EXHIBIT 10.6
CERTAIN PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT. THE SYMBOL "[****]" HAS BEEN INSERTED IN PLACE OF THE PORTIONS SO
OMITTED.
PRIVATE CONSOLIDATION LOAN ORIGINATION RESPONSIBILITY AGREEMENT
This Private Consolidation Loan Origination Responsibility Agreement dated as of
June 12, 2001 ("Agreement") is by and between Collegiate Funding Services, LLC,
with its principal office located in Fredericksburg, Virginia ("CFS"), and First
Union National Bank of Delaware with its principal office located in Wilmington,
Delaware (the "Lender").
CFS and the Lender hereby agree as follows:
96. Purpose:
The purpose of this Agreement is to establish terms under which the
parties agree to operate with respect to the marketing, originating,
servicing and funding of the Real World Private Consolidation Loan Program
(the "RWPCL Program").
The following provisions establish the terms, conditions and
responsibilities of CFS and the Lender with respect to the Lender's
funding of RWPCL Program Loans guaranteed under the requirements of The
Education Resources Institute ("XXXX").
97. Eligible Loans:
Borrower accounts processed under the RWPCL Program must consist of
one or more private nonfederal closed-end education loans, and may include one
or more federal loans qualifying for Federal Consolidation as defined under
Section 428C of the Higher Education Act; it being understood that such accounts
at no time will include any HEAL loan, any loan held by the guarantor or insurer
of such loan, any open-end credit obligation (e.g., HELOC or credit card debt),
or any Loan with a condition, or that is affected by an event or circumstance,
allowing the holder thereof to file any claim for guarantee or insurance payment
with respect to such loan, as further defined in Exhibit A hereto.
98. Definitions:
Unless the context clearly indicates otherwise, the terms set forth below
shall have the following meanings:
YYY. "ACT" means Title IV, Parts B, F and G of the Higher Education Act
of 1965 (20 USC Section 1071 et. seq.), as amended and in effect
from time to time, or any successor enactment thereto, the effective
administrative regulations promulgated thereunder, and any binding
directives issued by the Secretary of Education pursuant thereto.
ZZZ. "AFFILIATE" means any other person controlling, controlled by, or
under common control with Lender or CFS, as the case may be. For
purposes of this definition,
"control" means the direct or indirect ownership or control of, or
power to use, 25% or more of any class of voting stock of another
person.
AAAA. "APPLICATION" means an application for a Loan in the form provided
under the Regulations.
BBBB. "APPLICABLE LAW" means all federal, state and local statutes, laws,
rules, regulations, ordinances, orders, writs, injunctions or
decrees applicable to the performance by CFS, its agents, and its
permitted subcontractors and designees, of the terms and conditions
of this Agreement, including without limitation marketing,
processing, reporting, and recordkeeping, or other duties and
obligations with respect to, Applications or Loans. "Applicable Law"
includes without limitation the Act, the Equal Credit Opportunity
Act, the Federal Reserve Board's Regulation B, the Fair Credit
Reporting Act, the Truth-in-Lending Act, Regulation Z, the Fair Debt
Collection Practices Act, Title V of the Xxxxx-Xxxxx-Xxxxxx Act
(including all implementing regulations promulgated thereunder),
Electronic Signatures in Global and National Commerce Act, and other
state and federal nondiscrimination, truth-in-lending, usury,
electronic transaction, consumer privacy, consumer credit, consumer
protection, and credit opportunity laws and regulations.
CCCC. "BORROWER" means an individual or individuals who is/are (i)
eligible under the Regulations to be the obligor of a Loan, and (ii)
the sole maker(s) of a Note.
DDDD. "BORROWER FILE" means, with respect to any Loan, all documentation
that is required under Applicable Law and the Regulations for the
payment of a Default claim of such Loan. Without limiting the
generality of the foregoing, such documentation shall at a minimum
include:
(1) the Borrower's Application for such Loan;
(2) the original executed Note;
(3) evidence of full disbursement, including the applicable
repayment disclosure statement;
(4) evidence of due diligence servicing performed in accordance with
the requirements of Applicable Law and the Regulations;
(5) detailed repayment history, including, but not limited to,
payment transaction history and documentation of Deferments and
Forbearances;
(6) copies of any correspondence between CFS and the Borrower
related to the RWPCL Program including any spousal credit
notification letters required under applicable state law, other than
generic marketing letters, and a copy of CFS's electronic record of
its contact with the Borrower (after pay-off balances have been
received from all loan holders) confirming the Borrower's
authorization to proceed with Loan funding based on the certified
pay-off amounts;
(7) copy of credit bureau reports, income verification, proof of
citizenship, and all supporting documentation for any credit
override, and
(8) all other credit review documentation, records, or worksheets
generated or obtained by CFS.
EEEE. "BUSINESS DAY" means any day, other than a Saturday, a Sunday or a
day on which banks located in the State of New York are required or
authorized by law to remain closed. Any other references to "days"
shall mean calendar days.
FFFF. "DEFAULT" means, with respect to any Note, the occurrence of any
event which shall constitute a default or other grounds for filing a
Guarantee claim under the terms of the Regulations.
GGGG. "FEDERAL CONSOLIDATION LOAN" means a Loan made pursuant to Section
428C of the Act.
HHHH. "FORBEARANCE" means the period permitted by the Regulations during
which a Borrower (in Repayment) is permitted to temporarily forgo
payments or make reduced payments.
IIII. "GUARANTEE" or "GUARANTEED" means a commitment by XXXX to pay the
Lender the unpaid principal balance plus accrued unpaid interest of
a Loan or any portion thereof upon submission of a valid default,
death, disability or bankruptcy claim or claim with respect to any
other event or circumstance for which a claim would be paid under
and in accordance with the Regulations.
JJJJ. "LOAN" means a loan of money (which may be disbursed in one or more
installments) on behalf of Borrower, contingent upon an agreement to
repay, evidenced by a Note and Guarantee, which Loan was originated
in accordance with this Agreement and is a Private Consolidation
Loan under the Regulations.
KKKK. "NOTE" or "PROMISSORY NOTE" means a promissory note, in the form set
forth in the Regulations, executed by a Borrower for a Loan set
forth on the appropriate form furnished by CFS and approved by
Lender, CFS and XXXX, which Note meets the criteria set forth by
Applicable Law and the Regulations and which further contains no
blank spaces and no alterations or modifications of any kind
whatsoever and bears an unaltered original signature in the name of
the Borrower listed on the Application (in ink or in any other
legally valid electronic or digital form).
LLLL. "PRIVATE CONSOLIDATION LOAN" means a Loan made pursuant to the
Regulations.
MMMM. "REGULATIONS" means the terms, conditions, regulations, rules,
policies and procedures, including without limitation the
underwriting criteria and collection requirements, promulgated or
adopted by XXXX for processing, originating and servicing Loans
under the RWPCL Program. The Regulations are contained in Exhibit A
attached hereto.
NNNN. "SERVICER" means SunTech, Inc. or any subsequent loan servicer
approved by Lender.
99. Responsibilities of CFS:
CFS will act as marketing agent for Lender with respect to marketing
Private Consolidation Loans. As the marketing agent, CFS will receive
Applications and Promissory Notes from Borrowers, review the
documentation, collect all information required to complete the
Application, and perform data entry of certain information required to
convert the completed Application to the Servicer's system. CFS will send
Promissory Note forms to Borrowers for signature within 1 Business Day of
securing complete application information from Borrowers. CFS will be
responsible for insuring that each Application/Note submitted for a
Private Consolidation Loan is eligible in all respects to be consolidated.
CFS and the Lender hereby agree that the Servicer and the Lender may rely
fully upon CFS's certification of eligibility with respect to all actions
required of any party, other than actions required of Servicer or the
Lender under this Agreement, prior to consolidation. Without limiting the
foregoing, CFS shall:
EEEE. Perform a credit review of each prospective Borrower in accordance
with the underwriting criteria and procedures set forth in the
Regulations. CFS shall retain the FICO-score information, and any
applicable credit override information, for each prospective
Borrower with the Loan-level records supporting the Loan and shall
ensure that the FICO-score and applicable credit override
information is clearly and conspicuously identified to the Servicer
when the Loan data is initially transmitted to the Servicer for
conversion to the Servicer's Loan disbursement system. CFS shall, at
times and in the forms required under Applicable Law, send adverse
action letters or notices of incompleteness to applicants of all
rejected, denied, or withdrawn Applications. CFS shall retain copies
of all Applications, letters or notices, and all other Borrower File
records, related to rejected, denied or withdrawn Applications for
time periods required under, and in formats permitted under,
Applicable Law.
FFFF. Perform data entry of all information required of Servicer and
Lender to secure required approvals from XXXX of the Loan, and to
transfer such information to Servicer on or before 9:00 a.m. on the
business day CFS desires disbursement of the Loan. Each such
transfer of data will constitute certification to Lender by CFS that
(i) it has complied with its obligations under this Agreement with
respect to each Loan for which such file is transmitted to Servicer,
and (ii) each Loan included in the file transmission complies in all
respects with Applicable Law and the Regulations and is eligible to
be originated and funded by Lender and guaranteed by XXXX.
GGGG. Ensure that each Borrower File contains the items described in
Section 3 F. 1, 2, 6, 7 and 8, and that the Application/Note meets
all requirements for eligibility for consolidation under the
Regulations. CFS shall promptly capture and retain a copy of each
original Application and Promissory Note, any original addenda
thereto, and all other Borrower loan documents, obtained or received
by CFS in accordance with this Section 4; it being understood,
however, that any Borrower loan documents received solely via
electronic transmission or generated by CFS's system shall either be
imaged or stored in a manner that permits the
documents to be promptly and accurately reproduced. All such
document copies shall be retained in a secure fire-resistant
facility by CFS until five (5) years after the date the
corresponding Borrower File has been transferred to the Servicer.
HHHH. Ensure accuracy and completeness of any electronically transmitted
data, and send by overnight courier to the Servicer on or before the
last business day of each week for delivery by 10:30 a.m. on the
first business day of the following week, corresponding Borrower
File folders for each Loan funded electronically during such week.
IIII. Provide any missing documentation or information or correct any
document error or deficiency within 30 days of receiving notice of
the same from Servicer or the Lender pursuant to Section 6.D.
hereinbelow. If any such document deficiency is not corrected to the
satisfaction of Lender (as communicated by Lender or its Servicer)
or XXXX within such time period, CFS shall upon notice from Lender
or XXXX (which such notice shall identify how such deficiency
creates or will lead to an adverse Guaranty consequence under the
Regulations) thereafter pay an amount equal to -1/2% of the
outstanding principal of the affected Loan(s) into a First Union
designated escrow account as further set forth in Exhibit B attached
hereto.
JJJJ. Maintain all license and other governmental approvals and otherwise
comply with Applicable Law and the Regulations with respect to all
of its activities and obligations hereunder (including without
limitation obtaining and completing Applications, handling denied,
incomplete or withdrawn Applications, and dealing otherwise with
applicants.
KKKK. Act as custodian and bailee for the Lender with respect to all
original documents for Loans until all such documents are
transferred to Servicer, and with respect to copies of Borrower File
records in accordance with Section 4(C) hereof. As bailee and
custodian, CFS shall maintain custody, control and safekeeping of
such documents and such documents shall be under the sole dominion
and control of Lender. CFS shall deal with such documents only as
this Agreement requires and as Lender otherwise instructs in
writing.
LLLL. Pay to the Lender all of the principal balance (including
capitalized interest), outstanding unpaid interest and fees paid
with respect to any Loan upon the occurrence of any of the following
events:
(i) Lender determines in good faith that a claim may not be filed
on the Loan; or
(ii) the Borrower refuses to pay the Loan by claiming a legal
defense and Lender determines in good faith that there is
reasonable doubt that the Loan is legally enforceable; or
(iii) XXXX determines that any Loan is not or will not be entitled
in whole or in part to the benefits of the Guarantee or
refuses to honor all or part of a claim filed with respect to
a Loan
provided that such event is a result of (i) CFS's breach of any of its
obligations, representations, warranties, or certifications under this
Agreement, or the inaccuracy or incorrectness of any such representation,
warranty or certification, or (ii) CFS's action, or failure to act when
CFS is aware of a fact, circumstance, event, or condition giving rise to
such event and could have reasonably acted to avert or mitigate a loss to
Lender, or (iii) any lack of documentation or incomplete documentation
which made the Loan ineligible at the time it was made. CFS's
reimbursement obligation under this paragraph is unconditional and not
subject to offset, counterclaim, or recoupment. All reimbursement payments
shall be made in immediately available funds, within two (2) Business Days
upon conclusion of the process described in Section 8.A.1, and shall be in
an amount equal to the outstanding principal amount (including capitalized
interest) and all accrued but unpaid interest on the Loans repurchased,
fees paid (including without limitation all fees paid by Lender to XXXX
attributable to the related Loans and the loan origination fee paid to
Servicer for disbursing the Loan). Upon such reimbursement payment, all of
Lender's right, title and interest in such Loan, including the related
Borrower File and all principal and interest received after the
reimbursement date with respect to such Loans, shall be assigned to CFS
and Lender shall promptly deliver or cause to be delivered to CFS or CFS's
designated agent the related Borrower File endorsed to the order of CFS or
its designee without recourse or warranty of any kind.
