Common Manual Update

LOUISIANA STUDENT FINANCIAL ASSISTANCE COMMISSION
OFFICE OF STUDENT FINANCIAL ASSISTANCE

LOAN PROGRAM MEMORANDUM

LPM NO.: L2002-2 Effective Date: As Indicated
Pub. Date: February 7 , 2002 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 Assignment, Sale, and Transfer Requirements Clarified

The Common Manual has been revised to reflect existing regulatory provisions indicating when a loan may be assigned, sold, or transferred, to define the terms "assignment of a loan" and "loan sale," and to amend the definition of the term "loan transfer." An assignment or sale may only occur between lenders and holders that are eligible to participate in the loan and guarantor programs applicable to the loan type being assigned. If the assignment or sale of a loan changes the identity of the party to whom the borrower must send subsequent payments or communications, the loan may be assigned or sold only if it is fully disbursed. If the assignment or sale does not change the identity of the party to whom payments or communications are sent, the lender may assign or sell the loan after making the first disbursement. If a loan that is in a grace or repayment status is not assigned or sold, but the servicing of the loan is transferred to another party, the loan holder must notify the borrower regarding the contact information for the new servicing party.

The revised policy adds glossary definitions of the terms "assignment of a loan" and "loan sale." Assignment of a loan is defined as any change in the ownership interest of a loan, including a pledge of such an ownership interest as security. The term "loan sale" is defined as the change of ownership of a loan from one eligible FFELP lender or holder to another lender or holder. The definition of "loan transfer" is changed to include only those transactions that result in a change in the system used to monitor or conduct collection activities on the loan.

In addition, general requirements regarding loan sales and transfers from subsection 3.3.C. have been consolidated with associated borrower notification requirements in subsection 3.4.B. As a result, subsection 3.3.C. has been removed and subsection 3.3.D. has been redesignated as 3.3.C.

Affected Sections: 3.3.C., 3.3.D., 3.4.B., 3.5.E., appendix G
Effective Date: Retroactive to the implementation of the Common Manual.
Basis: §682.208(e); §682.401(b)(17)
Policy Information: Reference 335
Guarantor Comments:

None.

Basis: HEA 432(m)(1)(c); §682.102(a)-as updated in the Federal Register dated November 1, 1999.
Policy Information: Reference 552
Guarantor Comments: None.

 

Clarification: Borrower Exceeds Maximum Loan Amounts

The Common Manual has been revised to clarify that if a borrower exceeds either an annual or aggregate loan limit established in statute, the borrower may not receive additional Title IV funds of any type until one of the following occurs:

Affected Sections: 5.7
Effective Date: Retroactive to the implementation of the Common Manual.
Basis: §668.32(g)(2)
Policy Information: Reference 555
Guarantor Comments:

None.

 

Forbearance Records

The Common Manual has been revised to ensure consistency between subsections and to clarify that lenders may use any form or format acceptable to the guarantor to obtain a signed forbearance agreement. In cases where a signed forbearance agreement is required, the lender must retain a copy of that agreement. In addition, for each forbearance period, regardless of whether a signed agreement is required, the lender must document in the borrower's file or the loan's servicing history the forbearance beginning and ending dates and the reason for granting forbearance.

Affected Sections: 7.11.I.
Effective Date: Retroactive to the implementation of the Common Manual.
Basis: §682.414(a)(4)(ii)(G)
Policy Information: Reference 556
Guarantor Comments:

None.

 

Default Claims

The Common Manual has been revised to eliminate repetitive information regarding the timely filing deadlines for default claims within the same subsection and to align text in subsection 8.2.A. with text already in subsection 8.1.D. A new introductory paragraph has been added that states that if a borrower defaults on his or her loan, the lender may file a default claim with the guarantor.

Information regarding the earliest date a lender may file a default claim has been moved to the last subheading previously titled "Timely Filing Deadline for Default Claims," but now titled "Filing Time Frames for Default Claims."

Affected Sections: 8.2.A., CCI8.2.A.
Effective Date: Retroactive for loans on which the first day of delinquency on the oldest outstanding due date is on or after July 1, 2000.
Basis: None.
Policy Information: Reference 557
Guarantor Comments:

None.

 

Ineligible Claims

CCI chapter 8 of the Common Manual has been updated to eliminate a paragraph that stated that the eligible portion of a loan would be reguaranteed and considered current if payment of the ineligible portion is received within 30 days after the date the lender completed the curing activities. This paragraph followed the ICA/Location Cure Procedure for Ineligible Borrower Claims passage that was removed from subsection CCI8.8.K. in proposal #203 from batch #35, approved in April 1998. Information on penalties for timely filing violations for ineligible borrower claims is included in subsection CCI8.8.E.

Affected Sections: CCI8.8.K.
Effective Date: Effective with the implementation of the Common Claims Initiative (CCI).
Basis: None.
Policy Information: Reference 558
Guarantor Comments:

None.