EXHIBIT 10.4
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SERVICING AGREEMENT
EDUCATION LENDING SERVICES, INC.
October 1, 2002
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Xxx Xxxxx Xxxxx Xxxxxx, Xxxxx 0000, Xxxx Xxxxx, XX 00000, 310/513-2700
0000 Xxxx 000xx Xxxxxx, Xxxx Xxxxx, XX 00000, 310/513-2700
0000 Xxxxx Xxxxxx Xxxx, Xxxxxxx, XX 00000, 630/620-2700
000 Xxxxxxxx Xxxxxx, Xxxxx, XX 00000, 315/738-2300
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SERVICING AGREEMENT
THIS AGREEMENT is made and entered into as of October 1, 2002 by and among ACS
EDUCATION SERVICES, INC. ("ACS"), FIFTH THIRD BANK, as Eligible Lender Trustee
(the "ELIGIBLE LENDER TRUSTEE") on behalf of EDUCATION LENDING SERVICES, INC.
("LENDER"), and LENDER at Long Beach, California, with reference to the
following facts:
A. ACS has developed and is marketing a computerized origination, billing,
record keeping, accounting, reporting and loan management service
designated as the "Guaranteed Student Loan Processing Service" (the
"Service").
B. LENDER desires ACS to assist it in managing its Federal Xxxxxxxx (SSL),
Federal PLUS and Federal Consolidation loans through the use of the
Service.
Now, Therefore, ACS and LENDER hereby agree as follows:
1. ACS OBLIGATIONS.
A. ACS shall service LENDER's Federal Xxxxxxxx (SSL), Federal PLUS and
Federal Consolidation loan accounts as provided herein, and any
similar student loan accounts as may be mutually agreed upon (the
"Accounts"). For the purposes of this Agreement, an "Account" shall
mean one or more loans having the same holder, borrower (and student
in the case of a Federal PLUS loan), loan program, Guarantor, maturity
date and repayment terms.
B. ACS shall perform all services and duties customary to the servicing
of student loans in accordance with generally established procedures
and industry standards and practices, including specifically the
services and duties specified in Exhibit A (Origination Services),
Exhibit A-1 (Service Level Metrics), Exhibit B (Post-Origination
Services) and Exhibit F (PLUS Credit Review Services Terms) attached
to this Agreement. Such services and duties shall be performed with
respect to each Account until such Account is paid in full (whether by
the borrower or through the payment of Guarantee benefits or
otherwise) or deconverted from ACS's servicing system in accordance
with this Agreement, or this Agreement is otherwise terminated in
accordance with Section 5 below.
C. ACS shall perform its services and duties hereunder in compliance
with, and as required by, (i) the Higher Education Act, (ii) the
applicable Guarantor Regulations, and (iii) any other guarantee
program as mutually agreed between LENDER and ACS, as the foregoing
are reasonably interpreted and understood by ACS from time to time,
and the foregoing requirements shall determine the general scope of
services hereunder. For purposes of this Agreement, the "Higher
Education Act" means Part B of Title IV of the Higher Education Act of
1965, as amended from time to time, and the rules and regulations of
the U.S. Department of Education or any successor thereto (the
"Department") promulgated thereunder, and "Guarantor Regulations"
means any manual of policies and procedures to be followed under the
guarantee program operated by the applicable guarantor of the loans
involved (the "Guarantor"), as well as all supplements, amendments,
bulletins and updates, and all other written or unwritten policies,
procedures, rules and regulations promulgated or adopted, formally or
informally, by such Guarantor relating to its guarantee program or the
administration, interpretations, claims review or enforcement
policies, procedures and practices thereunder, as the same are
reasonably interpreted and understood by ACS from time to time.
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D. Within a reasonable period after delivery of the loan files to ACS
(generally within 30 days unless otherwise expressly agreed), ACS
shall (i) establish and maintain records received by ACS with respect
to each Account and complete records of ACS's servicing of the Account
from the date such servicing commenced, (ii) maintain possession of
original promissory notes, loan applications and other required
supplements that it receives from LENDER, stored in a fire-rated,
secure vault facility located at 0000 X. 000xx Xxxxxx, Xxxx Xxxxx,
Xxxxxxxxxx or 000 Xxxxxxxx Xxxxxx, Xxxxx, Xxx Xxxx, and (iii)
microfilm or otherwise reproduce the promissory notes, loan
applications, and other required supplements and cause such
reproductions to be stored at Brambles Information Management
Corporation or any equivalent facility.
E. If requested by LENDER, for any loans not originated by ACS for LENDER
hereunder, ACS shall make a Full Note Examination or an Abbreviated
Note Examination of the original promissory note and other loan
documentation for each Account following receipt by ACS for servicing,
as requested by LENDER on Exhibit D (Note Examination Election).
Following such initial election, LENDER may from time to time with
ACS's consent select a different loan examination option for a
particular set of loans or for all subsequent loans by making a new
election with respect thereto or by other appropriate written notice
to ACS.
F. By undertaking the loan examination and other duties provided above,
ACS assumes no responsibility for the origination, disbursement,
documentation or prior servicing of any loan (except to the extent
that ACS performed any of these services), it being understood and
agreed that the originator and/or prior servicer shall be responsible
for all aspects of each loan prior to commencement of servicing by
ACS. ACS shall not be liable for failure to detect any prior defect or
note any exception during the loan examination process, provided that
ACS has used reasonable care in the overall conduct of the loan
examination for the entire portfolio being purchased by LENDER. In the
event of any such defect or exception, LENDER shall exhaust all
recourse and remedies against the original lender, prior servicer, or
other responsible parties before asserting any claim against ACS
related thereto. The microfilm or other reproduction of each borrower
file made by ACS following delivery to ACS for servicing shall be
prima facie evidence of the record of loan documentation received and
reviewed by ACS, absent manifest error or other clear and convincing
evidence to the contrary.
G. If requested by LENDER, ACS shall provide cure services for rejected
loans arising from non-ACS errors, as provided in Exhibit E (Blanket
Cure Terms).
H. If ACS determines that any Account has been rejected by a Guarantor
and cannot or is not to be cured hereunder, LENDER is responsible for
providing direction to ACS for the disposition of such Account, which
shall remain on ACS's servicing system pending such direction from
LENDER. If LENDER instructs ACS to deconvert any Accounts, ACS shall
provide the following deconversion services:
i. Any files related to Accounts to be returned to LENDER shall be
assembled in substantially the manner in which they were received
by ACS, including any pertinent documents or information received
or created by ACS during its servicing;
ii. The files related to such Accounts shall be deposited in the U.S.
Mail as certified or registered mail addressed to LENDER unless
otherwise agreed in writing by LENDER and ACS. ACS shall not be
liable for any losses, costs or damages incurred by LENDER if
files are lost after being deposited in the U.S. Mail as
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certified or registered mail. If so instructed by LENDER at any
time, ACS shall procure at LENDER's expense such available
insurance coverage as LENDER may desire with respect to such
shipments;
iii. A transmittal shall be provided by ACS to LENDER listing each
Account and certain other mutually-agreeable Account information;
and
iv. Each Account record shall be removed from the ACS servicing
system.
The deconversion and file preparation and shipping fees specified in
Exhibit C (Servicing Fees) shall apply to and shall be payable
concurrently with any deconversion of rejected Accounts as provided
above, as well as any deconversion of Accounts following any
expiration or termination of this Agreement, or any other removal of
Accounts from this Agreement.
I. If any of the Accounts are guaranteed by a Guarantor that permits
electronic interface or expedited or express claims filing or review
processing (for example, Texas Guaranteed Student Loan Corporation's
Claims Automated Processing System (TGSLC's CAPS) or Northwest
Education Loan Association's Express Claim Program (NELA's ECP)), ACS
may participate therein on LENDER's behalf. In such event, ACS is
hereby authorized to enter into any participation agreement or similar
documentation required by such Guarantor on LENDER's behalf as its
agent in order to participate therein.
J. ACS shall prepare and maintain accounting records with respect to each
Account; process refunds and other adjustments; process address
changes and maintain address records.
K. ACS shall prepare a "Lender's Request for Payment of Interest and
Special Allowance" to be used in billing the Department for interest
and the special allowance for all eligible loans on a quarterly basis.
ACS agrees to submit the billing to the Department within 30 days
following the last day of each quarter (March 31, June 30, September
30, December 31). In the event that ACS does not submit the billing to
the Department within 30 calendar days following the last day of each
quarter, and such failure is not attributable to action or inaction by
LENDER or the Department or other causes beyond ACS's reasonable
control, including, without limitation, causes described in Section
13.I below, LENDER shall be entitled to payment by ACS of penalty
interest. Such penalty interest shall be calculated on the actual
amount of interest subsidies and special allowance payments that
LENDER is entitled to receive from the Department on the Accounts
covered by the billing report and for the time period between such
30th day through the date that said billing report is filed with the
Department by ACS, and interest shall be determined by multiplying the
LIBOR rate (as quoted in the Wall Street Journal, for the period
closest in term to the actual number of days covered by penalty
period) times such actual amount of interest subsidies and special
allowance payments.
L. ACS shall complete all forms and reports relating to ACS's servicing
activities required by the Department or any Guarantor.
