Publication Date: February 2004
DCL ID: FP-04-02
Mandatory timely completion of Loan Verification Certificates (LVC)
Posted on 02-17-2004
February
2004
FP-04-02
Subject:
Mandatory timely completion of Loan Verification Certificates (LVC)
Summary:
This letter reminds lenders in the Federal Family Education Loan (FFEL) Program
of the regulatory requirements related to the timely completion and return of
Loan Verification Certificates (LVC) in support of a borrower’s application
for a consolidation loan from another lender.
Dear
Colleague:
In
Dear Colleague Letter GEN-03-02 (January 2003), we reminded loan holders of
the regulatory requirements to respond to requests from another lender (FFEL
or Direct Loans) for certification of the status of a loan included on a borrower’s
application for a consolidation loan.
In accordance with 34 CFR 682.209(j), a loan holder has 10 business days after
receiving a written request for an LVC to provide the requesting lender with
a completed LVC or, if it is unable to certify, a written explanation as to
the reason why the holder is unable to provide the information.
The
regulations allow a loan holder to provide the requesting lender with a written
explanation as to why it cannot provide the certification.
This option addresses situations in which the loan holder has a technical problem
in providing the information within the 10-day timeframe (such as a computer
malfunction) or where the loan holder simply does not have information on the
borrower’s loan. Loan holders also
can provide a written explanation if they believe that they are the single holder
of the borrower’s FFEL loans and that the borrower thus does not qualify for
a consolidation loan from the requesting lender.
In this instance, the written explanation sent by the loan holder to the requesting
lender must provide information to support this claim, such as a printout provided
by a guaranty agency from NSLDS that shows that the lender is the only holder
or a statement from the guarantee agency that it has reviewed the borrower’s
NSLDS records and has determined that a single lender is the holder of all FFEL
loans for that borrower. It is not
the borrower’s responsibility to demonstrate to the loan holder that multiple
lenders hold his or her loans.
In
addition, a loan holder is not required to provide the requested loan information
when:
·
there is a judgment against the borrower on the loan that the borrower wants
to consolidate;
·
a loan has been sold; or
·
a loan is more than 270 days delinquent and a default claim has been submitted
to a guaranty agency.
As
explained in this letter, there are only a few acceptable reasons why a loan
holder would not be required to return the LVC within 10 business days, and
the desire to simply hold on to a borrower’s loan at the borrower’s expense
is not one of those reasons. Any continued
failure on the part of loan holders to respond in a timely manner to requests
for LVCs will be considered a violation of the regulations.
As
stated in DCL GEN 03-02, the timely certification of information, as required
by the regulations, is an important obligation that every loan holder must fulfill
in order to ensure that a borrower’s consolidation loan application can be
processed in a timely manner. Accordingly,
we have begun to take enforcement action against lenders that fail to meet these
requirements. Also, we anticipate that
guaranty agencies will take appropriate action if they become aware that a lender
in its guaranty program is failing to comply with this requirement.
Consolidation
lenders that do not receive loan certification information within 10 business
days or that question the propriety of the loan holder’s written explanation
should continue to inform their FSA regional lender review staff of such matters
so that we can follow up with the loan holder and, if necessary, take appropriate
remedial action.
We
thank you for your cooperation. If
you have any questions on the issues discussed in this letter, please contact
Victoria Bateman by email at victoria.bateman@ed.gov
or by phone at (202) 377-3301.
Sincerely,
Sally
L. Stroup
Assistant
Secretary for
Postsecondary
Education
