Bulletin ID
DLB - 97 - 11
| PublicationDate: 3/1/97 BulletinID: DLB - 97 - 11 DLB-97-11 March 1997 LOAN ORIGINATION TRANSITION INFORMATION Dear Colleague: During the recent Direct Loan Origination Center (LOC) transition, many Option 2 schools drew down Direct Loan funds to be disbursed upon receipt of promissory note acknowledgments from the new LOC in Montgomery. The first PUT to schools from the new LOC was transmitted on March 10, 1997, instead of March 4, 1997, as originally planned. Although a signed promissory note must be received by your institution prior to the disbursement of any Direct Loan funds to borrowers, the Department does not require a school to receive promissory note acknowledgments prior to disbursing Direct Loan funds. For promissory note review/acceptance guidelines, please refer to Direct Loan Bulletin DLB-96-6. If a promissory note is not received or is rejected by the LOC, schools are still responsible for making sure an acceptable promissory note exists for all loans and any follow-up necessary for rejected promissory notes still rests with the institution. Many schools, in order to avoid the need for follow-up to borrowers as discussed above, or to protect themselves from potential liability, have developed internal systems that require a promissory note acknowledgment to be received prior to making a Direct Loan disbursement. Some of these schools, in anticipation of receiving the promissory note acknowledgments from the new LOC, did not return the excess cash that resulted from the delay in disbursement caused by the late promissory note acknowledgments. Since the delay was beyond the control of schools, we will not assess any liabilities for the failure of a school to return excess cash if the cause of that failure was related to this problem. This enforcement limitation will only apply to Direct Loan funds drawn down from February 28, 1997 through March 7, 1997. In addition, the school must be able to demonstrate that once it received the promissory note acknowledgment(s), it immediately made the disbursement(s) to the borrower(s). Schools are reminded that they remain responsible for returning any excess cash received for reasons other than this delay in processing promissory note acknowledgments. Please feel free to keep this letter as documentation to provide to auditors and others who may be reviewing your institution's management of the Direct Loan Program. We regret any inconvenience this problem may have caused your institution. Thank you for your continued support of the Direct Loan Program. Sincerely, Joe L. McCormick Chair, Direct Loan Task Force |