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M. ACS shall automatically credit LENDER's account whenever a borrower
overpays an account by less than $5.00, and ACS shall have no
responsibility for reimbursing the borrower. When the overpayment is
more than $5.00, ACS shall remit the overpayment directly to the
borrower. When a borrower's balance owing is less than $50.00, ACS
may, at its discretion, write-off the balance.
N. ACS shall prepare and submit all papers and documents in accordance
with reimbursement procedures specified in the Common Manual: Unified
Student Loan Policy, as amended from time to time, upon default of
borrower.
O. ACS shall provide prompt notice to LENDER of any proceeding or action
filed, asserted or threatened against ACS that, if decided unfavorably
to ACS, would adversely impact ACS' status as an eligible "third-party
servicer."
2. LENDER OBLIGATIONS.
A. LENDER shall promptly transmit or cause to be transmitted to ACS any
material written communications it or any Guarantor receives at any
time with respect to any borrower's Account, including but not limited
to letters, notices of death or disability, adjudications of
bankruptcy and like documents, and forms requesting deferment of
repayment or loan cancellations. ACS will have no liability for
reliance upon information that would have been corrected by timely
transmittal to it of any such written communication, and shall not
bear any related servicing or other costs that could have been avoided
thereby.
B. LENDER shall examine all reports submitted to it by ACS promptly upon
receipt and promptly notify ACS of any discovered errors. ACS shall
not be responsible for damages or losses caused by any error disclosed
by a report to LENDER unless such error is brought to ACS's attention
within sixty (60) days after receipt of such report by LENDER.
C. LENDER shall be responsible for assuring that LENDER'S loan program
and the origination of the Accounts (except to the extent ACS
performed services with respect to origination of the Accounts) are in
compliance with all applicable federal, state and local laws and
regulations, including without limitation any consumer loan laws or
disclosure requirements applicable thereto, and shall defend,
indemnify and hold ACS harmless from any violation or non-compliance
with any of the foregoing.
3. BANKING.
A. ACS shall establish a disbursement bank account for loan origination.
Such bank account shall be in a bank designated by ACS that is
reasonably acceptable to LENDER, with all earnings on such account
being retained by ACS. Funding of said account shall be by wire
transfer on a schedule that complements the mutually agreed upon
disbursement schedule.
B. All borrower and other remittances, including guarantor claim
payments, shall be deposited to an ACS account at a remittance
banking/lock box facility at a bank selected by ACS, with all earnings
on such account being retained by ACS. Such remittances shall be
promptly processed and posted to borrower Accounts and the associated
funds shall be transferred to the Eligible Lender Trustee by ACH or
wire transfer within four (4) business days of receipt.
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4. CHARGES.
A. LENDER shall pay ACS for services rendered in the prior month
according to the schedule of fees in Exhibit C (Servicing Fees),
within fifteen (15) days after receipt of an invoice sent by ACS to
LENDER. Payments become delinquent if not received by ACS within
thirty (30) days from the invoice date, or fifteen (15) days from the
date of receipt, whichever is later, and thereafter shall incur a late
charge of one and one-half percent (1-1/2%) per month until paid.
B. The fees specified in Exhibit C shall remain fixed during the first
twelve (12) months of this Agreement. Unless otherwise expressly
agreed, charges during each subsequent twelve (12) month period of
this Agreement may be increased over the fees charged during the
previous twelve (12) month period by an amount equal to the greater of
(i) the percentage increase in the U. S. Department of Labor's
Consumer Price Index for Urban Wage Earners and Clerical Workers, U.S.
City Average (1982-84=100) (the "CPI") for the most recent twelve
(12)-month period available at the time of each annual adjustment, or
(ii) three percent (3%) per annum. (If at any adjustment date the CPI
is no longer published, then any replacement index specified by the
Bureau of Labor Statistics or successor U.S. governmental agency shall
be substituted therefor, with appropriate application of any necessary
conversion formula as may be specified by such agency, or if no such
replacement index has been so specified, then a comparable
cost-of-living index as may be mutually agreed between the parties
shall be used.)
C. ACS's fees are subject to adjustment by ACS (i) in the event of any
increase in telephone or postage rates, or (ii) as provided in Section
5.C below. The amount of any fee increase due to a change in telephone
or postage rates will be calculated in the same manner as any such fee
increase imposed on ACS's other customers and shall be designed simply
to pass on the cost of any telephone or postage rate increases
affecting ACS. Upon written request by LENDER, ACS will provide LENDER
with reasonable documentation supporting any telephone or postage fee
increase.
D. In addition to any other servicing fees or expense reimbursements to
which ACS shall be entitled under this Agreement, LENDER agrees to
reimburse ACS for (i) any sales or use taxes or similar taxes now or
hereafter imposed upon any goods or services provided by or activities
of ACS hereunder, and (ii) any expenses which ACS incurs as a result
of any additional work required due to any transfer of the guarantee
on serviced loans to a new or successor Guarantor, or any Guarantor
error, or any testing, reconciliation or remediation project or other
non-routine activity required by the particular needs of Guarantor or
LENDER, or resulting from third party errors.
E. In the event of any good faith dispute by LENDER regarding any amount
billed by ACS, LENDER may by written notice to ACS detailing the
grounds for the dispute withhold payment of such disputed amount for a
reasonable period pending resolution of the dispute, but shall pay the
undisputed portion billed when and as due. If the dispute has not been
mutually resolved within sixty (60) days after the date initially due,
LENDER shall deposit the withheld amount into an independent escrow
satisfactory to ACS pending mutual agreement or court decision
regarding proper disposition of such funds. Failure of LENDER to pay
the undisputed portion of a billing or to place any disputed amount in
escrow as provided above shall constitute a default hereunder.
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F. ACS shall have the right to offset any amounts due from ACS to LENDER
against the servicing fees or other amounts due ACS hereunder.
5. TERM AND TERMINATION.
A. This Agreement is for a term beginning October 1, 2002 and ending on
the third (3rd) anniversary of such date; provided, however, that
unless either party shall give the other written notice of its
intention not to renew this Agreement at least ninety (90) days prior
to its scheduled expiration date, this Agreement shall automatically
renew for successive twelve (12)-month periods thereafter, subject to
any renegotiated terms which may be mutually desired.
B. Either party may terminate this Agreement before its expiration upon a
material breach by the other party, if such breach has not been cured
within ninety (90) days after written notice of such material breach
has been sent to the other party, which written notice shall specify
in reasonable detail the alleged breach and reference this provision;
provided, however, that the notice and cure period shall only be
thirty (30) days if the breach is the non-payment of ACS's fees or
other charges.
C. In the event of changes in the Higher Education Act, Guarantor
Regulations, or other current or future law, regulation or other
requirement applicable to the serviced loans, including without
limitation, any changes in any interpretation, claims review or
enforcement policies, procedures or practices with respect thereto
(and including, without limitation, implementation or enforcement of
third-party servicer regulations promulgated by the Department), which
in ACS's reasonable determination expose ACS to increased risk of
liability to the Secretary of Education, LENDER or any other party,
impose increased duties or obligations upon ACS, cause ACS to incur
additional expense, or restrict or derogate from ACS's indemnification
rights or liability limitations under this Agreement, ACS shall have
the right, at its option, to (i) terminate this Agreement upon one
hundred twenty (120) days' prior written notice to LENDER, or (ii)
propose to LENDER an amendment to this Agreement which in ACS's
reasonable judgment appropriately addresses the increased risk, duties
or obligations (which may include an adjustment to ACS's fees and/or
expense reimbursements), and if the parties are unable to agree upon
such amendment within thirty (30) days after the same is submitted to
LENDER, any proposed adjustment shall not become effective and ACS
shall be entitled to terminate this Agreement upon one hundred twenty
(120) days' prior written notice to LENDER.
D. Notwithstanding any termination or expiration of this Agreement,
except in the case of termination by LENDER pursuant to Section 5.B or
by ACS pursuant to Section 5.C, and notwithstanding any sale of any
Accounts by LENDER or any subsequent owner, ACS shall have the right
and option to continue to service each of the Accounts on its system
under the terms of this Agreement on a "life of loan" basis until such
Account is paid in full by or on behalf of the borrower or the
Guarantor. Unless ACS notifies LENDER in writing that it elects not to
continue "life of loan" servicing thereafter at the time of a
termination or expiration of this Agreement, such event will only
result in no additional Accounts being placed with ACS for servicing
hereunder, but will not affect the continued servicing of existing
Accounts hereunder. In the event of ACS' negligence or willful
misconduct with respect to the servicing of Accounts subject to "life
of loan" servicing hereunder, at LENDER's option, ACS shall deconvert
and transfer any such Accounts to LENDER or its new servicer, and ACS
shall reduce the deconversion fees with respect to such deconversion
so that ACS shall be entitled to collect, and LENDER shall remain
responsible for, only those
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actual and reasonable labor costs and out of pocket expenses incurred
by ACS directly in connection with such deconversion.
6. REVIEWS AND AUDITS.
A. LENDER or its agent shall have the right, at reasonable hours and
under reasonable circumstances on a mutually-agreeable schedule, to
examine all LENDER's assigned student loan records and material
serviced by ACS that it deems necessary to determine compliance with
this Agreement. ACS shall submit to like examination by any
governmental agency or authority having supervisory jurisdiction over
LENDER.
