Lender and Servicer Due Diligence Measures Required by LOSFA Regarding the Office of the Ombudsman

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.

Guidance provided by the Department of Education in DCL GEN-98-25 states:

"A lender may elect not to make subsequent loans under the Master Promissory Note (MPN) or decide to require the borrower to submit a new MPN even though the student remains enrolled at a school authorized to use the multi-year process. This might occur, for example, due to a change in the borrower circumstances (such as bankruptcy or delinquency) or because the loan is being requested under a Lender of Last Resort Program."

Most bankruptcy filings result in claim filing and assignment of the note to a guarantor. Therefore, LOSFA encourages all lenders to adopt this guidance by revoking the current MPN and requiring borrowers to sign another MPN if he/she wishes to receive additional loans after filing bankruptcy. This process will also allow guarantors and lenders to track loans made prior to and after bankruptcy.