MMMM. CFS agrees that with respect to all Applications processed by CFS on
Lender's behalf on or after June 12, 2001, it will provide to such
applicants a copy of Lender's customer information privacy and
opt-out policies and practices notice ("Lender Privacy Notice") that
is required under the Joint Banking Agencies' regulations
implementing Title V of the Xxxxx-Xxxxx-Xxxxxx Act, Public Law
000-000 (xxx "XXX Xxxxxxxxxxxx"). Each time CFS mails a Promissory
Note to a Borrower for signature by the Borrower, CFS shall include
such Lender Privacy Notice as an insert along with such mailing, or
alternatively at CFS's option, CFS may send the Lender Privacy
Notice to each Borrower as a separate mailing at any other time
prior to the date the Borrower signs the applicable Promissory Note.
CFS will give Lender no less than 21 days advance written notice in
the event CFS changes its process for sending such Notices from one
of the foregoing alternatives to the other alternative. Beginning no
later than July 1, 2001, for all Borrowers who indicate Lender as
the desired lender, any on-line Loan application service offered by
CFS shall provide a copy of Lender's Privacy Notice within such
on-line Loan application service. Each such on-line application by
any Borrower who indicates Lender as the desired lender and agrees
to receive Lender's Privacy Notice electronically, shall require the
applicant to acknowledge receipt of a copy of such Privacy Notice as
a necessary step in the completion of such on-line application. If
the applicant does not consent to receive the privacy notice
electronically, then Lender's Privacy Notice will be sent to such
applicant by mail in accordance with the provisions earlier set
forth in this Section 4(I); provided, however, that if the applicant
electronically signs the Promissory Note as part of the on-line
session, the Lender's Privacy Notice will be mailed to such
applicant before the Borrower's Loan file data is electronically
transmitted to Servicer by CFS. CFS's delivery of Lender's Privacy
Notice shall comply with all requirements, including without
limitation
consumer consent provisions and delivery provisions, under the GLB
Requirements and other federal and state consumer privacy laws and
regulations. Anything to the contrary in this Agreement
notwithstanding, CFS shall at all times comply with, and cause its
agents and permitted subcontractors to comply with, all re-use,
redisclosure or other customer information handling, processing and
protection requirements under the GLB Requirements and other federal
and state laws and regulations affecting the privacy of consumer
information. CFS shall immediately forward to Lender any Borrower
communication received by CFS indicating the Borrower's election to
opt-out of the sharing of Borrower information by or among Lender,
its affiliates, agents and subcontractors (including CFS).
NNNN. CFS shall ensure that each time an Application and Promissory Note
are provided to a prospective Borrower for signature, additional
information specified under 12 C.F.R. Section 226.17(g) is provided
to the Borrower so that the disclosure required under the Truth In
Lending Act (and Regulation Z) for any Loan made to the Borrower can
be provided in full compliance with the delivery-timing requirements
under 12 C.F.R. Section 226.17(g). CFS shall ensure that the
disclosure of such additional information to prospective Borrowers
also complies with the advertising rules contained in 12 C.F.R.
Section 226.24, all other provisions of the Truth-in-Lending Act and
Regulation Z, and with all other Applicable Law.
100. Responsibilities of the Lender:
OOOO. Lender will perform the duties and adhere to the responsibilities
outlined in this Agreement. Lender shall, absent evidence of fraud,
bad faith, unfair dealing or criminal misconduct, be obligated to
provide daily funding for all Loans certified by CFS under this
Agreement. Notwithstanding the foregoing, Lender shall not at any
time have any responsibility or duty to undertake any investigation
or examination of CFS' activities under this Agreement and Lender
shall, as to the existence or non-existence of any fact or as to the
sufficiency or validity of any Loan or any document contained in the
Borrower File, be entitled to rely upon the certification given by
CFS.
PPPP. All Loans funded by Lender or its affiliates under the RWPCL Program
and all receivables related thereto, and all Loan documents (in
whatever form) received by or on behalf of Lender under this
Agreement or in connection with a Loan, shall be owned solely by
Lender or its Affiliates. Lender and its Affiliates shall have full
and unfettered rights in and to the Loans and the receivables relate
thereto, and the Loan documents, including, without limitation, the
right to administer, service, collect, sell, transfer, securitize or
otherwise dispose in any manner the Loans and receivables related
thereto. Nothing contained in this Agreement nor any action taken
under this Agreement shall be deemed or construed to (i) give CFS or
its Affiliates any right, title or interest, either in law or in
equity, in and to any Loan made or administered by Lender or its
Affiliates (or the receivables or Loan documents related to such
Loans) or make CFS or its Affiliates a loan production office or a
holder or originator of any such Loan, or
(ii) give CFS or its Affiliates any right whatsoever to control the
content and presentation of the underlying Loan documents.
101. Responsibilities of the Servicer:
Any Servicer retained by Lender to service Loans funded under this
Agreement from time-to-time shall:
QQQQ. Promptly upon receipt of the electronic or paper data for a Loan CFS
provides under Section 4.A., perform the actions necessary to
prepare such Loans for loading to the Servicer's system and
authorize disbursement by the Lender. The funding authorization
shall be in a form acceptable to the Lender and will be faxed by the
Servicer to the Lender (with the original to be forwarded later) at
least 60 minutes prior to the latest time the Lender may initiate
its electronic funding transaction, provided that:
(1) The data provided electronically by CFS contains no errors or
problems which cause undue or unexpected delays;
(2) CFS has given Servicer and Lender sufficient prior notice of
new payees to whom funds must be disbursed;
(3) CFS has given at least two days notice of any significant
increase in either the number of Loans or the number of
disbursements to be processed or of any other special
circumstance that could cause delay.
RRRR. The Servicer shall, promptly upon receipt of each file, undertake
its obligation with respect to such files and begin reviewing the
file for each Loan to confirm the following:
(1) Payoff Request Form(s) ("PRF(s)") is present and signed by a
representative of the owner of the Loans being consolidated,
or by any agent representing the owner and authorized to
execute the LPF on behalf of the owner.
(2) Application/Promissory Note is present and signed by the
Borrower. The Servicer shall have no obligation to verify that
the signature on the Application/Promissory Note is the actual
signature of the Borrower.
(3) The Borrower File received from CFS contains the items
described in Section 3(F)(1), (2), (6) and (7).
SSSS. Servicer shall, upon funding, convert the Loans to its servicing
system and commence repayment servicing in accordance with any
servicing agreement between Servicer and the Lender.
TTTT. Servicer shall, within thirty (30) calendar days of receipt of each
Borrower File, submit an exceptions list to CFS and Lender
identifying those items required to be in the Borrower File (i.e.,
Section 3(F)(1), (2), (6) and (7) that were not contained in the
File received by Servicer.
UUUU. Servicer shall immediately inform the Lender and CFS in writing of
any Loan determined by XXXX to be uninsured as a result of (i)
actions or failure to act by CFS or any other party, or (ii) any
breach or inaccuracy with respect to any representation, warranty or
certification given by CFS in connection with this Agreement.
VVVV. Lender shall cause Servicer's obligations under this Section 6 to be
added to any servicing agreement and custodian agreement between the
Servicer and the Lender. This Agreement shall in no way limit
Servicer's obligations under any servicing agreement or custody
agreement.
WWWW. Servicer shall add new payees to its system as identified and
requested in writing (including facsimile and e-mail to locations
identified by Servicer) by CFS. Servicer will add up to 15 new
payees within 1 Business Day of receiving a written request from
CFS. To the extent CFS requests more than 15 payees in a single
Business Day, such additional payees will be added within 5 Business
Days.
102. Insurance:
CFS shall obtain and maintain in force until all Loans that Lender funds
hereunder are repaid in full or paid as a claim by XXXX, and upon the
request of the Lender furnish proof of, errors and omissions and liability
insurance policies acceptable to the Lender providing coverage (with no
per occurrence minimum and not more than $10,000 deductible), with respect
to claims by Lender , arising from CFS's failure to perform any of its
responsibilities under, or from CFS's breach of its representations,
warranties or certifications made in, this Agreement, each in an amount of
at least $1,000,000 in the aggregate and per occurrence. Each such policy
shall be maintained with an insurer rated not lower than A by A.M. Best
Co., and shall provide that the policy cannot be canceled or modified
without at least 60 days written notice to Lender and Servicer. The policy
shall not be amended or modified in any manner which limits, restricts, or
conditions the coverage provided, decreases the amount of coverage or
increases the deductible, or in any other way reduces the coverage
provided, without the prior written consent of Lender and Servicer.
103. Reimbursement Procedure:
XXXX. If the Lender believes that CFS is obligated to reimburse it for any
Loan pursuant to Section 4.H. hereof, the Lender shall:
(1) Notify CFS in writing of the reason it believes CFS is
obligated to reimburse it and CFS shall issue a reimbursement
payment in accordance with Section 4.H; provided, however,
that CFS shall have 60 days after receipt of such notice to
(i) deliver written notice to Lender of CFS's dispute, if any,
with respect to said claim detailing CFS's good faith
reasonable basis for believing it is not obligated
to reimburse Lender for the affected Loan(s) under the terms
of this Agreement, or (ii) cure to the Lender's satisfaction
the cause of CFS' obligation, if any, to reimburse Lender for
such Loan. The parties shall negotiate in good faith to
promptly resolve any such dispute raised by CFS in accordance
with this Section 8(A)(1)(i).
(2) In the case of notice from Servicer, Servicer shall notify the
Lender, in writing, of the reason it believes CFS is obligated
to reimburse Lender and follow Lender's instructions with
respect to the Loan, any extension of the cure period or other
actions determined to be appropriate by the Lender.
YYYY. During the Term, CFS will provide a report within ten (10) days of
the end of each month that indicates for the preceding month the
total number and dollar amount of loans on which CFS has made a
reimbursement payment to any and all lenders participating in the
RWPCL Program (specific lenders and reimbursements by lender will
not be identified).
104. Loan Size:
Borrowers must have Loan indebtedness of at least $[****]. CFS intends to
maintain an average application size of $[****] that the Lender will
review quarterly. The Application Fee described in Section 12 below shall
be adjusted as provided for in Exhibit C attached hereto.
Lender will track the volume of Applications which, 6 months after
receipt, have a principal balance of $[****] or less. In the event these
Applications constitute more than [****] percent ([****]%) of all
Applications received, the Lender reserves the right to renegotiate the
Application Fee. In the event Lender elects to renegotiate the Application
Fee under this Section 9, Lender shall send written notice to CFS of the
same and thereafter both parties shall undertake good faith efforts to
adjust such Fee to their mutual satisfaction. In the event the parties are
unable to agree upon an adjusted Fee within 60 days of Lender's notice to
CFS, Lender may terminate the Agreement at any time thereafter upon notice
to CFS.
105. Funding:
The Lender agrees to fund [****] Loans [****] by [****] beginning June 12,
2001, subject to Section 5(A).
106. Borrower Benefits:
The parties acknowledge and agree that the RWPCL Program does not and will
not offer, provide, or otherwise make available any borrower benefits
programs of any kind or nature whatsoever, including without limitation
interest rate reductions, fee reduction(s), rebate or credit of any
amount(s), or other incentives with respect to the Borrower's Loan(s),
unless and until the parties hereafter amend this Agreement to provide for
such borrower benefit programs.
107. Application Fee:
The Lender agrees to pay an application fee as set forth in Exhibit C for
each successfully completed application. "Successfully completed
application" means an application for a Private Consolidation Loan from an
eligible borrower in which CFS and Lender have all of the required
documentation to make the Loan, regardless of whether it is actually made
or not.
108. Marketing:
ZZZZ. Marketing the RWPCL Program is the sole and exclusive
responsibility of CFS, subject to the following conditions. The
Lender and Servicer will not produce any of the marketing
materials developed, nor will their names, service marks,
trademarks or logos be used in any promotions without their prior
written consent.
AAAAA. The Lender hereby gives CFS, limited, non-exclusive,
non-transferable, royalty-free permission, during the term of
this Agreement (including any extensions and renewals hereof), to
use the Lender's name and/or the name and/or logo of Lender's
Educaid affiliate on marketing and promotional materials related
to the RWPCL Program (the "Marketing Materials"). Lender shall
not enter into any new business relationships with any entity in
which it may add or acquire any new marketing agents to market
Eligible Loans as defined in Section 2 hereinabove. As of the
execution date hereof, Lender is the sole funding source for
RWPCL Loans. In the event CFS enters into a new business
relationship during the term of this Agreement in which it may
add or acquire any other lender to fund RWPCL Loans, Lender shall
at all times thereafter, subject to the terms and conditions of
this Agreement, be given full opportunity to fund no less than
[****]% of all RWPCL Loans originated after the date any such
additional lender relationship is established (measured by the
total number of RWPCL Loans originated by CFS, not the aggregate
loan amount)
BBBBB. Lender and CFS shall agree with each other as to the form and
substance of any press release relating to this Agreement and any
press release about the RWPCL Program referencing or identifying
the Lender, and consult with each other as to the form and
substance of other public disclosures related to Lender's
participation in the RWPCL Program; provided, however, that
nothing contained in this Agreement shall prohibit any party from
making any disclosure which its legal counsel reasonably deems
necessary to comply with Applicable Law.