B. ACS agrees to provide LENDER with (i) a copy of ACS's annual SAS 70
servicer audit without charge, and (ii) a copy of ACS's Lender Audit
Guide audit report, as required by the Department under the Act, at a
prorated charge consistent with the manner charged by ACS generally to
its other clients.
C. As authorized by law, ACS shall cooperate fully with independent
auditors, the Secretary of Education, the Department's Inspector
General, the Comptroller General of the United States, and any
applicable Guarantor, or their authorized representatives, in the
conduct of audits, investigations, and program reviews with respect to
LENDER or the Title IV, Higher Education Act programs administered by
ACS for LENDER, as authorized by law. Furthermore, LENDER agrees to
provide ACS with written notice and copies of all audit reports or
findings (preliminary or final) relating to ACS's administration of
any aspect of such program for LENDER, as soon as such audit reports
or findings are available to LENDER. LENDER further agrees to
indemnify, reimburse and hold ACS harmless from the cost of
cooperating with, responding to or appealing any such audit report or
finding (including any cost of an attestation engagement performed for
any such response or appeal, attorneys' fees and costs), unless such
audit was caused by any ACS misconduct. If the results of any such
audit, investigation or program review shows material origination
and/or servicing errors by ACS which jeopardize the insurability of
the Accounts hereunder at or above 15% of the LENDER's Accounts
subject to such audit, investigation or program review, then ACS shall
pay the cost of such audit, investigation or program review.
7. REPRESENTATIONS, WARRANTIES AND COVENANTS OF ACS.
ACS makes the following representations, warranties and covenants to LENDER on
the date of this Agreement.
A. ACS (i) is duly incorporated, validly existing, and in good standing
under the laws of the jurisdiction in which it is incorporated; (ii)
is duly qualified to transact business and is in good standing as a
foreign corporation in each jurisdiction where the nature and extent
of its business and properties require due qualification and good
standing; (iii) possesses all requisite authority, permits and power
to conduct its business as contemplated by this Agreement including,
without limitation, eligibility as a third-party servicer under the
Higher Education Act; and (iv) is in material compliance with all
applicable laws and regulations.
B. The execution and delivery by ACS of this Agreement and the
performance of its obligations hereunder (i) are within its corporate
power, (ii) have been duly authorized by all necessary corporate
action, (iii) require no action by or filing with any governmental
agency, except for any action or filing that has been taken or made on
or before the date of this Agreement; and (iv) do not violate any
provision of its articles of in corporation or bylaws.
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C. ACS will maintain in effect all qualifications required in order to
service the Accounts and comply in all material respects with all
requirements of law if a failure to comply would have a materially
adverse effect on its ability to service the Accounts.
D. ACS will not permit any rescission or cancellation of an Account
except as ordered by a court or other government authority, or as
consented to by the LENDER.
E. ACS will not reschedule, revise, defer or otherwise compromise
payments due on any Account except during any applicable interest
only, deferral or forbearance periods or otherwise in accordance with
all applicable standards and requirements for servicing of the
Accounts, or as consented to by the LENDER.
F. All ACS financial statements delivered to LENDER were prepared
according to U.S. generally accepted accounting principles ("GAAP")
consistently applied and present fairly, in all material respects, the
financial condition, results of operations and cash flows of ACS.
G. No event which could cause a material adverse effect on ACS's
financial condition has occurred, and if such event shall occur, ACS
shall promptly give LENDER notice thereof.
H. ACS is not subject to, or aware of the threat of, any litigation that
is reasonably likely to be determined adversely to it and that, if so
adversely determined, would have a material adverse effect on its
financial condition or its ability to meet its obligations under this
Agreement and no outstanding or unpaid judgments against ACS exist,
and if such event shall occur, ACS shall promptly give LENDER notice
thereof.
I. Until all Accounts serviced hereunder have been repaid in full, or
paid as a claim by the Guarantor, or transferred to another servicer,
ACS agrees as follows:
i. ACS shall cause to be furnished to LENDER its financial
statements within one hundred twenty (120) days after the
end of each fiscal year audited by nationally recognized
independent certified public accountants.
ii. ACS shall maintain books, records and accounts necessary to
prepare financial statements according to GAAP and maintain
adequate internal financial controls.
iii. ACS shall maintain all licenses, permits and franchises
necessary for its business.
J. This Agreement will, upon execution and delivery by all parties thereto,
constitute a legal and binding obligation of ACS, enforceable against ACS
according to its terms.
K. The above representations, warranties and covenants, or any breach thereof,
shall not independently give rise to any cause of action or claim for
damages in the absence of monetary loss or other material breach by ACS of
the terms and conditions of this Agreement.
L. ACS shall use due care and diligence in performing its services in a timely
manner consistent with the applicable student loan program as reasonably
interpreted and understood by ACS.
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8. EXCLUSION OF WARRANTIES AND LIMITATIONS OF ACS'S LIABILITY.
A. ACS shall be entitled to rely upon any information or data supplied to
it by LENDER, any party on LENDER's behalf, or any third party
normally relied upon by servicers in the student loan industry
(schools, clearinghouses, etc.), and shall have no liability for any
error or loss if any such information or data is incomplete or
inaccurate. ACS shall not be responsible for reviewing and verifying
the compliance of the loan applications, promissory notes and related
disclosures and processes with applicable state and federal laws and
regulations, and ACS shall be fully entitled to rely upon and use such
materials and processes and shall have no liability for any damages or
loss resulting from such use.
B. Except for the representations, warranties and covenants in Section 7
of this Agreement, ACS hereby excludes and disclaims any and all other
warranties with respect to its services under this Agreement, and no
employee, agent or representative of ACS has the authority to bind ACS
to any other oral or written representation or warranty. LENDER will
review all processing output, reports and other information provided
to it by ACS and will use due care and diligence to detect and notify
ACS of any errors therein which LENDER discovers. Upon prompt
notification to or discovery by ACS of any processing error or data
inaccuracy, ACS shall use its best efforts to re-perform any erroneous
processing to the extent practicable and necessary, without charge if
ACS is at fault and otherwise at a rate equal, in ACS's best judgment,
to the greater of its original charge for such processing or its
direct and allocated indirect cost of such reprocessing.
C. ACS shall be entitled to cure at its own expense any error or omission
in the performance of its duties under this Agreement by the
reperformance of such duties to the extent such reperformance will
reasonably eliminate or mitigate any losses to LENDER.
D. Notwithstanding the form in which any legal or equitable action may be
brought, whether in contract, tort, negligence, strict liability or
otherwise, ACS's liability, if any, arising out of or in any way
related to any act or omission by ACS in connection with this
Agreement or its services hereunder, including but not limited to
errors solely due to ACS, its equipment, operators, programmers, or
program, shall be limited to direct losses of principal and interest
on rejected claims resulting from ACS's negligence or willful
misconduct. In the event a loan is rejected by a Guarantor due to
ACS's negligence or willful misconduct, and ACS is unable to cure the
Loan within twelve (12) months of the final reject date, ACS shall
reimburse LENDER for all principal and accrued interest and special
allowance payments loss thereon (including such loss during the period
of non-guarantee) by the end of the thirteenth (13th) month following
the final reject date, and the loan shall thereupon be assigned and
transferred to ACS or its designee, and this shall be the sole and
exclusive remedy of LENDER. If the guarantee is reinstated, ACS shall
reimburse LENDER for any interest and special allowance payments lost
on the Loan prior to its reinstatement.
E. Notwithstanding any other provision of this Agreement, except for
willful misconduct, ACS's liability, if any, arising out of or in any
way related to any act or omission by ACS in connection with any loans
which (i) entered repayment status prior to the date that ACS assumes
servicing responsibility, or (ii) have previously been cured following
non-ACS servicing error (i.e., rehab loans), or (iii) have been
deconverted from ACS's servicing system prior to the assertion of
ACS's liability, shall be limited to general money damages in an
aggregate amount with respect to any Account not to exceed the amount
paid for ACS's services by LENDER with respect to such Account, and
this shall be the sole and exclusive remedy of LENDER.
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F. ACS shall have no liability for its failure to comply with any law,
rule, regulation or other requirement applicable to any of the
serviced loans, including without limitation any change in any
interpretation, claims review or enforcement policies, procedures or
practices with respect thereto, (i) that was not articulated in
writing and actually made known to ACS or the student loan servicing
industry generally a reasonable period in advance of its
implementation, (ii) that is inconsistent with general industry
practices or prior Guarantor conduct or requirements unless and until
ACS shall have been notified thereof and had a reasonable opportunity
to comply with such new requirement and then only with respect to
servicing performed after the date thereof (i.e., not on a retroactive
basis with respect to servicing which has previously occurred based
upon prior requirements), or (iii) during any period in which the
Department and/or any Guarantor shall have indicated that it will not
enforce any such requirement, even if such requirement may legally be
in effect.
