Sallie Mae said today during its 3Q 2013 conference call that its Federal Family Education Loan Program (FFELP) residual securitization sales have demonstrated good value.
The student loan originator sold the residual interests in 5 FFELP securitization trusts totaling $12.5 million in 2013. Residual interests are what are left over from an underlying SLABS trust after making required payments to the relevant parties in a transaction.
“With our FFELP residual sales we wanted to demonstrate a value for these loans, we want to show that they could be liquidated and derive cashflows,” said Joe Fisher, CFA Managing Director, Investor Relations at Sallie Mae.
Core earnings from Sallie Mae's amortizing portfolio of FFELP loans were $92 million in 3Q2013, compared with the year-ago quarter's $94 million.
At Sept. 30, 2013, the company held $106 billion of FFELP loans, compared with $128 billion at Sept. 30, 2012. Approximately $12 billion of the $22 billion decline in FFELP loans is a result of the sales of the residual interests in FFELP securitization trusts earlier in the year.
During the third-quarter 2013, Sallie Mae issued $1.7 billion in FFELP asset-backed securities (ABS), $624 million in private education loan ABS and $1.25 billion in unsecured bonds. The company closed on a $1.1 billion asset-backed borrowing facility that matures on August 15, 2015. This facility was used to fund the call and redemption of SLM 2009-D Private Education Loan Trust ABS.
The 11% increase in loan origination this quarter comes at a time of increased scrutiny over the growing U.S. student loan debt figures. Sallie Mae said that it grew its origination despite loan amounts remaining flat. At the same time the company saw a decline in private education loan charge-off rates to 2.6 %, the lowest level in five years.
“There is a lot of media coverage on the growing student debt, said Fisher. “Our Job is to get the facts out and the fact is that the delinquency rate on private loans and federal loans are coming down and the default rate the federal loan program are less than the average. When we look at that and the success of our customers those are the facts that will ultimately prevail.”
Sallie Mae announced in May its intention to separate its education loan management business and consumer banking business. In September the company said that servicing of the existing private loan securitizations will be performed at the education loan management business rather than the consumer banking business.