Publication Date: February 2004
DCL ID: FP-04-02
Mandatory timely completion of Loan Verification Certificates (LVC)
Posted on 02-17-2004
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.
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 firstname.lastname@example.org or by phone at (202) 377-3301.
Sally L. Stroup
Assistant Secretary for