G. In no event, regardless of ACS's ability to reperform or cure any
error, shall ACS be liable under any circumstances, (i) for any
incidental, indirect, special, punitive or consequential damages, or
(ii) for failure to provide services herein for reasons beyond its
reasonable control, or (iii) for any violation of applicable law,
regulation or other requirement under this Agreement, where ACS's
action or inaction was in accordance with general industry standards
at such time, or (iv) for any losses, liabilities or expenses directly
or indirectly arising in whole or in part from or relating to any
Guarantor error (to the extent such loss, liability or expense
resulted directly and primarily from such Guarantor error), or (v) for
any losses, liabilities or expenses directly or indirectly arising in
whole or in part from or relating to any data transmission or
electronic data interchange (EDI) failure or error not due to ACS's
negligence or willful misconduct, or (vi) for the uncollectibility or
non-payment of any amounts payable on or with respect to Accounts
serviced hereunder, or the failure of any Guarantor to pay any claim
on a loan Account for any reason (including but not limited to the
bankruptcy or insolvency of the Guarantor) except where the
uncollectibility or failure to pay such claim is a result of ACS's
negligence or willful misconduct as provided hereinabove; provided,
however, that in no event shall ACS be liable for the uncollectibility
or non-payment of any amounts payable on or with respect to any
Accounts serviced hereunder which were delinquent on the date that ACS
assumed servicing responsibility, or the inability to submit any claim
on any such delinquent loan Account to any Guarantor or the failure of
any Guarantor to pay any claim on any such delinquent loan Account.
These limitations on ACS's liability and exclusion of damages are
independent of any other remedy or provision herein and shall not be
affected by ACS's inability to reperform or cure any error or any
failure of any other remedy or provision.
H. ACS's sole liability under or in connection with this Agreement or its
services, whether in contract, tort, negligence, strict liability,
pursuant to violation of statute or regulation, or under any other
theory, shall be limited as provided in this Section 8, and the
provisions hereof shall constitute the sole and exclusive remedy of
LENDER. Except for (and in addition to) amounts that may be paid to
LENDER pursuant to Paragraph D of this Section 8, in no event other
than willful misconduct shall ACS have any liability arising out of or
in any way related to any act or omission by ACS in connection with
this Agreement or its services hereunder for an aggregate amount
greater than two times ACS's gross annual revenue from servicing the
Accounts covered by this Agreement for the previous twelve months
(annualized based on the prior months' revenues during the first year
hereof, if ACS has not previously provided services for these
Accounts).
I. No claim or action, regardless of form, arising out of or in any way
related to any act or omission by ACS in connection with this
Agreement or its services hereunder shall be
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brought by LENDER more than one year after LENDER becomes aware of the
act or omission by ACS giving rise to such claim or action. In the
case of rejected claims due to ACS negligence or willful misconduct,
such one-year period shall commence at the end of the 13th month
following the final reject date.
J. The parties agree that the foregoing provisions have been reflected in
the amount of the charges payable by LENDER to ACS for the Service,
are an essential part of the basis for the bargain between the
parties, and that ACS would not have entered into this Agreement but
for such provisions.
9. INDEMNIFICATION.
If ACS or LENDER is required to appear in or is made a defendant in any legal
action or other proceeding commenced by a borrower or other third party with
respect to any loan Account for which services are provided hereunder, LENDER
shall defend and indemnify ACS against, and hold it harmless from, all claims,
losses, liabilities, and expenses (including reasonable attorneys' fees) arising
thereunder, except where the gravamen of the complaint arises directly and
primarily from ACS's negligence or willful misconduct with regard to the
performance of services hereunder. ACS shall defend and indemnify LENDER
against, and hold it harmless from, all claims, losses, liabilities, and
expenses (including reasonable attorneys' fees) arising from ACS's negligence or
willful misconduct with regard to the performance of services hereunder (subject
to Section 8 above). In particular, without limiting the foregoing, it is
understood that ACS shall be entitled to a defense and indemnity as provided
above where a student alleges that he or she did not receive a proper education
and/or was defrauded by the school or lender, or that a prior or subsequent
servicer or collection agency committed any error or misconduct or violated any
law or regulation.
10. CONTINGENCY PLAN.
ACS shall maintain a contingency plan (the "Plan") and allow LENDER to review
said Plan at ACS's site. Such review shall be no more frequently than on an
annual basis or within sixty (60) days of implementing any material changes to
the Plan.
11. FINANCIAL AND ADMINISTRATIVE RESPONSIBILITY.
Each party hereto represents that it is currently in compliance with, and agrees
to maintain its compliance with, all financial and administrative responsibility
standards or requirements that may be established from time to time by the
Department or any Guarantor for participation in the Title IV, Higher Education
Act programs for which ACS provides services hereunder. Each party shall have
the right to terminate this Agreement upon one hundred twenty (120) days'
written notice to the other in the event that the Department's financial or
administrative responsibility standards or requirements are hereafter changed
and as a result such party does not thereafter satisfy such standards or
requirements.
12. WAIVER OF JURY TRIAL.
THE PARTIES HEREBY EXPRESSLY WAIVE ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM,
DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER THIS AGREEMENT OR ANY OTHER
DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR IN ANY
WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES
HERETO WITH RESPECT TO THIS AGREEMENT OR ANY SUCH OTHER DOCUMENT OR AGREEMENT,
OR THE SERVICES AND TRANSACTIONS RELATED HERETO OR THERETO, WHETHER NOW EXISTING
OR HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT OR OTHERWISE.
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13. MISCELLANEOUS.
A. All specifications, tapes, data cards, programs, forms and procedures
used or developed by ACS in connection with this Agreement (except
those supplied by LENDER) shall be and remain the sole property of
ACS.
B. All information belonging to LENDER shall be retained by ACS in
confidence. ACS shall not use, make, and/or maintain a list of
LENDER's Account names, addresses, and/or account numbers for any
purpose other than fulfillment of its duties as servicer under this
Agreement. Upon termination or expiration of this Agreement, ACS shall
deconvert the loan Accounts as provided in Section 1.H above.
C. Each party hereto shall comply at all times with financial privacy and
data security requirements of the Xxxxx-Xxxxx-Xxxxxx Xxx, 00 X.X.X.
0000 et seq. (the "GLB Act") and any other applicable consumer privacy
laws, and enter into such additional agreements or provisions as shall
be reasonably requested by the other party regarding or confirming
such compliance. Should any future changes in the GLB Act or other
applicable privacy requirements impose additional costs on ACS, LENDER
shall pay or reimburse ACS for such additional costs.
D. Both parties agree to maintain the confidentiality of this Agreement
and all amendments hereto, and the terms hereof, and any audit reports
or findings (preliminary or final) relating to ACS's administration of
any Title IV, Higher Education Act program for LENDER, and not to
disclose or deliver the same (or any copies, excerpts or summaries
thereof) to the Department, any other government agency, national
accrediting agency, or any other third party (whether pursuant to
regulation, governmental request, or otherwise) without first using
best efforts to give the other party prior written notice of such
intention, which notice shall be sent by fax, Federal Express or other
overnight delivery service, and addressed to the President of the
other party. The other party may, at its option, thereupon take
appropriate steps to assure that any such information that may be
entitled to protection from disclosure under the Freedom of
Information Act (FOIA) is so protected, and the first party shall
cooperate with such efforts to protect from FOIA disclosure any
information of the other party which the other party believes to
constitute trade secrets, or of a commercial or financial interest, or
of a privileged or confidential nature, etc., including the inclusion
with such disclosure or delivery of appropriate submissions asserting
protection from FOIA disclosure. Notwithstanding the foregoing, either
party may disclose or deliver any of the foregoing to their
independent auditors on a confidential basis, provided that such
auditors shall not disclose or deliver the same without the disclosing
party first complying with this paragraph.
E. This Agreement and its performance shall be governed by the internal
laws of the State of California. Any legal action or other proceeding
related to this Agreement or the services provided hereunder shall be
brought in the appropriate State or Federal courts sitting in Los
Angeles, California, and all parties waive any objection to venue in
such courts and consent to the exclusive jurisdiction of such courts.
F. This Agreement may not be assigned except to an entity succeeding to
the business or assets of the assigning party, with written notice to
the other party.
G. ACS reserves the right to change any part or all of the Service upon
written notice to LENDER where appropriate; provided, however, that
such change shall not abrogate or in
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any way modify the substantive provisions of, and general duties of
ACS under, this Agreement.
H. LENDER agrees to provide ACS upon request with LENDER's current
financial statements filed with the Securities and Exchange Commission
and such other financial information as ACS may request from time to
time and that LENDER may agree to provide.
I. If either party is rendered unable, wholly or in part, to carry out
its obligations under this Agreement (other than the payment of money)
by reason of any act of God, act of war or terrorism, civil
disturbance, strike or labor unrest, breakdown or interruption of
power or communications systems, computer or other equipment failure,
failure of subcontractors or suppliers, or other circumstances or
event outside such party's reasonable control (whether or not similar
to the foregoing), the obligations of such party shall be suspended to
the extent thereof, and such party shall not be liable to the other
party for any non-performance hereunder or incomplete performance as a
result.
J. This Agreement supersedes any prior agreement and contains the entire
agreement of the parties on the subject matter hereof. No other
agreement, statement or promise made by any party to any employee,
officer or agent of the other party to this Agreement, or any other
person, that is not in writing and signed by both parties to this
Agreement, shall be binding upon them. No waiver, alteration or
modification of the Agreement shall bind ACS or LENDER unless in
writing and duly executed by ACS and LENDER.