CCCCC. In performing its marketing services under this Agreement, CFS
shall at all times comply with Applicable Laws, the Regulations,
and Direct Marketing Association (DMA) guidelines and all DMA and
State "do not solicit" marketing lists (whether covering
telemarketing or direct mail marketing). CFS shall not attempt
further phone calls or send additional mailings to, or in any way
contact, individuals who request of CFS that no future phone
calls, mailings, or contacts be made to such individuals.
DDDDD. CFS agrees not to market RWPCL Loans for funding by Lender to any
individual who (i) is a consumer or customer of Lender or any of
its Affiliates, (ii) CFS may not market to under Applicable Law,
and (iii) identified by Lender to CFS. Whenever Lender provides
CFS with a report listing such individuals, CFS shall promptly
and accurately match such list against any file, database, or
list of consumers/customers maintained or used by CFS to promote
the RWPCL Program. CFS shall not market RWPCL Loans for funding
by Lender to individuals identified in such data-matching
process. Furthermore, CFS agrees that it will not in any way
market, advertise or promote education finance products of any
type or from any source to Borrowers with applications submitted
for processing under this Agreement without Lender's prior
written consent, which Lender shall not unreasonably withhold.
EEEEE. CFS shall at all times accurately represent the RWPCL Program.
CFS specifically understands and agrees that Lender's goodwill
and reputation relies on responsible promotion of education loans
and services to consumers who meet the eligibility requirements
for such loans and services. CFS shall not at any time promote,
nor at any time cause, suffer or permit its agents or Affiliates
to promote, the RWPCL Program to Borrowers in any way which would
disparage Lender or Lender's Affiliates, be injurious to the
reputation of Lender or Lender's Affiliates, or cause Lender or
Lender's Affiliates to lose goodwill.
109. Regulatory Changes:
Lender may, in direct and demonstrable response to changes to Applicable
Law that (i) are directly binding on Lender or Loans made and held by
Lender, and (ii) which prevent the Lender from realizing sufficient profit
from the RWPCL Program, withdraw from the Program with 120 days prior
written notice to CFS. If legal or regulatory changes prohibit, limit or
alter the compensation provisions for the services rendered by CFS to
Lender, either party shall have the option to negotiate an amendment to
the Agreement or withdraw from the Program with 120 days prior notice to
the other party. Lender shall have no obligation to fund Loans after the
date of any of the foregoing notices, except that during such 120 day
notice period Lender shall, subject to and in accordance with this
Agreement, fund Loans for which CFS has secured complete application
information and has mailed related application forms to Borrowers for
signature prior to the date of any such notice.
110. Reports:
CFS will provide to Lender prior to the end of each calendar quarter, a
forecast of projected Application volume to be delivered to Lender under
this Agreement. This report will forecast monthly Application volume
(principal dollars and number of borrowers) for each of the twelve (12)
months following the end of the quarter in which the forecast is
submitted, with projected Application closings for each month in each
reporting period.
111. Invoicing:
CFS shall invoice each Friday for all loans processed during that week,
and each invoice shall provide sufficient detail to permit Lender to
verify the xxxx at the Borrower level and further include the total amount
funded by Lender each week, sorted by the FICO score group. Lender agrees
to execute a wire transfer of funds for all invoices, except as to amounts
which are under good faith dispute, within three business days of receipt
of invoice.
112. Expenses:
Other than the expenses described in this Agreement, all parties agree to
be responsible for their respective expenses under the RWPCL Program. CFS
shall be responsible for the cost of all marketing materials, data entry,
sales and related expenses incurred with respect to its marketing
activities; provided, however, that nothing herein shall require CFS to
print and/or bear the cost of printing any statutorily required consumer
notices sent on Lender's behalf such as the Xxxxx-Xxxxx-Xxxxxx privacy
opt-out notice (but excluding Truth-in-Lending information required to be
provided by CFS as described in Section 4J hereof); and provided further,
however, that if the inclusion of Lender's Xxxxx-Xxxxx-Xxxxxx privacy
practices and opt-out notice, or any other consumer notice that Lender
becomes statutorily obligated to send after the execution date hereof, in
the loan application package mailed by CFS to Loan Applicants necessitates
a higher postal rate for mailing of such package to Borrower than the
postal rate that would have been payable had Lender's Privacy Notice (or
other statutory notice) not been included in such mailing, then Lender
shall pay the differential in such postal rate.
113. Confidentiality:
FFFFF. This Agreement is considered confidential by all parties hereto
and must not be copied or disclosed to anyone other than
employees of the parties directly involved in the RWPCL Program
or such accountants, attorneys, or other professional advisors or
government agencies having jurisdiction over such parties without
the written consent of the other parties, except as otherwise
required by law.
GGGGG. All data, information, records, correspondence, reports or other
documentation relating to and identified with prospective,
existing or former Borrowers of Loans under this Agreement,
contained or reflected in Loan forms (including without
limitation the application and/or promissory note), RWPCL Program
forms, or otherwise obtained, received, prepared, generated or
maintained by CFS in connection with this Agreement or necessary
to complete, process, fund service, or otherwise administer a
RWPCL Program Loan, is and shall remain the confidential
information and property of Lender, regardless of whether it is
initially received or obtained by CFS from or at the direction of
Lender, the Borrower, or any lender of any loan underlying the
Borrower's Loan, or prepared and maintained by CFS in the course
of any of its activities under this Agreement (individually or
collectively referred to hereinafter as "Lender
Proprietary Information"). Lender Proprietary Information (i)
includes any customer list provided by Lender to CFS in connection
with Section 13(E), and (ii) excludes information contained in
marketing lists purchased by CFS or information obtained by CFS
other than in connection with the RWPCL Program. CFS shall hold all
Lender Proprietary Information in strictest confidence and not
release or divulge such Information to any party other than the
Lender and Lender's Affiliates without Lender's prior written
consent, except (i) as provided in Section 18(A), (ii) to such other
parties as Lender directs in writing, and (iii) as otherwise
explicitly set forth in this Agreement. CFS understands and agrees
that it shall only use Lender Proprietary Information to perform its
duties under this Agreement and that CFS shall not directly or
indirectly use, or suffer, permit or cause to be used, any such
Information for any other purpose whatsoever. In the event that CFS
becomes legally compelled to disclose any of the Lender Proprietary
Information to entities not described in the third sentence of this
Section 18(B), CFS shall provide Lender with prompt notice before
such Information is disclosed so that Lender may seek, before such
disclosure is made, a protective order or other appropriate remedy
or waive compliance with this Section 18(B). In the event that such
protective order or other remedy is not obtained, or that Lender
waives compliance with this Section 18(B), CFS shall furnish only
that portion of the Lender Proprietary Information which it is
advised by counsel is legally required and, if requested by Lender
at its sole expense, CFS shall exercise reasonable efforts to obtain
a protective order or other reliable assurance that confidential
treatment will be accorded to such Information.
114. Representations, Warranties, and Covenants of CFS:
CFS represents, warrants, and covenants each of the following to the
Lender on the date of this Agreement, on the date of each request for
Lender to originate and fund any Loan and on the date of Lender's funding
of any Loan (which such representations, warranties and covenants shall
survive any termination of this Agreement):
HHHHH. CFS (i) is duly organized, validly existing, and in good standing
under the laws of the jurisdiction in which it is organized; (ii)
is duly qualified to transact business and is in good standing as
a foreign limited liability company in each jurisdiction where
the nature and extent of its business and properties require due
qualifications and good standing; (iii) possesses all requisite
authority, permits and power to conduct its business as is now
being, or is contemplated by this Agreement to be, conducted; and
(iv) is in compliance with all Applicable Law and all of its
obligations under this Agreement.
IIIII. The execution and delivery by CFS of this Agreement and the
performance by it of its obligations hereunder (i) are within its
limited liability company power; (ii) have been duly authorized
by all necessary company action; (iii) except for any action or
filing that has been taken or made on or before the date of this
Agreement, requires no action by or filing that has been taken or
made on or before the date of this Agreement, require no action
by or filing with any
governmental agency; and (iv) do not violate any provision of its
operating or company agreement.
JJJJJ. This Agreement will, upon execution and deliver by all parties
thereto, constitute a legal and binding obligation of CFS,
enforceable against CFS according to its terms.
KKKKK. CFS 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 and no outstanding or unpaid
judgments against CFS exist.
LLLLL. All tax returns of CFS required to be filed have been filed (or
extensions have been granted) before delinquency and all taxes
imposed upon CFS that are due and payable have been paid before
delinquency, other than taxes which are being contested in good
faith by lawful proceedings diligently conducted and against
which reserve or other provision required by GAAP has been made
and in respect of which levy and execution of any lien have been
and continue to be stayed.
MMMMM. Each Loan CFS certifies to Lender as eligible to be originated
and funded by Lender (i) is genuine in all respects and is what
it purports to be; (ii) is free from any material claim for
credit, deduction, or allowance of any such obligor and free from
any defense, dispute, setoff, counterclaim or right of recission
(other than for payments made in respect of it) which could be
asserted and maintained, or which, with notice, lapse of time, or
the occurrence or failure to occur of any act or event, could be
asserted and maintained by the Borrower or any other party as a
result of any breach, nonperformance, or nonfulfillment of any of
the terms of this Agreement on the part of CFS or its agents;
(iii) was marketed, originated and is in compliance in all
material respects with all Applicable Law; (iv) is supported by a
Promissory Note that is in CFS's physical possession at the time
of such certification ; (v) conforms to the applicable
requirements under the Regulations for Guarantee; and (vi)
complies with all other terms of this Agreement with respect to
Loans.
NNNNN. Upon reasonable request CFS shall allow Lender (including
Lender's regulators and auditors) to monitor CFS sales calls to
Borrowers and application processing activities for the sole
purpose of monitoring the Program for contract and regulatory
compliance, and the information gained thereby shall be used for
no other purpose. The restrictions on Lender's use of the
information about CFS that it acquires pursuant to this section
19(G) shall survive any termination or expiration of this
Agreement. CFS shall remain obligated and liable to Lender in
accordance with the provisions hereof without diminution of such
obligation and liability by virtue of any such monitoring by
Lender.
OOOOO. CFS will, beginning July 1, 2001 and at all times thereafter
while this Agreement remains in effect, have in place an
information security program for
protecting Lender's Proprietary Information that fulfills the
objectives set forth in the "Interagency Guidelines Establishing
Standards for Safeguarding Customer Information", 66 Fed. Reg.
8616, February 1, 2001, codified in Appendix B to 12 C.F.R. part
30 (implementing section 501(b) of the Xxxxx-Xxxxx-Xxxxxx Act,
Public Law 106-102).
CFS further represents and warrants to the Lender the following: until all
Loans that Lender funds hereunder have been repaid in full or paid as a
claim by XXXX, CFS or transferred by the Lender to another entity:
PPPPP. CFS shall maintain books, records and accounts necessary to
prepare financial statements according to GAAP.
QQQQQ. Upon reasonable request CFS shall allow Lender (including
Lender's regulators and auditors) to inspect any of its
properties, to review reports, files and other records and to
make and take away copies, to conduct tests or investigations,
and to discuss any of its affairs, conditions and finances with
its directors, officers, employees or representatives from
time-to-time during reasonable business hours, for the sole
purpose of monitoring the Program for contract and regulatory
compliance, and the information gained thereby shall be used for
no other purpose. The restrictions on Lender's use of the
information about CFS that it acquires pursuant to this section
19(J) shall survive any termination or expiration of this
Agreement. CFS shall remain obligated and liable to Lender in
accordance with the provisions hereof without diminution of such
obligation and liability by virtue of any such inspection,
review, testing, investigation, or discussions, by Lender.
RRRRR. CFS shall (i) maintain its corporate existence (such that there
shall not be any mergers or acquisitions in which CFS is not the
surviving entity) and good standing in its state of organization,
and (ii) maintain all licenses, permits, and franchises necessary
for its business.
115. Representations and Warranties of Lender:
Lender represents and warrants to CFS on the date of this Agreement, on
the date of each request for Lender to originate and fund any Loan, and on
the date of Lender's funding of any Loan (which such representations and
warranties shall survive any termination of this Agreement):
SSSSS. Lender (i) is duly incorporated, validly existing, and in good
standing under the laws of the jurisdiction in which it is
organized; (ii) is duly qualified to transact business as a
general corporation; and (iii) possesses all requisite authority,
permits and power to conduct its business as is now being, or is
contemplated by this Agreement to be, conducted; and (iv) is in
compliance with all federal and state laws and regulations
applicable to its performance of its obligations under this
Agreement.
