Student loan provider Sallie Mae announced last week that it is looking to the wholesale consolidation loan business for its next growth channel.

During a presentation last week at the Bank of America's 36th Annual Investment Conference last week, Sallie Mae CEO Timothy Fitzpatrick said the student loan provider had already purchased several wholesale portfolios of consolidation loan paper, and would continue with that line of business. It is still unclear, however, if Sallie Mae would fund venture through securitization.

"We will begin competing more aggressively in a wholesale strategy of the consolidation loan marketplace," Fitzpatrick said. "This is a program that we have not built or participated in, in the past."

Fitzpatrick said the company expected to earn fees from the business, but did not disclose further details. He said executives would divulge more information during its upcoming third-quarter earnings call.

The Sallie Mae has bought huge portfolios of student loans by taking over second-tier originators, such as SouthWest Student Services Corp. and USA Group. Although the student loan provider has occasionally bought loans on the spot market, when the pricing was right, it never has comprised a large part of their volume. Furthermore, said one market professional familiar with the company, "there has been some pricing that did not seem to make a lot of economic sense. I would be surprised if that is what they are talking about."

(c) 2006 Asset Securitization Report and SourceMedia, Inc. All Rights Reserved.

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