K. In the event any Account is transferred off ACS's servicing system,
whether in connection with a termination or expiration of this
Agreement as to which ACS elects not to continue servicing existing
Accounts, or otherwise, unless otherwise expressly provided herein or
agreed in writing at the time of such transfer off, LENDER agrees to
pay ACS the deconversion and file preparation and shipping fees
specified in Exhibit C (Servicing Fees).
L. Any notice required under this Agreement shall be in writing and shall
be effective upon personal delivery or facsimile transmission or upon
receipt after being sent by Federal Express or mailed by registered or
certified mail, return receipt requested, postage pre-paid, addressed
as follows: If to ACS, at Xxx Xxxxx Xxxxx Xxxxxx, Xxxxx 0000, Xxxx
Xxxxx, Xxxxxxxxxx 00000-0000, Attn: President, or if to LENDER, at the
address for LENDER set forth in ACS's records for delivery of reports
hereunder. Each party may specify a different address by sending to
the other written notice of such different address as provided herein.
M. The section captions in this Agreement are for convenience only and
will not be deemed part of this Agreement or used in the
interpretation thereof. Both parties or their counsel have
participated in the preparation, drafting and negotiation of this
Agreement. Accordingly, this Agreement shall be construed according to
its fair language and any ambiguities shall not be resolved against
either party as the drafting party.
N. The invalidity, illegality or unenforceability of any provision or
term of this Agreement in any instance shall not affect the validity
or enforceability of such provision in any other instance or the
validity or enforceability of any other provision, and each such
provision shall be enforced to the fullest extent possible.
O. This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original and all of which taken together
shall constitute one and the same agreement.
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14. INSURANCE COVERAGE. ACS will keep in force and effect computer services and
software errors and omissions coverage of not less than $2,000,000, an umbrella
liability policy of not less than $15,000,000, employee crime (including
fidelity) insurance of not less than $1,000,000 and business interruption
insurance of not less than $1,000,000. ACS will furnish proof of such coverage
to the LENDER from time to time upon request by LENDER. Should the insurance
coverage, or any portion thereof, be voluntarily terminated or reduced by ACS or
involuntarily terminated or reduced without LENDER's consent, ACS shall, if
available, replace such terminated or reduced portions of the insurance coverage
prior to final termination or reduction, or as soon thereafter as commercially
reasonable. In the event of any termination or reduction in coverage, voluntary
or involuntary, ACS shall notify LENDER immediately, but in no event later than
five (5) business days following receipt of notice of the termination or
reduction or, with respect to voluntary termination or modification,
contemporaneously with ACS's giving notice to the insurer.
15. SECURITY INTEREST OF INDENTURE TRUSTEE.
A. ACS acknowledges and agrees that all or a portion of the right, title
and interest of LENDER under this Agreement and the Eligible Lender
Trustee under the Accounts serviced hereunder may be assigned to the
Indenture Trustee or the other secured parties (the "Secured Parties")
pursuant to an indenture of trust or other security agreement (the
"Indenture") and that, if the original promissory notes are delivered
to ACS, ACS shall hold all such original promissory notes evidencing
the student loans within such Accounts and related documentation as
bailee on behalf of the Indenture Trustee as holder of a security
interest in such student loans under the terms and conditions of the
Indenture.
B. LENDER shall advise ACS in writing of the particular Indenture Trustee
to which the Accounts have been assigned, if any, prior to the
assignment becoming effective.
C. In order for LENDER to direct ACS to transfer any such Account from
the account of LENDER (to the Secured Parties, another authority, an
eligible lender, another indenture account of LENDER, or a successor
servicer, pursuant to the Indenture or otherwise), ACS must first
receive a Request to Transfer Loans form which shall not be valid
without the signature of the Indenture Trustee.
D. The security interest of the Secured Parties and the provisions of
this Section 15, shall not be amended or revoked without the written
consent of the Indenture Trustee.
E. ACS hereby acknowledges and agrees that the security interest of the
Secured Parties in the Loans under the Indenture shall be and is
hereby prior to any lien ACS may have in such Financed Student Loans
(other than its fees due hereunder), and ACS agrees to execute and
deliver to the Indenture Trustee all financing statements, notices and
other instruments reasonably requested in connection with this
Agreement by the Indenture Trustee.
F. ACS acknowledges that upon the occurrence of certain events of default
under the Indenture pursuant to which Loans are financed, the
Indenture Trustee shall have the right to exercise the termination
rights of the LENDER set forth in Section 5. Notwithstanding anything
in this Section 15 to the contrary, ACS shall, within a reasonable
time frame after receipt of a written request by the Indenture
Trustee, and upon a mutually agreeable schedule, release any and all
Loans to the Indenture Trustee.
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16. SERVICING FOR AFFILIATES.
Upon request of LENDER, ACS agrees to provide services pursuant to this
Agreement for and on behalf of one or more corporations or limited liability
companies that are controlled by or under common control with LENDER and trusts
that are established by LENDER or any of such corporations or limited liability
companies (herein an "Affiliate") with respect to Accounts originated by ACS and
owned by such Affiliate. To initiate ACS's obligation to provide services for
any Affiliate, LENDER shall identify such Affiliate in writing and ACS, LENDER,
the Affiliate and the Eligible Lender Trustee on behalf of the Affiliate shall
execute and deliver an Affiliate Servicing Addendum in substantially the form
attached hereto as Exhibit G. Upon execution and delivery of the Affiliate
Servicing Addendum, ACS shall provide services to such Affiliate in accordance
with this Agreement and such Affiliate Servicing Addendum.
Executed as of the day and year first above written.
ACS EDUCATION SERVICES, INC. EDUCATION LENDING SERVICES, INC.
By /s/ Xxxxxx X. Xxxxxx By /s/ Xxxxxxx X. Xxxxx
--------------------------------------- ---------------------------------------
Title Xxxxxx X. Xxxxxx, President Title Executive Vice President/Secretary
-------------------------------------
By /s/ Xxxxxx Xxxxxx FIFTH THIRD BANK, as Eligible Lender
--------------------------------------- Trustee for Education Lending Services, Inc.
Title Xxxxxx Xxxxxx, Xx. Vice President
By: /s/ Xxxxx X. Xxxxxxx
--------------------------------
Title: AVP & STO
------------------------------
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SERVICING AGREEMENT
EXHIBIT A
ORIGINATION SERVICES
ACS's FFEL Origination Service consists of the following activities, applicant
notices, and reports.
I. ACTIVITIES
1. Open and date stamp incoming mail.
2. Enter manually or electronically all loan applications data onto the
Loan Origination System.
3. Validation of applications for completeness and accuracy.
4. Attempt to obtain information for incomplete applications by telephone
and if unsuccessful by correspondence.
5. Transmit loans to the Guarantor and receive approved/rejected loans
from the Guarantor.
6. Process loan cancellations.
7. Disburse loan proceeds as scheduled by Lender and/or schools.
8. Convert disbursed loans to the Loan Servicing System.
9. Perform Guarantor reporting on behalf of the Lender and in compliance
with the applicable Guarantor program requirements.
10. Borrower files will be secured and fire protected to the degree it
will not obstruct processing during the Origination process.
11. Respond to telephone and written inquiries from borrowers and schools.
In connection with the foregoing origination services, LENDER authorizes ACS to
review and approve the loan application on LENDER's behalf, and where required
by the applicable Guarantor, execute the loan application on LENDER's behalf to
indicate such approval. Unless otherwise expressly requested by LENDER in
writing to ACS, ACS shall be authorized to approve any loan application on
LENDER's behalf that appears to be properly completed by the borrower and the
school, without regard to the identity of the borrower or the school.
II. APPLICANT NOTICES
.. Validation Incomplete Letter - Requests information from the borrower that
is missing or invalid on their application.
.. Lender Reject Letter - Notifies the borrower that the lender has rejected
their loan application.
.. Disclosure Statement - Loan document produced by the system letter
generator and replaces the state printed disclosure. Disclosure statement
printing by ACS allows full electronic interface with the Guarantor,
enhancing processing time and reducing paper flow.
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.. Loan Cancellation Letter - Notifies the borrower that the lender has
received and processed the borrower's or school's request to cancel their
loan.
. Borrower Request
. School Request
.. Loan Recovery Letter - Notifies the borrower that the lender has received
and processed their returned disbursement check.
.. Validation Approval Letter - Notifies the applicant that their loan
application has been approved by the lender and Guarantor and their
scheduled disbursement date.
III. REPORTS
.. Application Error Report - ACS internal report used to identify
applications that did not pass the system validation program. Validation is
established using the lenders unique lender policy as well as the loan
program and Guarantor requirements.
.. Disbursement Listing - Report provided to the lender and user as a check
roster. This report provides the lender with accounting entry information.
.. Undisbursed Commitments Report - Provides the lender with detailed
information on an individual loan basis, about undisbursed loan
commitments.
.. Undisbursed Funds Analysis - Provides the lender with detailed information
on an individual loan basis, about undisbursed loan commitments. The report
can be used as a tool to provide schools with information about future
disbursements to borrowers attending that institution.