TTTTT. The execution and delivery by Lender of this Agreement and the
performance by it of its obligations hereunder (i) are within its
corporate power; (ii) have been duly authorized by all necessary
action; (iii) except for any action or filing that has been taken
or made on or before the date of this Agreement, require no
action by or filing with any governmental agency; and (iv) do not
violate any provision of its articles of incorporation.
UUUUU. This Agreement will, upon execution and delivery by all parties
thereto, constitute a legal and binding obligation of Lender,
enforceable against Lender according to its terms.
VVVVV. Lender 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 affect on its financial condition.
116. Notice:
All notices given under this Agreement shall be in writing and shall be
sent by certified mail, return receipt requested to the parties at their
respective addresses given below. Such notice shall not be effective until
received by the respective party.
Mr. J. Xxxxx Xxxxxx, President & Chief Operations Officer Collegiate
Funding Services, LLC
000 Xxxxxxxxx Xxxxxxx, Xxxxx 000
Xxxxxxxxxxxxxx, Xxxxxxxx 00000
If to Lender:
c/o Xx. Xxxxx X. Xxxxxxxxxx,
Senior Vice President
First Union National Bank of Delaware
0000 X Xxxxxx, Xxxxx 000-X
Xxxxxxxxxx, Xxxxxxxxxx 00000
117. Entire Agreement:
This Agreement, including all exhibits hereto, represents the entire
agreement of the parties and supersedes all prior agreements, written or
oral, with respect to such subject matter. Each of the parties has read
and understands this Agreement, and has had the opportunity to have this
Agreement reviewed by an attorney.
118. Term; Termination:
WWWWW. The parties agree that the term of this Agreement shall be from
the date first written above until June 12, 2004 ("Initial
Term"). The Agreement shall thereafter automatically extend for
two (2), one-year periods (each an "Additional Term") unless one
of the parties notifies the others in writing of their intent not
to
renew at least 90 days prior to the expiration of the Initial
Term or Additional Term, as applicable.
XXXXX. B. This Agreement may be terminated under the following
circumstances within the time specified:
(1) By mutual agreement of parties, in writing, at the time so
agreed to by the parties;
(2) By Lender or CFS, in writing, if the other party has in any
material respect breached any covenant, obligation,
representation or warranty contained herein, and such breach
has not been cured within sixty (60) calendar days after the
date on which written notice of such breach is given to the
party committing such breach;
(3) By either party (the "solvent Party") in writing, in the event
the other party (the "insolvent Party") files for or is
subject to any insolvency or bankruptcy proceeding, makes an
assignment for the benefit of creditors or becomes subject to
any receivership, conservatorship or liquidation, in which
case this Agreement may be immediately terminated by the
solvent Party by giving written notice of termination to the
insolvent Party. In such event, this Agreement shall not
constitute assets or property in any insolvency proceeding,
and therefore may not be assigned to any trustee, receiver,
creditor or the other third party.
(4) By Lender in the event the volume of completed Applications
received during any two (2) consecutive months is less than
[****] Dollars ($[****]).
(5) By Lender upon written notice to CFS in the event that the
Guaranty Agreement between Lender and XXXX terminates or the
"Consolidation Loan Origination Responsibility Agreement"
between Educaid and CFS terminates. Furthermore, Lender shall
have no obligation to fund any Loans under this Agreement
after the date, if ever, that (i) XXXX limits or suspends
issuing Guarantees on RWPCL Loans, or (ii) the Office of the
Comptroller of the Currency or any other regulatory agency
with jurisdiction over Lender directs the Lender to
discontinue its activities under this Agreement.
YYYYY. Termination or expiration of the Agreement shall not terminate or
affect any rights, obligations or liabilities of either party that
arose prior to the effective date of such expiration or
termination.
119. Ownership Changes:
Should ownership of either CFS or Lender change by 50% (or controlling
interest) of either, notification is required within 30 days by the party
subject to the change to the other party. This contract, and all the
rights and obligations of CFS hereunder, may not be assigned or
subcontracted by CFS without the prior written consent of Educaid, which
consent shall not be unreasonably withheld. The Lender may assign this
contract, or any or all of its rights and obligations under this contract,
to any parent, subsidiary or affiliate of Lender's without CFS's consent.
Any assignment contrary to the foregoing shall be void.
120. Amendment:
This Agreement may be amended only by a written instrument signed by all
of the parties hereto. The effective date of any amendments shall be the
date the parties have signed said instrument unless otherwise stated
therein.
121. Binding Effect:
This Agreement shall be binding upon and shall inure to the benefit of the
parties and each one's permitted successors and assigns.
122. Agency:
The parties acknowledge that nothing herein is intended to authorize CFS
or the Lender to enter into an agency relationship with any other entity
or individual, including without limitation the holder of any loans to be
consolidated or their agents, nor shall any provision hereof be
interpreted as creating such an agency relationship or subjecting the
Lender to any liability, loss or imputed or vicarious knowledge,
liability, or loss in connection with any Loan made pursuant to this
Agreement by reason of any act or omission of any such other entity or
individual. No legal relationship of any kind exists as a result of this
Agreement other than the covenants expressly contained herein. This
Agreement shall not be deemed or construed to constitute, create, give
effect to or otherwise imply a partnership, copartnership, joint venture
or business organization of any kind between the parties, or principal and
agent relationship between the parties or any of their respective
Affiliates. It is agreed that each party shall at all times be an
independent contractor and not an agent for the other party. Neither party
has the authority to assume or create any obligation or responsibility,
express or implied, on behalf of, or in the name of, the other party or to
bind such other party in any way. Each party shall be responsible for
wages, taxes, withholding, insurance, hours, and conditions of employment
of its personnel during the term of this Agreement.
123. Default; Jurisdiction:
Should any party default hereunder, the nondefaulting party shall be
entitled to recover all costs of enforcing this agreement, including
reasonable attorney's fees. This agreement shall be governed by, subject
to, and interpreted in accordance with the laws of the Commonwealth of
Virginia without regard for its conflict of laws statute.
124. Indemnification.
Each party (the "Indemnifying Party") agrees to assume liability and to
pay for, and hereby agrees to indemnify, defend, and hold harmless the
other party (the "Indemnified Party") and its officers, directors,
employees, Affiliates, successors, and assigns from and
against, any and all liabilities, losses, costs, damages, penalties,
fines, or expenses, including without limitation legal costs and
reasonable attorney's fees (together "Losses"), in connection with any
claims, suits or proceedings made or brought by a third party to the
extent that such Losses result from, arise out of , or relate to a
violation, breach or non-performance by the Indemnifying party or its
agent(s) of any of the Indemnifying Party's obligations, covenants,
representations, warranties, or certifications under or in connection with
this Agreement. It is specifically understood that neither party shall
make or agree to any settlement of any such claim involving financial
compensation by the other party, its successors, assigns, or Affiliates.
Except in the event of fraud or criminal misconduct, neither party shall
be responsible or liable to the other party for consequential, incidental,
indirect, special or punitive damages.
125. Severability.
It is the intent of the parties that this Agreement be construed and
interpreted in a manner such as to permit enforcement of all of its terms.
However, if any provision of this Agreement is held invalid or
unenforceable in any jurisdiction for any reason, such provision shall, as
to such jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without invalidating the remainder of such provision or
the remaining provisions hereof, and any such invalidity or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction, unless such
invalidity shall destroy the economic incentive for either party's
participation in the Agreement. Such invalid or unenforceable provision
shall be amended, if possible, in accordance with Section 25 hereof in
order to accomplish the purposes of this Agreement.
126. Mandatory Arbitration.
Any dispute or controversy between the parties involving less than
$250,000 arising out of, connected with or relating to this Agreement
shall be resolved by binding arbitration administered and conducted under
the Commercial Arbitration Rules of the American Arbitration Association
and title 9 of the United States Code. The prevailing party in any
judicial action or arbitration shall be entitled to reimbursement from the
other party for cost, filing fees, arbitration filing fees, reasonable
pretrial, trial and appellate attorneys' fees, witness fees, expert fees,
arbitration panel fees, and travel fees. A judgement upon the arbitration
award may be entered in any court having jurisdiction. Any arbitration
hearing shall take place in the State of California. Nothing in this
section, however, shall prevent either party from seeking equitable relief
from a count of competent jurisdiction for the other party's breach of
Section 18 hereof or infringement of intellectual property rights and
proprietary sections of this Agreement.
127. No Implied Waivers.
No failure or delay on the part of any party in exercising any right,
privilege, power, or remedy under this Agreement, and no course of
dealings among the parties, shall operate as a waiver of such right,
privilege, power, or remedy; nor shall any single or partial exercise of
any right, privilege, power, or remedy under this Agreement preclude any
other or further exercise of any right, privilege, power, or remedy or the
existence of any other right, privilege, power, or remedy. No waiver shall
be effective against any party unless signed in writing by an authorized
officer of such party.
128. Corporate Obligation.
No director, officer, employee or agent of any party shall be individually
liable to any other party for the taking of any action, or for refraining
to take any action, in good faith pursuant to this Agreement. The
Agreement is a corporate obligation and any liability arising hereunder
shall be a corporate liability.
129. Remedies Not Exclusive.
No remedy by the terms of this Agreement conferred upon or reserved to any
party hereto is intended to be exclusive of any other remedy, but each and
every such remedy shall be cumulative and in addition to every other
remedy given under this Agreement or existing at law or in equity
(including, without limitation the right to such equitable relief by way
of injunction) or by statute on or after the date of this Agreement.
130. Conflicts in Terms.
To the extent that any provision of the Regulations (Exhibit A) shall
conflict with the terms and conditions of this Agreement, the terms and
conditions of this Agreement shall be deemed controlling.
Entered into as of this 12th day of June, 2001.
FIRST UNION NATIONAL BANK OF DELAWARE
By /s/ Xxxxx Xxxxxxxxxx
------------------------------
Xxxxx Xxxxxxxxxx
Vice President
COLLEGIATE FUNDING SERVICES, LLC
By /s/ Xxxx X. Xxxxxxx
------------------------------
Xxxx X. Xxxxxxx
CEO
Attachments: Exhibit A -- Real World Private Consolidation Loan Underwriting,
Origination & Servicing Guidelines with an effective date of June
12, 2001
Exhibit B -- Escrow Account Provisions
Exhibit C -- Application Fee
EXHIBIT A
[REAL WORLD PRIVATE CONSOLIDATION LOAN UNDERWRITING,
ORIGINATION & SERVICING GUIDELINES WITH AN EFFECTIVE DATE OF
JUNE 12, 2001 - TO BE ATTACHED]
UNDERWRITING,
ORIGINATION,
AND
SERVICING GUIDELINES
FOR THE
REAL WORLD(TM) PRIVATE CONSOLIDATION
LOAN PROGRAM
ADOPTED AS OF JUNE 12, 2001
----------------------------
CONFIDENTIAL AND PROPRIETARY
----------------------------
TABLE OF CONTENTS
PRIVATE CONSOLIDATION LOAN OVERVIEW............................................ 1
UNDERWRITING GUIDELINES........................................................ 2
I. LOANS ELIGIBLE FOR CONSOLIDATION.................................. 2
II. BORROWER AND/OR CO-BORROWER ELIGIBILITY........................... 3
III. DENIAL PROCEDURES................................................. 4
IV. RECONSIDERATION POLICY AND PROCEDURES............................. 8
V. PRIVATE LOAN FORMS................................................ 9
ORIGINATION GUIDELINES......................................................... 10
I. FUNDING PROCEDURES................................................ 10
II. FILE SHIPMENT TO SERVICER......................................... 10
III. DISBURSEMENT/REFUNDS/CANCELLATIONS................................ 11
IV. PAYMENT TO GUARANTY FEES TO XXXX.................................. 11
SERVICING GUIDELINES........................................................... 15
I. REPAYMENT TERMS................................................... 15
II. FORBEARANCE ELIGIBILITY........................................... 16
III. LATE CHARGES...................................................... 16
IV. DUE DILIGENCE..................................................... 16
V. PRE-CLAIM ASSISTANCE.............................................. 17
VI. SKIP TRACING...................................................... 17
VII. CREDIT BUREAU REPORTING........................................... 18
VIII. DEFAULT CLAIMS.................................................... 18
IX. CLAIM RECALL...................................................... 19
i
X. BANKRUPTCY CLAIMS................................................. 19
XI. DEATH CLAIMS...................................................... 20
XII. DISABILITY CLAIMS................................................. 21
XIII. APPEAL PERIOD FOR CLAIM REJECTS................................... 21
XIV. CURE PROCEDURES................................................... 21
GUIDELINE AMENDMENT PROCEDURES................................................. 22
ADDENDA...............................................FOLLOWING PAGE 22
ADDENDUM A - PRIVATE CONSOLIDATION LOAN APPLICATION AND PROMISSORY NOTE
ADDENDUM B - UNDERWRITING WORKSHEET
ADDENDUM C - RECONSIDERATION WORKSHEET
ii
CERTAIN PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT. THE SYMBOL "[****]" HAS BEEN INSERTED IN PLACE OF THE PORTIONS SO
OMITTED.
