CRI- Common Review Initiative Reducing Lender Review Redundancy

Redundancy Reduction Efforts First industry effort- May 2001 meeting –ED proposed to review large servicers –SLSA proposed relying on independent audits Discussion of the issue continued –July 2001 NCHELP Summer Institute –November 2001 Fall Training Conference –Lender review guide discussions with ED –May 2002 industry meeting

Redundancy Reduction Efforts Discussions led to some efforts to reduce redundancy –Substitutions –Servicer reviews –Combined reviews Between guarantors and ED Between guarantors –Reliance on other guarantors reviews –Off-site reviews

Issues With Current Efforts Previous efforts to reduce redundancy have had a beneficial, but limited, effect. Issues include: –Localized, inconsistent approach to an industry-wide problem –Some ED Financial Partners regional offices have not emphasized this issue –Few efforts use multiple approaches to reduce redundancy

Origins of CRI The original workgroup conducted an industry survey in One suggestion from the survey was to establish a cooperative group of guarantors to conduct reviews. This would be a Common Manual-like approach where costs/staff are shared to conduct a single review of certain large lenders and servicers.

Potential CRI Benefits Depending upon GA participation, almost complete elimination of redundancy Reduced overall costs to guarantors and trading partners Higher quality reviews from adopting best and consistent practices Potential to integrate several strategies currently used to reduce redundancy

CRI Discussions September 2002 –Workgroup approach to developing an industry-wide proposal discussed November 2002 –Guarantor CEO Caucus endorses developing a CRI proposal –Tony Bright, NELA CEO, appointed as Guarantor CEO Caucus liaison to CRI

CRI Discussions December 2002 –Initial steering committee conference call –CEOs surveyed to develop contact list January 2003 –Steering committee is expanded –Draft discussion document developed –Planned future industry meetings –Workgroup leaders selected

Steering Committee Members

CRI Workgroups In order to develop a CRI proposal, the following workgroups were formed: –CRI Administration and Governance –Cost and Staff Sharing –Review Scheduling and Lender Selection –Common Review Procedures –Industry Partners Liaison

CRI Workgroups CRI Administration and Governance –Main goal is to determine how the CRI effort would be administered –Being led by Judi Royce, Program Review Supervisor, Florida Department of Education

CRI Administration and Governance Initial issues being considered are: –Should there be an executive committee to oversee the operation of CRI? If so, how it will be selected, what are the terms of membership, positions, etc.? –Will there be regularly scheduled meetings or conference calls for participants? –Should there be an agreement/contract for guarantors that agree to participate?

CRI Administration and Governance Initial issues being considered are: –Should there be permanent subcommittees, and if so, which ones? –Does the group need funds that are contributed to support the administration of CRI? –How will decisions be made?

CRI Workgroups Cost and Staff Sharing –Main goal is to determine how guarantors will share review costs and staffing needs –Being led by Aaron Cook, Manager, Policy & Program Assistance, NELA

Cost and Staff Sharing Initial issues being considered are: –Developing a plan for the equitable sharing of review costs –What costs would be shared and by whom? –How will review teams be selected - multi- agency teams or single agency teams? Based upon geography? –Qualifications/standards for review staff

Cost and Staff Sharing Initial issues being considered are: –Training for review staff? –Will there be a review team leader, and if so, how selected? –Need for all guarantors to commit staff, or can some guarantors participate by providing funds only? –Do all participants pay for all reviews?

CRI Workgroups Review Scheduling & Lender Selection –Main goal is to determine which lenders/servicers would be reviewed and when –Being led by Pete Pundt, Director, Compliance Services, AES/PHEAA

Review Scheduling & Lender Selection Initial issues being considered are: –Who will be reviewed? –What if lender only deals with a limited number of guarantors? –Reviews of serviced versus non-serviced lenders. –If a servicer review is conducted, how will that apply to the serviced lenders?

Review Scheduling & Lender Selection Initial questions being considered are: –What about guarantors who service for lenders? –When will the reviews be conducted to ensure that all reviews are conducted in an efficient and timely manner? –Is there a need for an on-going group to handle scheduling issues?

CRI Workgroups Common Review Procedures –Main goal is to determine how reviews would actually be conducted –Being led by Rick Buckingham, Manager, Compliance & Investigations, USA Funds

Common Review Procedures Initial issues being considered are: –Common pre-visit questionnaire –Entrance/exit interview procedures –Start with best practices, ED draft guidance, or a combination of both? –What is the review scope - include 799 review or have ED partner on this? –Sample selection procedures –Assessment/collection of liabilities

Common Review Procedures Initial issues being considered are: –How would exceptions to common guarantor policies be handled? –Do reviews take into account which guarantor guaranteed the loan? –Identifying risk to determine review emphasis. –How should review responses be handled? –Extrapolation of findings? –How many reviewers are needed on each review, and for how long?

CRI Workgroups Industry Partners Liaison –Main goal is to represent CRI to industry partners to gain buy-in and necessary approvals –Being led by Vicki Shipley representing the NCHELP Central Office

Industry Partners Liaison Initial issues being considered are: –What approvals are needed? –Communicating with interested/affected parties –Documenting benefits of CRI –Obtaining trading partner buy-in to CRI approach

Current Status of CRI A face-to-face meeting was held at TG on March 10 – 11, –20 guarantors were represented in person –4 additional guarantors participated via conference call Workgroups met to begin discussing issues. Entire group met to discuss progress, crossover issues affecting other workgroups, and to propose deadlines.

Whats Next? Workgroups will continue to meet via conference calls. A final CRI proposal will be developed based upon workgroup results. Necessary approvals and buy-ins will be obtained. Assuming guarantor CEO approval, target for submission to ED is mid-summer, The goal is to conduct reviews under the CRI framework in the review biennium.