.. Undisbursed Analysis by Date - Provides the lender with detailed
information on an individual loan basis, about undisbursed loan
commitments. The report can be used as a tool to provide the lender with
cash flow projections to fund their student loans.
.. Validation Acceptance Report - ACS internal report used to identify those
loans which passed validation The report displays key data elements to
verify their correct entry.
.. Approved Loan Listing - ACS internal report which provides evidence of loan
guarantee by the Guarantor. This report enables reduced application
processing time and paper flow. This report allows ACS full electronic
interface with the Guarantor, enhancing processing time and reducing paper
flow.
.. Application Status Grand Totals - Provides the lender with management
information concerning the total number of applications and corresponding
dollar amounts for specific loan application status.
.. Lender Month End Manifest - Provides the lender with required Guarantor
month end reporting of loan origination activity. The report is used to pay
the lender insurance premium (guarantee) fees.
.. Lender Month End Manifest Detail - Provides the lender with borrower level
detail of transaction activity to support the Lender Month End Manifest.
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EXHIBIT A-1
SERVICE LEVEL METRICS
Area Action Target Metric
---------------------------------------------------------------------------------------------------------------------------
Application Data Files Loaded Loaded into system Within one (1) business day
---------------------------------------------------------------------------------------------------------------------------
Application Data Entry Completed Paper Applications 100% within three (3) business days of
receipt
---------------------------------------------------------------------------------------------------------------------------
Sending Loan Verification Certificates Sent (Fax or Mail) . Electronic submissions - 100 % within one
(1) business day
. Paper Only Submission - 100% within three
(3) business days
---------------------------------------------------------------------------------------------------------------------------
LVC Data Entry Completed LVC's Keyed 100% within 3 business days of receipt of
completed LVC
---------------------------------------------------------------------------------------------------------------------------
Request Guaranty Submit to guarantor for Within 10 business days of funded loan
guaranty
---------------------------------------------------------------------------------------------------------------------------
Funding Fund completed, guaranteed 100% within 2 days of completing the
applications application file
---------------------------------------------------------------------------------------------------------------------------
Total Time to Fund Report on total days from Targeted to achieve 80% within 45 days -
date of entry to ACS system
to date of loan funding
---------------------------------------------------------------------------------------------------------------------------
Phones Stats . Max 5% Abandon
. 80% of calls answered in les than 20 seconds
. Average Handle Time
---------------------------------------------------------------------------------------------------------------------------
Lender Service Response to e-mail inquiries Within two (2) business days
---------------------------------------------------------------------------------------------------------------------------
Customer Service Hours of Operation Consolidation:
M-Th: 7:00 AM - 4:30 PM
Fri: 7:00 AM - 3:30 PM
Borrower Services:
M-F: 5:00 AM - 9:00 PM
Web Site - 24/7
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SERVICING AGREEMENT
LVC FOLLOW-UP
Day/Timeline Action
----------------------------------------------------------------------
Day 1 LVC Sent
----------------------------------------------------------------------
Day 15 1st Follow-up - phone call to creditor
----------------------------------------------------------------------
Day 25 2nd Follow-up - phone call to creditor
----------------------------------------------------------------------
Day 30 Letter/E-mail to borrower
----------------------------------------------------------------------
Day 60 Cancel for no activity if LVC's un-received -
returned to originator
FOLLOW-UP:
Establish reporting to monitor above metrics.
Frequency: weekly report initially - monthly reporting upon mutual agreement.
Establish Monthly call to review SLA metrics.
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SERVICING AGREEMENT
EXHIBIT B
POST-ORIGINATION SERVICES
1. LOAN CONVERSION
At the time of purchase or placement of a loan with ACS for servicing, the loan
shall be converted and a note examination may be conducted in accordance to
predetermined criteria. The tasks involved in loan conversion generally include:
Origination and Verification of Account Data
Generation of Receipt of Loans Transferred
Account Package Preparation
Generation of Exceptions Report
Renegotiation of Rejected Accounts
Reconciliation and Balancing
Keypunch Account Data
Microfilm and Microfiche Copies
Run Serialization Crosscheck
Edit and Error Correction
Appropriate Vault Space
Generate Sale Transmittal
Mail Conversion Notification to Borrower
2. BORROWER RELATIONS
Borrower relations begin during In-school Status and continue throughout the
life of the loan. During this period, the Service generally provides the
following printed notices to the borrower and required telephone contacts:
Introductory Letter
Pre-Grace Statement
Separation Data Change Letters
Disclosure Statement
Phone/Address Verification
Grace Expiration/First Payment Reminder
Student Status Verification (as required)
Skip Trace Locate Letters
Response to Borrower Inquiry Letters
Deferment Processed Notices:
Continuing
Forbearance
Unemployment
Other Deferment
Billing Notices:
Interim Interest Notices
Regular Installment and Past Due Payment Notices
Interim and Payout Demand Notices
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SERVICING AGREEMENT
Telephone Contacts:
Due Diligence Borrower Calls
Due Diligence Parent/Relative Calls
Skip Tracing Calls
Response to Borrower Inquiry Calls
3. RELATED LOAN SERVICING ACTIVITIES
Related loan servicing activities include:
Lock Box Remittance Banking
Payment Processing
Name/Address Updates
Payment Research and Special Handling
Interest Capitalization
Payment Reapplication
Internal Audit of Default Claim
Claim Preparation and Submission
Reperformance/Renegotiation
4. REPORTING
Record keeping and accounting are performed as part of the Service. A series of
monthly reports are provided to LENDER regarding the status of its loans. This
reporting includes:
Loans Transferred/Removed Ledger
Student Loan Ledger
Monthly Transaction Report
Accounting Entry Summary Report
Portfolio Summary and Analysis - Characteristics
Portfolio Summary and Analysis - Delinquency
Portfolio Summary and Analysis - Maturity Analysis
Portfolio Summary and Analysis - Reconciliation
Delinquent Report and Summary
Name/Address Report
Paid-in-Full Ledger
Receipt for Loans Transferred
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SERVICING AGREEMENT
EXHIBIT C
SERVICING FEES
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EXHIBIT D
NOTE EXAMINATION ELECTION
LENDER hereby makes the following election with respect to any Note Examination
or other document examination to be performed by ACS in connection with loan
files to be serviced by ACS hereunder (other than any loans which may be
originated by ACS for LENDER):
ACS ENCOURAGES ALL LENDERS TO HAVE A NOTE EXAMINATION PERFORMED UPON ALL NON-ACS
ORIGINATED FILES TO BE DELIVERED TO ACS FOR SERVICING, SO AS TO MINIMIZE TO THE
EXTENT POSSIBLE THE LIKELIHOOD OF LOSSES OR OTHER SERVICING PROBLEMS WHICH MAY
RESULT FROM MISSING OR INADEQUATE LOAN DOCUMENTATION. IF LENDER ELECTS NOT TO
HAVE A NOTE EXAMINATION, LENDER THEREBY AGREES TO ACCEPT FULL RESPONSIBILITY FOR
ANY LOSSES OR SERVICING ERRORS WHICH RESULT IN WHOLE OR IN PART FROM MISSING OR
INADEQUATE LOAN DOCUMENTATION. NOTWITHSTANDING LENDER'S ELECTION, ACS'S
LIABILITY FOR ANY LOSSES ARISING FROM ITS FAILURE TO DETECT MISSING, INCOMPLETE,
INACCURATE, OR ERRONEOUS DATA OR DOCUMENTS SHALL BE SUBJECT TO THE LIABILITY
LIMITATIONS SPECIFIED IN SECTIONS 1.F AND 8 OF THE SERVICING AGREEMENT.
.. FULL NOTE EXAMINATION
If LENDER has elected Full Note Examination, ACS agrees to undertake a
general review in accordance with standard industry practice of the loan
documentation listed on note examination checklists to be generated by ACS
and approved by LENDER. By undertaking such review, however, ACS does not
guarantee or assure the genuineness, accuracy, completeness or compliance
of such documentation with any contract or with applicable law and
regulation.
.. ABBREVIATED NOTE EXAMINATION
If LENDER has elected Abbreviated Note Examination, ACS agrees to undertake
a general review in accordance with standard industry practice of the loan
documentation listed for the categories of data selected by LENDER from
note examination checklists to be generated by ACS and approved by LENDER.
By undertaking such review, however, ACS does not guarantee or assure the
genuineness, accuracy, completeness or compliance of such documentation
with any contract or with applicable law and regulation. LENDER
acknowledges and agrees that it shall be responsible for any losses or
servicing errors which result in whole or in part from missing or
inadequate loan documentation which might have been discovered in a Full
Note Examination.
.. NO NOTE EXAMINATION
By electing and instructing ACS not to undertake any Note Examination or
other document examination prior to commencing servicing, LENDER
acknowledges and agrees that LENDER assumes the risk and full
responsibility for missing or inadequate loan documentation and for any
losses or servicing errors that might have been avoided had a Full Note
Examination been undertaken, and agrees that ACS shall not be liable under
any circumstances for any such losses or servicing errors.
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EXHIBIT E
BLANKET CURE TERMS
The following Blanket Cure Terms shall apply between LENDER and ACS when in
the course of its servicing, ACS submits claims to Guarantors which are rejected
by the Guarantor for servicing errors which occurred prior to ACS's servicing or
for which ACS is otherwise not liable under the Servicing Agreement.