PRIVATE CONSOLIDATION LOAN OVERVIEW
The REAL WORLD(TM) PRIVATE CONSOLIDATION LOAN (RWPCL) - is a private (i.e.,
non-federal) consolidation loan that is underwritten using Credit Scoring and
Credit Requirements. Each RWPCL is
- made by First Union National Bank of Delaware (the "Lender"),
- originated on the Lender's behalf by Collegiate Funding Services,
LLC, ("CFS" or the "Originator"),
- disbursed and serviced by SunTech, Inc. (the "Servicer"), and
- guaranteed by a private non-profit guarantor, The Education
Resources Institute, Inc. ("XXXX") and not the Federal Government.
The RWPCL will replace the Borrower's prior eligible education loan obligations
with new terms and conditions. To be eligible for an RWPCL, the applicant must
meet the underwriting requirements of these Guidelines.
The interest rate on the RWPCL will be Prime plus 1%. The Borrower will also be
responsible for a guaranty fee of 1% or 3%, which is added into the loan amount.
Prime is adjusted monthly; based on the rate published in the Wall Street
Journal printed on the last business day of the month.
The minimum private loan balance needed to qualify is $[****].
The FICO score will determine the guaranty fee and maximum balance:
FICO [****]+ = guaranty fee of 1% and maximum of $[****] loan amount
FICO [****]-[****]= guaranty fee of 3% and maximum loan amount of $[****]
Adding a Co-Borrower to the loan may, depending on the Co-Borrower's credit
profile, make the Borrower eligible for an RWPCL loan (for example, if the
Co-Borrower's income is needed to meet the minimum debt-to-income ratio).
However, adding a Co-Borrower will not alter the guaranty fee or the maximum
loan amount. Furthermore, the Borrower must have a 650 FICO score or higher even
if applying with a Co-Borrower, subject to branch overrides in particular cases
as described in the Reconsideration Section below.
Borrowers can use the RWPCL to pay off federal loans as well as private loans.
However, the maximum amount of Federal loans that may be added to the Private
consolidation is $[****].
REPAYMENT TERMS
Loan Balance Repayment Term
$7500 - $39,999 Up to 20 years
$40,000 - $60,000 Up to 25 years
Greater than $60,000 Up to 30 years
Note: Repayment terms are based on a Borrower's consolidated loan balance; these
terms may be changed by the Borrower after the Borrower has completed one full
year of full principal and interest payments. (Any such change will require the
signature of both signers of the original RWPCL, if there is a Co-Borrower on
the note.) However, the Borrower cannot exceed the maximum repayment period
applicable to his/her balance at the time the loan was approved.
UNDERWRITING GUIDELINES
I. LOANS ELIGIBLE FOR CONSOLIDATION
CRITERIA FOR ELIGIBILITY
To be eligible for consolidation by means of an RWPCL, a loan must:
1. Be a closed end loan (set for a specific term and amount).
2. Be evidenced by a valid promissory note, signed by the Borrower, as
certified by the current holder of the loan.
3. Have been funded by any company or institution that is engaged in the
business of making loans.
4. Have been made pursuant to a loan program explicitly limited to
education loans. (For example, home equity lines that happen to be used for
educational purposes do not qualify.)
5. Have been used to pay for educational expenses at a post-secondary
institution eligible under the US Department of Education Title IV program OR in
conjunction with obtaining certification to practice in a professional field
(i.e., bar examination, medical internship/residency, etc.). Note: it is not
necessary that a school be approved by XXXX.
6. Be reported at a credit reporting agency as a student loan trade line
or certified by the holder or its servicing agent as a loan used for educational
purposes.
7. Be certified by the Borrower as having been used to finance education
expenses. (This certification is contained in the printed application form, and
must not be altered or deleted as submitted by the Borrower.).
8. Be in repayment.
9. Be not more than 60 days delinquent, as certified by the current holder
(or servicing agent) of the loan.
Note: Items 4 and 5 above are not applicable to loans that are themselves
consolidation loans. For consolidation loans that are to be paid off with an
RWPCL, the Originator may rely on the certification referred to in Item 7 above.
A Borrower is free to choose which eligible loans to submit for
consolidation. Even a single non-federally guaranteed loan may be refinanced by
an RWPCL if it and the Borrower otherwise qualify.
An existing RWPCL cannot be "re-opened" to cover other loans; the Borrower
must take out a new RWPCL.
LOAN SIZE MINIMUMS AND MAXIMUMS
To obtain an RWPCL, an applicant must be seeking to consolidate at least
$[****] in non-federal education debt. Up to $[****] of federal debt can be
consolidated along with private debt. In order to receive a consolidation loan,
applicants with Federal loans that total $[****] or more must consolidate their
Federal loans under a Real World Consolidation Loan, not dealt with in these
Guidelines.
The maximum amount of loans that can be consolidated in an RWPCL depends
on the credit score of the Borrower. (The Co-Borrower's credit score is not
relevant to this determination.) A Borrower with a credit score of [****]-[****]
can consolidate up to $[****] of eligible loans; a Borrower with a credit score
of [****] or higher can consolidate up to $[****]. These maximums are both LOAN
MAXIMUMS and PROGRAM MAXIMUMS; a Borrower with an existing RWPCL can obtain a
new RWPCL but only in an amount equal to the maximum less his/her existing
RWPCL(s). For example, suppose a Borrower consolidates $[****] in 2001, and four
years later wants to consolidate two newer loans totaling $[****]. If the
Borrower has a FICO score that places him in the $[****] "cap" maximum range, he
may NOT consolidate the new $[****] loan unless by that time he has paid down
the first RWPCL to $[****], so that the two RWPCLs together total no more than
$[****]. The above caps can be waived on a case-by-case basis only with TERI's
express written consent prior to approval.
II. BORROWER AND/OR CO-BORROWER ELIGIBILITY
To be eligible for a Real World Private Consolidation Loan, the Borrower
must meet the following minimum underwriting criteria. Unless otherwise noted,
any Co-Borrower must also meet these criteria:
- Credit Score greater than or equal to [****]
- Maximum debt-to-income ratio (DTI):
- [****]% if credit score is between [****]and [****]
- [****]% if credit score is greater than [****]
The Borrower or Co-Borrower must pass this test; it is not necessary that
both pass.
- No bankruptcies within the past five years.
- Current on mortgage or rent payment.
- Two or more revolving credit and/or installment debts, with no more
than two accounts having been 30 days past-due in the preceding 12
months, and no accounts having been more than 60 days past-due in
the preceding 12 months. If a Co-Borrower has two current debts, the
Borrower need not have any, but any accounts the Borrower does have
must meet the above past-due limitations.
- United States citizenship - required for either the Borrower or the
Co-Borrower.
- No record of paid or unpaid charged off account over $150 or no
record of a foreclosure, repossession, open judgment or suit, unpaid
tax lien or other negative public record items.
- Verified income stream for at least one Borrower or Co-Borrower on
the application.
There is no minimum employment duration required; nor is there a
requirement for the Borrower or Co-Borrower to be employed. One of them must
however be able to evidence a flow of income sufficient to repay the loan as per
the DTI criteria set out earlier in this document. If the loan requires spousal
income be included to meet DTI, the spouse is considered a Co-Borrower and must
sign the promissory note. In community property states (such as California and
Nevada), spousal income must be considered if disclosed and verifiable. All
items detailed for the Borrower must also be verified for a Co-Borrower.
Details on certain of these items are as follows:
A. CITIZENSHIP
The Borrower or the Co-Borrower must be a U.S. Citizen. The Originator must
verify citizenship with one of the following:
- Drivers License - This will serve as verification of citizenship
only if a social security number is printed on the document.
- Passport
- U.S. Armed Services ID
- Birth Certificate
- Certification of U.S. Citizenship (INS form N-560 or N-561)
The Originator will forward documentation of citizenship to the Servicer along
with the Borrower file.
B. EMPLOYMENT
The Originator must verify the Borrower's and/or Co-Borrower's employment with
one of the following:
- A signed letter, on company letterhead, from the Borrower's employer
(preferably the company Personnel Department) verifying employment,
with additional telephone verification.
- Copies of the Borrower's two most recent pay stubs.
- If the Borrower is self-employed, signed copies of his/her two most
recent Federal Tax returns.
If the Originator does not receive one of the first three means of employment
verification, it must:
- Contact the Borrower at his/her place of business, and verify the
company phone number with Directory Assistance.
- Contact the Borrower's business (preferably the company Personnel
Department), and verify employment.
C. INCOME
The Originator must verify the Borrower and/or Co-Borrower's Income with one of
the following depending upon the source of income:
- If the Borrower is salaried, a copy of paycheck deposits, pay stubs
etc. The document must be dated within the last 30 days of
application date.
- Copies of the most recent pay stubs (representing 30 days worth of
income).
- Most recent W-2 form.
- Most recent copy of signed 1040 Tax return with all schedules
attached.
- An original letter from the employer; signed by a third party and
verbally verified.
- Original letterhead from a CPA, with a signature and verbal
confirmation, stating annual income.
- If self-employed, signed copies of two most recent Federal Tax
returns (with all schedules attached).
Additional Sources of Income:
- Alimony/child support or separate maintenance as source of income -
Six months' canceled checks and/or six months' bank statements
showing deposits, or court ledgers. Income must continue for three
years from application date. The income and liability details of a
divorce older than five years need not be pursued unless it is a
primary source of income or unless it represents a significant
liability. In addition, the Borrower and/or Co-Borrower should also
be provided the option of providing an attorney's letter detailing
the income/liability information if he/she does not wish to provide
a full copy of a divorce decree for qualification purposes. It may
be assumed that child support will discontinue at age 18 unless
evidence to the contrary is provided. Complete tax returns with W-2s
may be obtained for Alimony and Separate Maintenance.
- Retirement benefits, Supplemental SS, Veteran's compensation,
disability, welfare award, Social Security, Corporate pension
benefit - Letter showing future revenue stream amount and frequency.
If letter is not specific, two months' worth of bank
statements or most recent check stub or copies of two months'
canceled checks should be submitted. Please see underwriting manager
if duration of the income is less than two years.
- Bonuses and Overtime - Recent pay stub dated within the last 30
days.
- Commission - Copy of last two years signed, completed personal
federal tax returns, with all schedules and W-2s attached.
- Dividend, Interest, Capital Gains - Two years' broker statements
showing all consistent incomes, or copy of last two years' signed,
completed copy of signed personal Federal Tax returns, with all
schedules and W-2s attached.
- Rental Income - Copy of last two years' signed, completed personal
Federal Tax returns, with all schedules and W-2s attached. If the
property has been rented for less than twelve months, receipts and
bank statements showing deposits.
Note: For situations where tax returns are required, calculate rental
income based on a 24-month average, subject to underwriter discretion if rental
income decreases substantially during the 24-month period.
D. TOTAL GROSS MONTHLY INCOME
- Borrower and/or Co-Borrower (salary) income
- Other income
- Interest
- Dividends
- Rental Income from investment rental properties if positive
cash flow
- Alimony, child support, separate maintenance, etc., if
provided.
- Bonuses, commissions, overtime (may be reduced to reflect
Regional Economic conditions).
- Self-employed income is generally calculated utilizing two
years' average of income stated on tax returns when available
or required.
Note: If the Borrower has been with current employer for more than two years,
calculate average for previous twenty-four months. If with current employer more
than one year and less than two years, calculate average using number of months
on the job. If with current employer less than one year with minimum two year
earning commission, use either lower average monthly commissions of the current
job or average for total income received from all employers during previous
twenty-four months.
E. MORTGAGE/RENT VERIFICATION
The Borrower and Co-Borrower must each be current on rent or mortgage
payments. Choose one of the following as an acceptable means of verification for
mortgage or rent:
- Mortgage review on the Credit Bureau report indicating a 12-month
history and paid current.
- Request a copy of the Borrower's most recent monthly mortgage xxxx,
showing no past due amounts. If an amount is shown past due, have
the Borrower provide a copy
of canceled check for the past due amount, or call the mortgage
holder to verify payments.
- Call the Borrower's mortgage company or landlord to verbally verify
the status of the account, or request written verification if the
company representative is unable to give a verbal status without
prior release from the Borrower. The name and number of the person
contacted must be documented in the account history.
- Request a letter from the Borrowers' landlord or mortgage company,
on company letterhead, indicating that the Borrower is current.
The easiest method for verification of mortgage payments will be the
Credit Bureau report. Rental payments will not be shown on a Credit Bureau
report and will require a call or request for written verification from the
landlord.
Note: The delinquency criteria from page 5 (Borrower and/or Co-Borrower
eligibility) must be applied to the Borrower's mortgage account. This means that
neither the Borrower nor the Co-Borrower can have been 60 days or more past due
on his or her mortgage payment in the past twelve months, even if the account
has been brought current at the time of review for loan approval.
F. CALCULATING DEBT TO INCOME RATIO
Monthly debt is derived/calculated from information on the application and
the credit bureau report. The debt to be considered:
- Monthly mortgage/rent
- All loans in repayment currently (auto, personal, education, boat)
- Revolving debt from credit cards and personal lines of credit
- Alimony and child support payments
- Those debts for which the Borrower or Co-Borrower has liability
showing on the credit bureau report and/or application.
