Common Manual Update



LPM NO.: L2001-10 Effective Date: As Indicated
Pub. Date: December 3, 2001 Distribution: Lenders and Schools
Topic: Common Manual Update

To assure that your Common Manual remains current, please record this document on your LPM/LPB index, and retain it in Appendix E of your manual.

The following summaries inform schools, lenders, and servicers of the latest Common Manual policy changes. These changes will appear in the manual's next annual update in 2002. However, these changes are effective before the next update is scheduled to be delivered.

Loan Disbursements When a Bankruptcy Action is Filed

The Common Manual has been revised to provide the lender flexibility in making loan disbursements when the borrower files certain types of bankruptcy actions before the loan is fully disbursed. If the bankruptcy action does not require the filing of a claim with the guarantor, the lender may—but is not required to—make subsequent disbursements of a loan. If the lender chooses not to make the remaining disbursements, the lender must notify the school, the borrower, and the guarantor of the disbursement cancellations. The lender also must notify the borrower that he or she may reapply for the loan funds in the same amount that was not disbursed. The lender must ensure that decisions to cancel—or not cancel—subsequent disbursements are administered consistently.

As with bankruptcy actions for which a claim is required, if the lender cancels any of the undisbursed or undelivered funds because of a bankruptcy action, the lender must agree to make a new loan for the amount that was canceled or any remaining loan eligibility as determined by the school.

Affected Sections: 6.2.I., 8.2.D., CCI8.2.D.
Effective Date: Bankruptcy notices received by the lender on or after January 1, 2002.
Basis: None.
Policy Information: Reference 544
Guarantor Comments: None.

Return of Unearned Loan Proceeds

The Common Manual has been corrected to state that if a student officially or unofficially withdraws, takes an unapproved leave of absence, does not return from an approved leave of absence, or is expelled, the school must return to the lender that portion of unearned Federal Family Education Loan (FFEL) funds for which the school is responsible no later than 30 days from the date the school determines that the student is no longer enrolled. In the case of an approved leave of absence, the funds must be returned within 30 days from the date the student notifies the school that he or she will not return or the ending date of the leave of absence, whichever is earlier. This change aligns the text in this subsection with text in federal regulations as well as with text in subsection 4.7.B.

Affected Sections: 6.3.G.
Effective Date: School refund determinations made on or after October 7, 2000, unless implemented earlier by the school on or after November 1, 1999.
Basis: §668.22(j).
Policy Information: Reference 546
Guarantor Comments: None.

Recall Requirements Corrected

The Common Manual has been corrected to include the currently enforced requirement that a lender must recall a bankruptcy claim if the lender receives notice that the bankruptcy case has been dismissed.

Affected Sections: 8.5, CCI8.5
Effective Date: Retroactive to the implementation of the Common Manual.
Basis: §682.402(f)(5).
Policy Information: Reference 547
Guarantor Comments: None.

Bankruptcy Repurchase Clarified

A correction has been made to the text of the Common Manual to clarify that lenders are not required to repurchase a loan upon which a default claim was paid prior to the date of the borrower's bankruptcy petition. Previously, the policy stated that the repurchase was not required if the default claim was paid prior to the date the lender received the notice of the bankruptcy action. The revised policy more accurately identifies the petition date as the trigger for the repurchase requirement rather than the lender's receipt date.

Affected Sections: 8.7, CCI8.7
Effective Date: Retroactive to the implementation of the Common Manual.
Basis: None.
Policy Information: Reference 548
Guarantor Comments: None.