1. CURE SERVICES FOR REJECTED ACCOUNT(S)
A. For any Account rejected by the Guarantor in whole or in part because
of servicing error which occurred prior to ACS's servicing or for which ACS is
otherwise not liable under the Servicing Agreement, ACS and/or an outside
collection agency selected by ACS will attempt to reinstate the guaranty (cure)
on the Account under the terms and conditions specified below and for the fees
specified herein.
B. Cure services shall generally include:
Using best efforts to locate the borrower in the event the borrower's address is
invalid;
Upon location, certifying, in a manner acceptable to the Department and the
applicable Guarantor, that the borrower has been located in the event a "locate
cure" is required;
Performing all written and telephone contacts as required for locate cure by the
Department and the Guarantor necessary to claim file the Account with the
Guarantor; and/or
Using best efforts to cause the borrower to make one full payment or return a
signed repayment obligation (RO) in the event a "payment or RO cure" is
required.
C. ACS will use best efforts to undertake such cure services within 30
days of receipt of a rejected Account. If ACS is unable to cure the Account
within an approximate 45-day period following commencement of cure services, or
if ACS in its sole judgment determines not to attempt to cure the Account
itself, ACS will place the Account with a "1st placement" outside collection
agency for a period generally not longer than 180 days. If the "1st placement"
collection agency is unable to cure the Account within the specified time frame,
ACS will then place the Account with a "2nd placement" collection agency for a
period generally not longer than 270 days. If the "2nd placement" collection
agency is unable to cure the Account within the specified time frame, ACS will
then place the Account with a "3rd placement" collection agency for a period
generally not longer than an additional 270 days. Following placement with any
outside collection agency, ACS shall only be responsible for administrative
services in interfacing with such agency on the Accounts involved. ACS shall not
have any responsibility for training or otherwise supervising the outside
collection agency or its personnel.
D. For the cure services specified herein, LENDER shall pay to ACS a fee
for each Account cured as specified in Exhibit E-1. Such fees are subject to
adjustment from time to time upon 30 days' prior written notice from ACS to
LENDER.
E. If LENDER wishes ACS to arrange on LENDER's behalf for additional
collection agency services on rejected Accounts for which no cure is
successfully accomplished hereunder, the terms applicable thereto are set forth
in Exhibit E-2. If no Exhibit E-2 is attached, ACS shall not provide such
services.
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SERVICING AGREEMENT
2. LIMITATIONS ON ACS'S LIABILITY
A. LENDER acknowledges that in placing Accounts with outside collection
agencies, ACS is merely providing an administrative service to LENDER.
Accordingly, ACS does not guarantee the success of its or any outside collection
agency's cure efforts and shall not otherwise be responsible for the failure of
any cure efforts to reinstate or obtain payment of any Account. ACS makes no
warranties or representations, expressed or implied, regarding the cure services
or the outside collection agencies used.
B. Subject to the provisions set forth herein, in the event of any error
by ACS for which ACS would be liable under the Servicing Agreement, ACS shall be
responsible only for reperformance of any cure activity or erroneous processing
to the extent practicable and necessary without charge to LENDER. With respect
to cure services under this Exhibit, ACS shall not otherwise be liable for
damages or other monetary relief except in the case of ACS's gross negligence or
willful misconduct.
C. ACS shall not under any circumstances, regardless of any failure of
the foregoing remedies, be liable for (i) the error or misconduct of any outside
collection agency, or (ii) for losses or damages caused by circumstances or
events beyond ACS's reasonable control, or (iii) for any special, indirect,
incidental, punitive, or consequential damages of any nature.
3. TERMINATION
The cure services provided for in this Exhibit may be terminated by either party
upon 30 days' written notice to the other. Termination shall not affect any
payment obligations of the parties arising from services provided during the
term of the Servicing Agreement, or from cures obtained on Accounts after
termination. Following termination, unless otherwise instructed by LENDER in
writing, ACS shall permit the outside collection agencies to continue to work
any Accounts already placed which such agencies believe will result in a cure
within a reasonable period of time following termination. All other Accounts
shall be recalled from such agencies within 30 days after termination.
4. EXCLUSIONS AND DECONVERSION
LENDER hereby gives approval for ACS to undertake the cure services outlined in
Section 1 of this Exhibit on Accounts with a principal balance outstanding (PBO)
of $500 or greater. Accounts with PBOs less than the aforementioned amount or
Accounts which are not successfully cured within the time frames described above
will be deconverted for the fees specified in the Servicing Agreement.
5. INCORPORATION BY REFERENCE
The terms of the Servicing Agreement are incorporated herein by reference and
shall be applicable to the cure services contemplated by this Exhibit, to the
extent not inconsistent with or contrary to any provision herein. In the event
of any conflict, the terms of this Exhibit shall prevail.
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SERVICING AGREEMENT
EXHIBIT E-1
CURE FEES
Subject to the Blanket Cure Terms to which this Exhibit E-1 is attached,
the following fees shall apply to all services provided thereunder:
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SERVICING AGREEMENT
EXHIBIT F
PLUS CREDIT REVIEW SERVICES TERMS
ACS shall provide the following PLUS Credit Review Services, subject to all of
the terms and conditions of the Servicing Agreement to which this Exhibit F is
attached.
1. DEFINITIONS
A. As used herein the following words shall have the meanings
respectively indicated:
"Adverse Credit" or "Adverse Credit history" means that the credit history of an
Applicant reflects any condition or event which would at the time of such Loan
Application disqualify the Applicant from eligibility for a PLUS Loan under the
Higher Education Act or any applicable Guarantor Regulations. As of the
effective date hereof, each of the following is understood to be a disqualifying
Adverse Credit item which will be identified by ACS on its credit review
reports:
(a) any account or debt shown on the Applicant's credit report is
ninety (90) or more days delinquent as of the date of the credit report; or
(b) at any time during the five (5) years preceding the date of the
credit report, the Applicant has been the subject of a default determination,
bankruptcy discharge, foreclosure, repossession, tax lien, wage garnishment, or
write-off of a Higher Education Act, Title IV debt.
"Applicant" means an individual who has submitted a Loan Application to LENDER.
"Borrower" means an individual who is the maker or co-maker of a promissory note
and who obtains a PLUS Loan from LENDER in accordance with the Higher Education
Act and any applicable Guarantor Regulations.
"Educational Institution" means any institution of postsecondary education which
is an "eligible institution" under the Higher Education Act and is eligible
under any applicable Guarantor Regulations.
"Loan Application" means the application for a PLUS Loan, which application must
be executed by a prospective Borrower, certified by an Educational Institution,
and accepted by LENDER.
"PLUS Loan" means a loan made under the Federal PLUS Program established under
the Higher Education Act.
"Servicing Agreement" shall mean the Servicing Agreement between ACS and LENDER
to which these PLUS Credit Review Services Terms are attached, or to which they
relate.
B. Any other capitalized terms used herein shall have the same meanings
as set forth in the Servicing Agreement, unless the context otherwise requires.
2. CREDIT REVIEW SERVICES
A. ACS and LENDER hereby agree to a PLUS credit review services
arrangement whereby--
LENDER agrees to make PLUS Loans to individuals eligible to be
Borrowers pursuant to the terms of the Higher Education Act and any
applicable Guarantor Regulations;
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SERVICING AGREEMENT
ACS agrees to act as an agent of LENDER for the receipt, evaluation,
handling and maintenance of certain PLUS Loan credit information on behalf
of LENDER, in order to assist LENDER in making decisions with respect to
the approval or denial of PLUS Loans consistent with the terms of the
Higher Education Act and any applicable Guarantor Regulations; and
LENDER makes the final lending decision, in accordance with the
procedures established herein and such credit history appeal processes
(relating to credit report errors or extenuating circumstances) as may be
further determined by LENDER.
B. ACS agrees to provide the following credit review services on behalf
of LENDER:
Review Loan Applications for information required by credit bureaus
for performing a credit check. In this regard, LENDER shall assure that all
Loan Applications with co-Applicants shall include the social security
number of each Applicant. LENDER or the Educational Institution of the
Applicant(s) will be contacted if additional information is required.
Generate and submit to a national credit bureau appropriate Applicant
information for the purpose of obtaining credit information for each
Applicant.
Receive and evaluate a credit report from a national credit bureau for
each Applicant. ACS shall be entitled to rely upon all information
furnished to ACS by a national credit bureau and shall not be liable or
responsible in any manner for any inaccuracy or error contained in the
credit report obtained by ACS on LENDER's behalf from a national credit
bureau.
Identify each Applicant for a PLUS Loan who does not have an Adverse
Credit history by generating and providing to LENDER a disbursement report
related to loan origination.
Identify each Applicant for a PLUS Loan who has an Adverse Credit
history by generating and providing to LENDER a credit review report which:
a. Lists the name, address, and social security number of
each Applicant who has an Adverse Credit history;
b. Lists the Adverse Credit factors found on the
Applicant's credit bureau report which, absent extraordinary
circumstances, require credit denial; and
c. Provides the name and address of the credit bureau
accessed for the Adverse Credit history information.