Note: When assessing the monthly debt, duplicate accounts may show between
the application and credit bureau report. If this occurs, the higher payment
shown will be taken into consideration.
Income that would be considered:
- All regularly occurring income of the applicant(s) assessed,
including salaries, retirements benefits, and annuities.
G. CREDIT BUREAU REPORT REVIEW
The review of the Credit Bureau Report will be a major part of the
Underwriting Review. Each applicant - the Borrower and any Co-Borrower - must
have a score of [****] or better unless approved according to the
Reconsideration Policy and Procedures.
III. DENIAL PROCEDURES
After review if it is determined that the file cannot be approved the
following procedure should be followed:
- Determine if a counter-offer can be made. The Borrower may be able
to obtain a Co-Borrower to assist him/her in qualifying if the
problem with the loan involves lack of income or the Debt to Income
Ratio. If the file already has a Co-Borrower no counter offer can be
made.
- The status code PREJCO should be used to indicate that a counter
offer has been extended.
If a Co-Borrower will be used the file should be placed in the status code
PCORQ. This status will indicate that the file is on hold until the necessary
documentation can be obtained from the Co-Borrower (paystubs, credit bureau
information, complete application).
- After the examination of the Co-Borrower has been completed it will
be necessary to underwrite the file again using the information for
the Co-Borrower. If approved, normal approval procedures as noted
previously should be followed.
If the file already has a Co-Borrower and does not meet the criteria for
approval no counter offer may be made. The file should be placed in the status
code PREJ. This will indicate that the file has been rejected and Denial
Procedures should be followed.
An adverse action letter must be sent to any Borrower who has had a Credit
Bureau Report pulled and no resulting credit has been issued. This letter must
be sent within 5 business days of the credit decision for adherence to
regulatory requirements. This letter will detail all information required by
regulation, including without limitation the name, address and phone number for
the Credit Bureau that was utilized to make a determination of ineligibility for
the loan. This will give the Borrower opportunity to obtain a copy of the Credit
Bureau Report.
NO DETAILS OF A BORROWER AND/OR CO-BORROWER CREDIT BUREAU REPORT SHOULD BE
DISCUSSED WITH THEM UNTIL THEY HAVE RECEIVED A COPY OF THAT REPORT. DISCUSSIONS
ABOUT BORROWER'S INFORMATION WITH A CO-BORROWER AND VICE VERSA ARE PROHIBITED.
An Adverse Action Letter must be sent when the Borrower has been
non-responsive for 90 days. A Credit Bureau report is no longer valid as of the
90th day from the date it was pulled. The letter would be sent to indicate that
the request for credit has been denied due to inactivity on the part of the
Borrower or Co-Borrower. Efforts should be made throughout the processing of the
loan to reach the borrower by phone, with a follow-up in writing no later than
60 days after material has been requested. This letter will inform the Borrower
of the specific date when an adverse action letter will be sent if said Borrower
has not responded. The date of the adverse action letter should be no later than
90 days from the date that credit was originally obtained.
Note: Responsive Borrowers will not be denied simply because the credit
bureau has aged to 90 days. In that situation, the Originator should note the
file to record conversations with the Borrower. This note should detail the
progression of events leading to the ultimate decision
on the file. A new credit bureau report will have to be pulled, however, if the
first is more than 90 days old.
IV. RECONSIDERATION POLICY AND PROCEDURES
For a denied Borrower or Co-Borrower to be reconsidered, he/she must
request reconsideration of the denied application in writing. The Borrower(s)
must then satisfactorily resolve all denial reasons listed in the Adverse Action
Letter. The request for reconsideration must provide documentation that
satisfies the criteria listed in the reconsideration grid below. Approval of an
applicant who meets all reconsideration criteria is a "POLICY OVERRIDE".
If a denied applicant
- is below the score cutoff but has a credit score no lower than
[****],
- fails the debt-to-income test,
- lacks sufficient credit history, or
- has credit derogatories that would disqualify him/her for an RWPCL,
the Originator may grant an override , but only with (1) the sign-off of
the manager of the Lender's credit department (or the manager of CFS as the
Lender's agent) and (2) TERI's written consent evidenced by the sign-off of any
authorized XXXX staff. The Originator will complete a Reconsideration Worksheet
and attach all applicable information and fax all documents needed for
reconsideration to XXXX for approval and signature. Follow-up via phone or email
by the Originator with XXXX will be done after 48 hours. The Lender's agent (the
Originator) must submit a copy of these sign-offs to XXXX at the time of
origination. Such overrides may be granted where, for example, an applicant made
good faith efforts to cure derogatory credit but was unable to do so due to
circumstances beyond his/her control. Any override granted to an applicant who
fails to meet reconsideration criteria is an out-of-policy override. For
convenience, it will be referred to in these guidelines by the term "BRANCH
OVERRIDE". CFS, as agent for the Lender must so designate it in its system for
reporting purposes, and forward all such original documentation to the Servicer
while retaining copies for itself.
The Lender's agent, CFS, will provide XXXX with full documentation of each
branch override. The Lender and Originator will use best efforts to keep the
total number of branch overrides for each calendar year, for each loan program,
to less than three percent (3%) of total approved loan decisions for such year,
calculated in terms of gross dollars approved.
Each file where a policy or branch override has occurred must reference
this fact.
For all purposes of these guidelines, an application with a credit score
below [****] that has been approved as a branch override will be treated as a
[****] credit score loan.
V. PRIVATE LOAN FORMS
PRIVATE CONSOLIDATION LOAN APPLICATION AND PROMISSORY NOTE - ADDENDUM A
UNDERWRITING WORKSHEET - ADDENDUM B
This document must be completed in its entirety prior to render an
underwriting decision on the loan. The underwriter should conduct a thorough
review of this document.
- Borrower and Loan detail
- Score Review - indicate with a "Y" or an "N" the applicable score
for either the Borrower or the Co-Borrower.
- Credit Review - indicate with a "Y" or an "N" the answers to all
questions. Either the Borrower or Co-Borrower must have an answer of
"Y" to all of these questions for loan eligibility.
- Employment/Income Verification - not all areas of this will require
completion. Check only the applicable form of employment and income
verification used for the Borrower or Co-Borrower being examined.
- Total Gross Income - all income figures should be represented as a
monthly gross figure. Breakdown all income used for qualification in
its proper designation.
- Total Gross Monthly Income - Total all figures that comprise the
income for the Borrower or Co-Borrower into a total figure.
Double-check all math calculations.
- Documentation Review - indicate with a "Y" or an "N" if all
documentation is present. Detail with a "Y" or an "N" all those
pieces of documentation that are contained in the file.
- Final Recommendation/Comments - Detail all reasons for a denial in
this area. An overall comment should also be made for all loans that
are approved.
- Underwriter Signature and Date - Please also xxxx whether the loan
was approved or denied.
- Senior Underwriter Signature and Date - Until further notice all
loans must be signed off by the
Underwriting Manager.
All files requiring a reconsideration using a Branch Override or a Policy
Override will be indicated on the Underwriting Worksheet as well as the
Checklist Window in CT.
Reports will be pulled to determine the percentage of files where a
reconsideration was used.
RECONSIDERATION WORKSHEET - ADDENDUM C
This document must be completed if reconsideration is required to approve
the loan being reviewed. The completed form along with necessary attachments
should be forwarded to XXXX for review, approval, and signature prior to loan
approval.
EXAMPLES OF EACH DOCUMENT ARE INCLUDED IN THE ADDENDA AT THE END OF THESE
GUIDELINES.
ORIGINATION GUIDELINES
I. FUNDING PROCEDURES
Upon completion and approval of an application, it will be disbursed
within 5 business days unless otherwise agreed to by the Applicant.
II. FILE SHIPMENT TO SERVICER
All original documentation will be forwarded to the Servicer within five
(5) business days following the initial electronic file transfer from the
Originator to the Servicer.
Should the Originator receive any correspondence, notices, or
communications from or with respect to any Borrower (e.g., bankruptcy and death
notices) after the Borrower file has been sent to the Servicer, the Originator
will immediately forward such documents to the Servicer.
III. DISBURSEMENT/REFUNDS/CANCELLATIONS
CFS will contact every Borrower (but need not also contact any
Co-Borrower) whose application has been approved, prior to sending the account
to the Servicer for disbursement. By this contact, which will be by telephone or
email, CFS will convey and confirm to the Borrower:
1) the loans included in the consolidation,
2) the balance of such loans and the total payoff amount, and
3) the guaranty fee that will be added to the RWPCL.
At this time, CFS will answer any other relevant questions of the
Borrower, and notify the Borrower that this is the final step prior to the
funding and disbursement of the RWPCL. CFS will make data entries confirming
this communication in its origination files, which will be part of any Borrower
File forwarded to the Servicer and subsequently included in any claims package
forwarded to XXXX.
Upon receipt of the disbursement file by electronic transmission from CFS,
the Servicer will disburse the loan proceeds (other than the borrower guaranty
fee) by one or more checks or electronic fund transfers to the holder of
pre-existing loans to be paid off, or such holders' designated Servicers. The
Servicer will also send a disclosure statement to the Borrower itemizing all
such payments in accordance with applicable law.
A returned uncashed check or EFT will not result in a cancellation of the
loan so long as at least one other pre-existing loan is in fact paid off by the
consolidation loan Borrower. Return of a check or EFT within thirty (30) days
following origination will trigger a refund of the applicable portion of the
guaranty fee to the lender, and the Servicer will notify XXXX and the Lender of
any fee refundable to the lender. The Servicer will make any redisclosures that
may be required by law.
Any payment received from a lender or servicer to which a payoff check has
been sent, unless in the exact amount of the payoff check, will be applied to
principal due on the Borrower's account, but will not trigger any changes to the
repayment schedule or any refund of guaranty fees.
IV. PAYMENT OF GUARANTY FEES TO XXXX
BORROWER GUARANTY FEE
The Borrower is assessed a Guaranty Fee of either 1% or 3%, depending on
his/her FICO score, as follows:
- If FICO score is [****] or above, the Guaranty Fee is 1%;
- If FICO score is less than [****], the Guaranty Fee is 3%.
Note: Only the Borrower's credit score is used in this determination. If
there is a Co-Borrower on the loan the Co-Borrower's credit score has no bearing
on the amount of the Guaranty Fee.
The Guaranty Fee is added to the balance of the loans being consolidated.
The principal payoff balance plus the Borrower Guaranty Fee equals the Total
Loan Amount (the "Amount Financed," in Truth-in-Lending terms).
LENDER SUPPLEMENTAL GUARANTY FEES
1. The Lender will also pay XXXX , an Up-Front Supplemental Guaranty Fee.
The amount of this fee will vary, based on the composition of the underlying
loans being consolidated, as follows:
a) If the underlying loan balance is <50% XXXX-guaranteed loans,
Lender owes XXXX [****]% of the Total Loan Amount.
b) If the underlying loan balance is greater than or equal to 50%
XXXX-guaranteed loans, Lender owes [****] ([****]%) to XXXX.
This fee is NOT added to the Borrower's Total Loan Amount.
2. The Lender will also pay to XXXX a Quarterly Lender Supplemental
Guaranty Fee based on the composition of the underlying loans consolidated and
the amount of time the loan has been in repayment. All loans made during a given
academic year (which is deemed to be the period July 1 - June 30) will bear the
following fees at least through the tenth anniversary of the end of such
academic year (for example, loans made during the period July 1, 2001 - June 30,
2002 will bear the following fees at least through June 30, 2012):
a) If the original underlying loan balance was <50% XXXX-guaranteed
loans, the Lender owes XXXX a fee equal to [****] basis points
([****]%) of the outstanding principal balance at the end of each
quarter for all loans except those for which a guaranty claim has
been filed with XXXX.
b) If the original underlying loan volume was greater than or equal to
50% XXXX-guaranteed insured loans, the Lender owes XXXX a fee equal
to [****] basis points ([****]%) of the outstanding principal
balance at the end of each quarter for all loans except those for
which a guaranty claim has been filed.
This fee is paid by the Lender and is not charged to the borrower.
At the tenth anniversary of the end of an academic year, XXXX and the
Lender will compute the cumulative gross default rate (i.e., claims paid,
regardless of TERI's subsequent recoveries thereon) for all loans that were made
during such academic year. If the cumulative gross default rate is below
[****]%, then no Quarterly Lender Supplemental Guaranty Fee will be payable
thereafter with respect to such loans. If the cumulative gross default rate for
all such loans is [****]% or higher, the Lender will continue to pay the fees
prescribed above.
FEE CALCULATION
1. CFS will be responsible for determining the Borrower's credit score and
whether the underlying loans being paid off with the Borrower's RWPCL are
XXXX-guaranteed. In accordance with the above structure, CFS will assign a fee
code to each RWPCL and calculate the Borrower guaranty fees due. CFS will
transmit the information on each RWPCL to the Servicer who will rely on the code
and the calculations. In its payoff request forms submitted to the holders of
loans to be consolidated, CFS will request that such holders certify not only
the loan balance but whether a given loan is or is not XXXX-guaranteed, and CFS
will be entitled to rely on such certification. If the holder does not indicate
that a loan is XXXX-guaranteed, the loan will be treated as not XXXX-guaranteed.
