Private Student Loan, You Could See Your Interest Rate Rise
  • Highlights three lenders that have clauses in promissory notes which could result in 2-3% increase in interest rates triggered by one late payment
• What About Credit Unions?
  • Explores the increasing role that credit unions are providing in the private student loan market
• Borrower Benefits on Private Student Loans
  • Provides examples of savings opportunities available to private loan borrowers
• What Ingredients Go Into the "Secret Sauce"?
  
  • Insights into the factors that lenders consider in making their credit decisions
• Does It Make Sense To Shop Around For Private Student Loans?
  
  • Provides details on new Fair-Isaac policy about the impact of applying for multiple student loans on your credit score (hint:  it helps student borrowers)
• The Promissory Note
  
  • Highlights the key terms to be aware of when evaluating lender promissory notes
• What is the Meaning of "Instant Credit Response"?
  
  • Reviews the on-line application process and analyzes the speed of lender credit reviews
• Private Loan Fee Structure
  
  • Benchmarks most common fees assessed by private lenders for both origination and servicing of loans

Third Round of TALF May Include $3.6 Billion Sallie Mae Deal

From an unlikely place, the McGraw-Hill Q1 2009 Earnings Call (McGraw-Hill is owner of Standard & Poor's rating agency): 

"We understand that after a disappointing April, a bigger round of funding for TALF programs is shaping up in May and these include deals for student loans, credit cards, auto loans, auto leases in the asset backed area."

This blurb appeared earlier in an Asset-Backed Alert:

Citi Holding's Student Loan Corp. Finds a New Competitor: CitiFinancial?

I did a "student loan" query on Google and found this Adwords advertiser appearing as #2 in the Sponsored Links (right between SunTrust and Wells Fargo):

Looking For A Small Loan?

Loans.CitiFinancial.Com      Apply Online With CitiFinancial For Any Amount Up To $15,000.

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Citibank's Student Loan Corporation did not appear as a Sponsored Link.  Click on the link above and here's what you will find:

Over 1/6 of First Marblehead 2007 Vintage Student Loans in Forbearance

First Marblehead recently released 1Q Static Pool Data on their student loan trusts.  Here are the highlights:

• Usage of forbearance jumped dramatically between the 4Q 2008 and 1Q 2009 as the wave of new borrowers entering repayment struggle with their monthly payments.  Forbearance allows for temporary postponement of payments.  Percentages below represent forbearance as a percentage of loans in repayment including forbearances in the denominator:

Most Emailed on NY Times: End the University As We Know It

Here is the link. 

Citibank's Student Loan Corp. Sees 50% Drop in First Quarter 2009 Earnings

Here is the earnings release for Citibank's Student Loan Corporation (STU). 

Two primary drivers of the earnings decline were:

• "...higher cost of funds resulting from the refinancing of maturing term debt with less favorable terms, resulting in higher credit premiums over the London Interbank Offered Rate (LIBOR)..."
• "In addition, there has been a significant divergence between the 90-day Commercial Paper rate as published by the Department of Education (CP), which determines special allowance payments, and LIBOR, which is the basis of the Company’s funding."
  • Sallie Mae reported on the same challenges last week during their conference call