Generate and mail to the Applicant an "adverse action" letter on
behalf of LENDER and in LENDER's name with respect to each Applicant who
has been identified as having an Adverse Credit history, within 30 days
after ACS receives a completed Loan Application from LENDER and the credit
bureau report.
Upon request by LENDER from time to time, return the original or a
copy of each Loan Application processed by ACS (other than electronically
transmitted Loan Applications, which will not be transmitted to LENDER) for
which an Adverse Credit history exists, and other information in ACS's
possession regarding its review of such Loan Application.
Maintain accurate books and records of all transactions hereunder,
including Adverse Credit history reports of Applicants processed for LENDER
hereunder.
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SERVICING AGREEMENT
C. LENDER agrees that, with respect to all PLUS Loans processed under
these PLUS Credit Review Services Terms, it will:
Assure that all information set forth in Loan Applications and all
other information provided to ACS in connection with the performance of its
services hereunder is accurate and complete.
Be responsible for handling and evaluating all appeals of credit
denial.
Communicate, if appropriate after the credit denial appeal process is
completed, its approval of a Loan Application to ACS for each Applicant
which ACS previously identified as possessing an Adverse Credit history by
submitting a letter attached to the Loan Application (or a copy of the Loan
Application) requesting the PLUS Loan to be guaranteed, due to error or
other extenuating circumstances relating to the original credit information
obtained by ACS on LENDER's behalf, and properly documenting such error
correction or other extenuating circumstances.
D. Nothing contained in these PLUS Credit Review Services Terms shall
make ACS a loan production office or a holder or originator of any
PLUS Loan, the application of which has been processed hereunder.
LENDER acknowledges that it has sole authority and responsibility for
the decision to approve or deny PLUS Loans hereunder.
3. TERM
The credit review services contemplated by these PLUS Credit Review Services
Terms shall commence on the date first mentioned above and continue until the
sooner of (i) termination by either party, with or without cause, upon not less
than thirty (30) days' written notice to the other party; or (ii) automatic
termination upon the termination or expiration of the Servicing Agreement.
4. LIABILITY LIMITATIONS
In performing its PLUS Loan credit review services and other Loan Application
processing functions, ACS shall only be liable for its own gross negligence or
intentional misconduct. ACS shall have no responsibility for the inaccuracy or
incompleteness of any Loan Application or credit bureau report or the
information contained thereon, or for any credit decision made by the Lender.
Subject to the foregoing, the provisions of the Servicing Agreement limiting
ACS's liability are also hereby incorporated by reference and shall be binding
between the parties hereto with respect to the PLUS Loan credit review services
and other matters contemplated herein.
5. INCORPORATION BY REFERENCE
The terms of the Servicing Agreement are incorporated herein by reference and
shall be applicable to the PLUS Loan credit review services, to the extent not
inconsistent with or contrary to any provision herein. In the event of any
conflict, the terms of this Exhibit shall prevail.
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SERVICING AGREEMENT
EXHIBIT G
AFFILIATE SERVICING ADDENDUM
THIS AFFILIATE SERVICING ADDENDUM is made this ___ date of ___________,
2002 (the "Affiliate Servicing Addendum"), by and among ACS EDUCATION, SERVICES,
INC. ("ACS"), EDUCATION LENDING SERVICES, INC. ("ELS"),
__________________________ ("Affiliate") and _______________________________ as
the eligible lender trustee on behalf of the Affiliate ("Affiliate Eligible
Lender Trustee").
This Affiliate Servicing Addendum is an addendum to that certain Servicing
Agreement among ACS, ELS and Fifth Third Bank as eligible lender trustee on
behalf of ELS (the "ELS ELT") dated as of _____________, 2002, including all
amendments, addenda, attachments, exhibits and schedules thereto (herein the
"Servicing Agreement").
Capitalized terms used in this Affiliate Servicing Addendum without
definitions shall have the meanings ascribed to such terms in the Servicing
Agreement.
WHEREAS, ELS desires ACS to provide the services set forth in the Servicing
Agreement for the Affiliate and the Affiliate Eligible Lender Trustee; and
WHEREAS, ACS agrees to provide the services set forth in the Servicing
Agreement with respect to student loans owned by the Affiliate and held by the
Affiliate Eligible Lender Trustee acting on its behalf under the terms of the
Servicing Agreement.
NOW, THEREFORE, in consideration of the mutual promises contained herein
and other valuable consideration, and intending to be legally bound, ACS, ELS,
Affiliate and Affiliate Eligible Lender Trustee agree as follows:
(1) ACS and ELS agree to amend the existing Servicing Agreement by adding
this Affiliate Servicing Addendum to the Agreement. For purposes of construing
the Servicing Agreement in order to carry out the intention of this Affiliate
Servicing Addendum, (i) each reference to LENDER in the Servicing Agreement
shall mean the Affiliate and; (ii) each reference to the Eligible Lender Trustee
in the Servicing Agreement shall mean the Affiliate Eligible Lender Trustee.
(2) ACS agrees to perform its duties and obligations for the Affiliate and
the Affiliate Eligible Lender Trustee in accordance with the terms and
conditions set forth in the Servicing Agreement, as amended, for student loans
owned by the Affiliate and held by the Affiliate Eligible Lender Trustee. ELS,
Affiliate and Affiliate's Eligible Lender Trustee agree to perform their
respective duties and obligations in accordance with the terms and conditions
set forth in the Servicing Agreement, as amended.
(3) ELS shall be responsible for and agrees to pay all fees due to ACS for
services rendered to the Affiliate and the Affiliate Eligible Lender Trustee by
ACS under the Servicing Agreement with respect to the student loans owned by the
Affiliate. ACS shall not be required to separately xxxx Affiliate and Affiliate
Eligible Lender Trustee, but shall xxxx XXX directly for services provided
hereunder to Affiliate and Affiliate Eligible Lender Trustee. In addition, ELS
shall be responsible for all aspects of the relationship, support services, and
interface with Affiliate, it being understood that ACS shall have no obligation
to deal with Affiliate directly with respect to loan servicing or related
issues, and ACS shall be entitled to rely on any instructions given by ELS on
behalf of Affiliate.
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SERVICING AGREEMENT
(4) Notwithstanding Section (1) above, ELS, rather than Affiliate or
Affiliate Eligible Lender Trustee, shall have the right to terminate the
Servicing Agreement with respect to the services provided to the Affiliate and
the Affiliate Eligible Lender Trustee on the terms and conditions set forth in
the Servicing Agreement.
(5) All notices or other communications by one of the parties hereto to the
Affiliate shall be addressed as follows:
_____________________________________; and to the Affiliate Eligible Lender
Trustee as follows: _______________________________________, or such other
address as may be indicated from time to time by such party.
(6) This Affiliate Servicing Addendum shall be effective as of the first date
written above.
(7) This Affiliate Servicing Addendum may be simultaneously executed in several
counterparts, each of which shall be an original and all of which shall
constitute one and the same instrument.
(8) By signing this Affiliate Servicing Addendum, each party certifies that it
has the power and authority to execute and deliver this Affiliate Servicing
Addendum and to carry out its terms and the terms of the Servicing
Agreement, and the execution, delivery and performance of this Affiliate
Servicing Addendum has been duly authorized by each respective entity.
IN WITNESS WHEREOF, the parties hereto caused this instrument to be duly
executed as of the month, day and the year of this Affiliate Servicing Addendum.
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SERVICING AGREEMENT
ACS EDUCATION SERVICES, INC.
as Servicer
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
EDUCATION LENDING SERVICES, INC.
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
[ ]
--------------------------------------
as Affiliate
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
[ ]
--------------------------------------
as Affiliate Eligible Lender Trustee
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
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SERVICING AGREEMENT
TABLE OF CONTENTS
Section Page
------- ----
1. ACS Obligations......................................................... 1
2. LENDER Obligations...................................................... 4
3. Banking................................................................. 4
4. Charges................................................................. 5
5. Term and Termination.................................................... 6
6. Reviews and Audits...................................................... 7
7. Representations, Warranties and Covenants of ACS........................ 7
8. Exclusion of Warranties and Limitations of ACS's Liability.............. 9
9. Indemnification......................................................... 11
10. Contingency Plan........................................................ 11
11. Financial and Administrative Responsibility............................. 11
12. Waiver of Jury Trial.................................................... 11
13. Miscellaneous........................................................... 12
14. Insurance Coverage...................................................... 14
15. Security Interest of Indenture Trustee.................................. 14
16. Servicing for Affiliates................................................ 15
EXHIBIT A ORIGINATION SERVICES............................................... 16
EXHIBIT A-1 SERVICE LEVEL METRICS............................................ 18
EXHIBIT B POST-ORIGINATION SERVICES.......................................... 20
EXHIBIT C SERVICING FEES............................Error! Bookmark not defined.
EXHIBIT D NOTE EXAMINATION ELECTION.......................................... 23
EXHIBIT E BLANKET CURE TERMS................................................. 24
EXHIBIT E-1 CURE FEES........................................................ 26
EXHIBIT F PLUS CREDIT REVIEW SERVICES TERMS.................................. 27
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SERVICING AGREEMENT
EXHIBIT G AFFILIATE SERVICING ADDENDUM....................................... 30
34