Where CFS has misstated the percentage of paid-off loans that were
XXXX-guaranteed, and done so in reliance on certifications from holders, such
misstatement and any resulting underpayment of fees will not be the basis for
denial of a guaranty claim.
2. The Servicer will be responsible for generating files and reports to
determine the fees due from Lender to XXXX on a weekly basis. The reports and
files covering a calendar week of disbursements will be sent to the Lender by
the first business day following the end of such week.
3. XXXX and Lender will be responsible for timely review of the data from
the Servicer and will promptly communicate in writing any amounts or
calculations in question.
4. The Lender will pay all fees due to XXXX promptly upon receipt of the
Servicer's report(s).
5. If within ninety (90) days after said fees are paid CFS determines that
it made an error in calculating the ratio of non-XXXX guaranteed to XXXX
guaranteed loans, it will promptly so notify XXXX and the Lender, and XXXX shall
reimburse Lender for any fees erroneously paid, or the Lender shall forward
additional fees to XXXX, as the case may be.
6. XXXX or the Lender, as the case may be, will make refunds and
adjustments as provided above within 10 business days of receipt of a documented
request from the Lender (or its agent) or XXXX, as the case may be.
REPORTING
CFS will provide to the Servicer via electronic transmission the following
information pertaining to each Borrower account:
- Appropriate Borrower guaranty fee (1% or 3%) based on Borrower's
FICO score and a calculated dollar figure for such fee, based upon
the "make-whole" factor
- Borrower FICO score
- Whether the XXXX-guaranteed underlying loans are greater than or
less than 50% of the total dollar volume for a single consolidation.
CFS will convey this information by using a tier level field: a
blank in the field equates to XXXX guaranteed underlying loans <
50%; a "1" in the tier level field equates to XXXX guaranteed
underlying loans > 50%
The Servicer will produce and distribute weekly and quarterly reports. The
weekly report will contain the Borrower Guaranty Fees due to XXXX and the
Up-Front Supplemental Guaranty Fees due to XXXX. The Servicer will remit
electronic reports to Lender and XXXX each Monday or the first business day
thereafter if Monday is a holiday. The weekly report will cover all
disbursements made during the week.
The Lender will review the report from the Servicer. Unless there is a
reasonable basis for disputing a charge, the Lender will remit the entire amount
owed to XXXX by wiring funds into an account designated by XXXX. The Lender
shall also cause a report with sufficient detail to be sent to XXXX. The form of
such report will be as mutually agreed among the Lender, the Servicer, and XXXX.
XXXX will reconcile the fees paid and provide to the Lender a written list
of loans on the weekly electronic report which have been rejected, if any, and
the reasons for such rejection.
Each month, XXXX will provide to the Lender a list of all loans that have
become subject to TERI's guaranty during the previous month.
The Servicer will provide the Lender a quarterly report to support the
payment of the Quarterly Lender Supplemental Guaranty Fee. Such report will
identify all loans meeting the fee structure described above and will be
delivered to the Lender by the 10th day after the end of each calendar quarter.
The Lender will use the Servicer's report to support the remittance to
XXXX for Quarterly Lender Supplemental Guaranty Fee which shall be paid by the
20th day of the each April, July, October and January for the preceding quarter
Unless there is a reasonable basis for disputing a charge, the Lender will remit
the entire amount owed to XXXX by wiring funds into an account designated by
XXXX.
An example for the Servicer's quarterly report is shown below. On or
before December 31, 2010, the Lender, Servicer and XXXX will agree on a revised
form that will reflect academic year cohorts for the purpose of determining
whether a particular cohort of loans continue the bear a Lender Supplemental
Guaranty Fee, as described above. In the meantime, if the Lender Supplemental
Guaranty Fees are changed, the sample form below will be amended accordingly.
Sample Quarterly Report for Lender to Calculate the Quarterly Supplemental
Lender Fee:
For loans originated during Calendar Year: 2001:
PRINCIPAL
BALANCE AT CLAIM
LOAN TYPE QUARTER END FILED? RATE CALCULATED FEE DUE
--------- ----------- ------ ---- ------------------
< 50% XXXX composition $[****] No [****] $[****]
$[****] Yes [****] $[****]
> 50% XXXX composition $[****] No [****] $[****]
$[****] Yes [****] $[****]
TOTAL $[****] $[****]
SERVICING GUIDELINES
I. REPAYMENT TERMS
All consolidation loans are for immediate repayment. The Servicer will
schedule the first payment due for a date that is no more than 60 days after the
date of first disbursement.
The Originator will set the initial repayment period for the loan and
inform the Servicer of such period by electronic data transmission. If the
Originator fails to provide this information to the Servicer, the Servicer will
enter in its records, as the repayment period for the loan, the maximum
permissible repayment period for such loan according to these Guidelines. The
Servicer will be responsible for disclosing this, and making all other
truth-in-lending disclosures, to the Borrower.
The Servicer may thereafter alter the repayment period and repayment
amount under the following circumstances:
- pursuant to forbearance as set forth below,
- pursuant to the Borrower's request as set forth below, and/or
- to reflect changes in the interest rate applicable to the loan.
Any change in the interest rate will generally not cause the Borrower's
payment amount to change, but will instead cause the number of payments to
increase or decrease, thus causing the repayment schedule to be lengthened or
shortened. The repayment schedule may be extended beyond the program maximum
(see "Repayment Terms," above), for up to an additional 2 1/2 years, if
necessary to accommodate interest rate increases. If the extension of the
repayment is
insufficient to amortize principal over the maximum term plus 2 -1/2 years and
cover monthly interest, the monthly payment amount will be increased to the
minimum amount that is sufficient to do so, and the Servicer will notify the
Borrower of this change.
The Servicer may increase or decrease the Borrower's monthly payment
amount at the Borrower's request, subject to the above limitations, and provided
that the loan is less than 30 days delinquent at the time of the request.
II. FORBEARANCE ELIGIBILITY
The Servicer is authorized to grant the Borrower a total of six (6) months
of hardship forbearance: non-payment of principal and interest. This forbearance
can only be applied for after the Borrower has completed one full year of full
principal and interest payments on the consolidation loan. This forbearance may
be granted by the Servicer in one forbearance or increments adding up to a
maximum of six (6) months. This forbearance can be applied to the Borrower's
loan prospectively as well as retrospectively.
The Servicer may use administrative forbearance in the event of death or
bankruptcy of the Borrower or Co-Borrower, or as part of the cure process, as
more fully described below No forbearance may be granted except upon written
request signed by the Borrower.
III. LATE CHARGES
Late Charges are assessed in accordance with the provisions on the
promissory note.
IV. DUE DILIGENCE
Before a claim can be filed with XXXX, the Servicer must attempt to
collect the loan from the Borrower and Co-Borrower as applicable in accordance
with the due diligence guidelines outlined below:
1-30 Days Past Due
- Complete two telephone contacts or four attempts to each Borrower
and Co-Borrower(s).
- Send a late notice to the Borrower and Co-Borrower(s).
31-60 Days Past Due
- Complete two telephone contacts or four attempts to each Borrower
and Co-Borrower(s).
- Send a late notice to the Borrower and Co-Borrower(s).
61-90 Days Past Due
- Complete two telephone contacts or four attempts to each Borrower
and Co-Borrower(s).
- Send a late notice to the Borrower and Co-Borrower(s).
91-119 Days Past Due
- Send a late notice to the Borrower and Co-Borrower(s).
- The Servicer will cease telephone collection activities by the 90th
day of delinquency.
120-130 Days Past Due
- A Final Demand will be sent to the Borrower and Co-Borrower(s).
NOTE: For purposes of these Guidelines,
- a "telephone contact" means either actual contact with the Borrower
or Co-Borrower, or two attempts. On a given day, only one attempt to
each individual at a specific telephone number will be counted
toward satisfying the due diligence requirement.
- All letters except the Final Demand letter may be addressed and
mailed to the Borrower and any Co-Borrower, or to two or more
Co-Borrowers, jointly if residing at the same address.
- The Final Demand letter must be separately addressed and mailed to
each Borrower and Co-Borrower even if two or more of them live at
the same address.
- Each of the past-due periods above (e.g., 31-60 days past due) is
called a `bucket."
If a Borrower makes one or more payments that do not eliminate his
delinquency but ratchet his delinquency back to an earlier bucket, the Servicer
will not be required to perform the due diligence activities scheduled for that
earlier bucket, but must resume due diligence activities if and when the
delinquency increases and rolls into the next bucket.
The Servicer may, to the extent permitted by applicable law, perform
telephone due diligence activities inadvertently omitted during the 1-120 day
delinquency buckets if such activities are completed no later than the date the
claim is filed. Such performance of omitted due diligence activities will
preclude denial of a claim based on the prior omission.
The Servicer need not continue sending collection notices to an address
that has become invalid, or continue attempting calls to a telephone number that
has become invalid, if the Servicer is unable to ascertain the correct address
or telephone number through the skip-tracing described below.
V. PRE-CLAIM ASSISTANCE
The Servicer will submit a request for pre-claim assistance to XXXX
between the 70th and 90th day of delinquency. The tolerance for error is ten
(10) calendar days. Once a request for assistance is filed and the loan is over
90 days delinquent, the loan will be under the direct supervision of XXXX and
XXXX will assume all responsibility for the performance of all telephone due
diligence activities. If the loan becomes less than 60 days delinquent because
the Borrower has made some but not all overdue payments, the Servicer will
notify XXXX and resume the performance of telephone due diligence activities.
VI. SKIP TRACING
If the Servicer becomes aware (through notification or otherwise), on or
before the 89th day of delinquency, that a Borrower or Co-Borrower's address is
invalid, it must undertake skip-tracing activities as listed below. If it
becomes aware of such invalidity after the 89th day of delinquency, it must
promptly notify XXXX. Any required skip-tracing must be completed prior
to claim filing. The Servicer will attempt to locate the Borrower or Co-Borrower
through the following skip-tracing techniques:
- Calling directory assistance
- One attempt to reach each reference on the application*
- One attempt to reach each Borrower and Co-Borrower on the
application
- Calling the Borrower or Co-Borrower's place of employment, when
known. If a place of employment has informed the Servicer that they
will not validate information or that the Borrower is no longer
employed there, then the Servicer is no longer required to call the
place of employment.
- Conducting a social security search through at least one national
credit reporting agency
* This is required activity for the Borrower's references only
The Servicer may cease skip-tracing efforts if its attempts to locate the
Borrower or Co-Borrower through the above techniques fail. In the case of an
invalid phone number, the Servicer will continue to contact the Borrower by mail
unless the address is also determined to be invalid. The Servicer may perform
skip-tracing activities inadvertently omitted during the 1-89 day delinquency
buckets if such activities are completed no later than the date the claim is
filed. Such performance of omitted skip-tracing activities will preclude denial
of a claim based on the prior omission
Skip-tracing performed during a prior delinquency period of a loan, but
not during the 120-day delinquency period leading immediately to the filing of a
guaranty claim, will satisfy the Servicer's due diligence obligations if the
particulars are included in the account history provided to XXXX as part of the
claim package.
VII. CREDIT BUREAU REPORTING
Within 45 days of delinquency, the Servicer must report the Borrower and
all Co-Borrowers to at least one national credit agency. Normally this will
occur for all loans more than 40 days delinquent at a month end. The Servicer
will continue to report account delinquency on a monthly basis up to claim
payment date. Tolerance for delayed reporting is plus or minus 30 days.
VIII. DEFAULT CLAIMS
Default claims must be submitted to XXXX between the 180th day and the
210th day of delinquency. XXXX will allow a five-business-day tolerance for
submission of default claims. Required claim documentation includes:
1. Application, Promissory Note (if separate from the Application),
Disclosure Statement, and the electronic record of the Borrower contact
described in the first paragraph under Section III of the Origination Guidelines
above.
2. Forbearance Form(s) and supporting documentation where required and/or
system generated history reflecting the forbearance period
3. Credit Bureau Report with credit score
4. Due Diligence History for the most recent 120 day delinquency period
5. Payment History
6. Underwriting Worksheet
7. Income verification
8. Pay-Off Request Forms or other evidence that the underlying loans have
been consolidated
9. Assignment of Rights
10. Copy of the Borrower's proof of citizenship (if applicable)
11. Bankruptcy and Death information as appropriate
If a loan has had prior periods of delinquency that have not aged to 120
days, the Servicer need not report due diligence activities undertaken during
those periods. The only due diligence history it must report is that for the 120
days of delinquency that gave rise to the guaranty claim.
XXXX will send claim payments by check to the Servicer, within time frames
established in the Guaranty Agreement between the Lender and XXXX.
XXXX will accept microfilm or laser copies of all original documents with
the claim package. In the event that the Servicer is unable to secure the
original Promissory Note, XXXX will accept a copy of such Note if it is
accompanied by a notarized affidavit certifying that the original has been
misplaced and that the copy is a true one. Further, the complete copy of the
Note must contain the signatures of all obligors of the note. If a court of
competent jurisdiction refuses to accept the submitted copy of a note in the
event that XXXX must litigate a case, and XXXX loses the case for that reason,
XXXX will be reimbursed by the Lender for the amount that XXXX paid to the
Lender on the claim. XXXX, the Lender, the Servicer and the Originator
acknowledge there may be contractual agreements between Lender and either the
Servicer or the Originator governing responsibility for reimbursing XXXX the
amount of the claim if a court of competent jurisdiction refuses to accept such
a copy of a Note.
IX. CLAIM RECALL
If the Servicer files a claim and prior to the date XXXX sends the claim
payment or the Borrower or Co-Borrower makes a payment or the Borrower qualifies
for a forbearance which brings the loan less than 60 days delinquent, the claim
will be recalled.
X. BANKRUPTCY CLAIMS
If the Servicer is notified that a Borrower or Co-Borrower has filed for
bankruptcy, the Servicer must forward to XXXX copies of all documentation
relating to the bankruptcy within ten
(10) calendar days, with a tolerance of five business days. The Servicer must
file a claim with XXXX within sixty (60) calendar days after it is notified of
the bankruptcy action for Chapter 13, Chapter 11, or (but only if there is an
adversary action noted in the filing) Chapter 7.
Chapter 7 Bankruptcy Claim Filing Procedures
In the event that the Borrower or Co-Borrower files for Chapter 7
bankruptcy and has not been claim-submitted for delinquency, the Servicer must
place the account on an Administrative Forbearance to cover all delinquency and
the period of the bankruptcy proceeding on the account. All activities on the
account with regard to due diligence must cease until such time a determination
is made as to the dismissal, discharge or close of the case (s). If the loan (s)
are discharged, XXXX will contact the Servicer, and the Servicer must file the
claim with XXXX accordingly.
If the Servicer receives a Bankruptcy filing under chapter 11 or 13, or
under Chapter 7 with an adversary action noted in the filing, then upon the
dismissal, discharge or the close of the case XXXX may request a claim recall on
the account. Upon receipt of the recall request from XXXX, the Servicer will
bring the loan current by the use of an Administrative Forbearance and resume
normal billing activities. Administrative Forbearance is in addition to the six
months of forbearance requestable by a Borrower, and does not require any
minimum payment history before it can be granted.
XI. DEATH CLAIMS
Upon receipt of acceptable notification* that the Borrower or Co-Borrower
has died, the Servicer must suspend any and all collection activity with respect
to the loan, as an administrative forbearance, for 60 days. If the Borrower in
whose name and Social Security number the account is listed has died, the
Servicer will de-convert and reconvert the loan under the other Borrower's name.
*ACCEPTABLE WRITTEN NOTIFICATION OF DEATH
- Certified copy of the death certificate
- Letters testamentary or certificate of appointment of the executor /
executrix of the estate, stamped and certified by the applicable
court.
- Obituary from local newspaper
All written notification must be received by XXXX within sixty (60)
calendar days of receipt by the Servicer. If the Servicer receives verbal or
written notification that is not considered acceptable, the Servicer will still
provide XXXX, within sixty (60) calendar days, with the written notification. In
instances where unacceptable information is received, the Servicer will continue
all collection activity as well as pursue all avenues to obtain acceptable
written notification.
The Servicer will file a claim with XXXX within sixty (60) calendar days
of receipt of the acceptable notification provided the loan(s) are single
signatory. In instances where there is more than one signatory, a claim will not
be filed to XXXX, as the surviving signatory (s) is still obligated on the debt.
Any payments that XXXX receives from a deceased's Estate will be forwarded
to the Servicer to be applied to all applicable loan (s), provided the Servicer
has retained the servicing of the loan(s).
XII. DISABILITY CLAIMS
XXXX does not offer disability claims. The Servicer will continue normal
servicing functions in accordance with TERI's servicing guidelines.
XIII. APPEAL PERIOD FOR CLAIM REJECTS
The Servicer will have 60 days to appeal a decision by XXXX to reject a
claim for errors or omissions in the origination or servicing of the loan as
specified in these Guidelines. XXXX will not reconsider a decision to deny a
claim if the appeal is not submitted within the allotted time. A new 60 Day
Appeal Period is started for each subsequent reject if the reject reason differs
from the initial reject reason(s); however, if the initial reject reasons(s) has
(have) not been addressed, the claim will be rejected without regard to
subsequent reject reasons. The 60-Day Appeal Period will start four (4) calendar
days after the "date shipped" of TERI's written rejection. TERI's written claim
rejection shall detail the reason(s) for such rejection.
XIV. CURE PROCEDURES
If a claim has been rejected due to due diligence deficiencies, the
guaranty will be reinstated if:
- the Servicer collects from the Borrower sufficient payments to
reduce the Borrower's delinquency, according to the Borrower's
existing payment schedule, to less than 30 days; or
- the Servicer brings the Borrower back into repayment by capitalizing
all accrued interest, applying administrative forbearance to
eliminate any delinquency in principal and interest payments,
redisclosing the loan with a new payment schedule, and collecting
from the Borrower three consecutive, on-time payments according to
such new schedule. For this second type of cure, at the time the
Servicer files its request for reinstatement the loan must be within
30 days of being current. For these purposes, a payment is
considered "on time" if received no later than seven days after the
agreed upon due date. In addition, the payment amounts actually
received from the Borrower must be within a tolerance of no more
than $5.00 of the established monthly payment.
Nothing in these Guidelines requires a Servicer to submit a guaranty claim
that it knows will be rejected for due diligence deficiencies; the Servicer may
retain the account and attempt to restore the loan to current status.
If a claim is rejected and it is later determined that a processing error
(e.g., application of forbearance to the wrong account number) made prior to the
claim filing date caused an incorrect delinquency and if corrected the loan
would be brought to less than 30 days delinquent, the loan can be recalled and
the rejected claim status removed.
If a due diligence failure is cured by the second method stated above,
including capitalization of the accrued interest portion of some or all
delinquent payments, and if such loan subsequently defaults, XXXX will not pay
such capitalized interest. A loan may be cured only once.
A loan may be cured for any servicing errors but not for an error in the
underwriting or origination of the loan.
After the loan is cured, the Borrower will still qualify for any remaining
hardship forbearance that he or she may still be eligible to use.
GUIDELINE AMENDMENT PROCEDURES
Any amendments, changes or revisions to these guidelines must be agreed to
by XXXX, the Originator, the Lender and the Servicer in writing prior to
implementation, provided however that the Servicer's consent will not be
required for any amendment of the amount of any Borrower Guaranty Fee or Lender
Supplemental Guaranty Fee. Further, unless required by either state or federal
regulatory requirements, the introduction of any amendments, changes or
revisions to these guidelines will generally take place in the spring of each
year so that they will be in place for the upcoming academic year. In general
the effective dates for the changes will be June 1st. This will be considered
the loan program academic year. In no case will amendments, changes or revisions
to these guidelines be introduced later than June 1 of any year unless agreed to
by XXXX, the Originator, the Lender and the Servicer.
XXXX will provide the Lender, Servicer and Originator with at least sixty
(60) days written notice of proposed Program Guidelines changes so as to allow
all of them time to review and comment on them. XXXX will if requested meet with
any one or more of the Lender, Servicer and Originator shortly after the
expiration of the sixty-day review period in order to discuss the suggested
Program Guidelines changes. Comments concerning modifications or changes to the
suggested Program Guidelines may be accepted by XXXX at its sole discretion. If,
within the 60-day period described above, or such longer period as XXXX may
stipulate when it circulates proposed changes, XXXX receives no comments from
any other party that would require revision of the proposed changes, the changes
will be deemed accepted and will become final and take effect as provided in
TERI's notice. If, however, XXXX does receive comments that would require
revision, it will circulate a response, together with such revision as it deems
appropriate, and he Lender, Servicer and Originator will have sixty (60) days
from the date that they receive such response to either reject or accept the
revision, provided that none of them may unreasonably reject any proposed change
that does not affect the commercial expectations of the parties in entering into
the respective agreements between or among them. Their acceptance will be deemed
given if they do not reject the revision in this second 60-day period. All
notifications to XXXX must be in writing.
If the revised Program Guidelines are rejected by the Lender, Servicer, or
Originator, all parties will adhere to the previously adopted Program
Guidelines. If all parties agree (or are deemed to agree) to adopt the new,
revised Program Guidelines, the Servicer or Originator, as
the case may be, shall have at least sixty (60) days to implement new changes.
If the Servicer needs additional time to implement the agreed upon changes, the
Servicer shall notify both XXXX and the Lender of the need for additional time
setting forth the reasons for such request. XXXX and the Lender will not
unreasonably deny the Servicer's request for additional time unless the request
is due to the Servicer's negligence in the implementation of the agreed upon
changes.
CERTAIN PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT. THE SYMBOL "[****]" HAS BEEN INSERTED IN PLACE OF THE PORTIONS SO
OMITTED.
EXHIBIT B
ESCROW ACCOUNT PROVISIONS
1. ESTABLISHMENT OF RESERVE ACCOUNT. First Union shall establish and
maintain, and under the circumstances described in Section 4(E) CFS shall
be required to fund, a separate interest bearing account in the name of
First Union and CFS and designated as the Reserve account (the "Reserve
Account"). CFS shall have no right or claim to any amounts deposited in or
otherwise credited to any Reserve Account except to the extent expressly
set forth herein.
2. REQUIRED RESERVE ACCOUNT PAYMENTS. In the event CFS has failed to provide
documentation within the 30-day period under Section 4(E), CFS will
deposit into the Reserve Account an amount calculated by First Union in
accordance with Section 4(E) within 5 days of receiving notice of the same
from First Union. In the event the amount deposited by CFS is less than
the required amount, CFS shall, promptly upon being notified by First
Union thereof (but in no event more than 2 Business Days thereafter),
deposit into the Reserve Account funds in an amount not less than that
required to remedy such deficiency.
3. RIGHTS OF FIRST UNION IN RESERVE ACCOUNTS. First Union will hold all
amounts deposited in or otherwise credited to the Reserve Account under
First Union's sole, complete and unrestricted control as security for the
full performance by CFS of its obligations to First Union now existing or
hereafter arising under Section 4(H) of the Agreement. All such amounts
deposited in or credited to the Reserve Account are hereby assigned to
First Union and First Union is hereby granted a first priority security
interest therein for that purpose. In the event CFS thereafter becomes
obligated to make a reimbursement payment to First Union under Section
4(H) (at the conclusion of the process described in Section 8(A)(1)) with
respect to the affected Loan(s), First Union may, without notice to CFS,
offset and apply all funds in the Reserve Accounts to the satisfaction of
such obligations.
4. INTEREST. All amounts deposited or credited in or to the Reserve Account
shall be held in a First Union National Bank Money Market Savings Account,
or another mutually agreed upon account at a First Union National Bank,
and the Reserve Account shall accrue interest at the then current rate in
effect from time to time. The parties acknowledge that the amounts
deposited or credited in or to the Reserve Account are owned directly by
CFS, subject to the pledge and other obligations created by this
Agreement, and CFS hereby agrees to treat the same as its assets (and
earnings) for federal and state income tax and all other purposes.
5. RETURN OF FUNDS. First Union will withdraw and return to CFS amounts in
the Reserve Account that relate to Loans, including any accrued interest
thereon, upon the occurrence of either of the following events: (i) the
Loans are paid-in-full by the Borrower, or (ii) the
2
document deficiency identified pursuant to Section 4(E) with respect to
such Loans is cured to Lender's satisfaction. First Union will withdraw
and return such amounts within 5 days of the paid-in-full date or the date
of cure.
CERTAIN PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT. THE SYMBOL "[****]" HAS BEEN INSERTED IN PLACE OF THE PORTIONS SO
OMITTED.
EXHIBIT C
Application Fee
Per Application Fee
Lender will pay CFS a fee for each completed Application. The fee will be
calculated by multiplying the applicable rate against the balance of the
underlying loan amount consolidated (i.e., exclusive of any guarantee fees
charged to the borrower). The applicable rate is determined by the FICO score of
the primary borrower as set forth below. The applicable rate will be based on
the Average Application amount during the immediately preceding 6 calendar
months of Applications ("Measurement Period"). The Average Application amount
will be the sum of the amounts of all underlying loans included in all
Applications funded during such 6-month period, divided by the number of
Applications funded during such period. Lender will calculate and communicate
the Average Application amount within 2 Business Days after the end of each
calendar month.
Applicable Rate
Based upon the Average Application amount during the preceding Measurement
Period, the applicable rate paid in a month will be according to the following:
AVERAGE PRIMARY PRIMARY
APPLICATION BORROWER'S FICO BORROWER'S
UNDERLYING LOAN SCORE IS FICO SCORE IS
BALANCE <[****] >[****]
---------------- -------------- -------------
<$[****] [****]% [****]%
$[****]-$[****] [****]% [****]%
>$[****] [****]% [****]%
