Sallie Mae 2005 Annual Report Download - page 100
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90
Retained Interest in Securitized Receivables
The following table summarizes the fair value of our Retained Interests along with the underlying
student loans that relate to those securitizations that were treated as sales.
As of December 31, 2005 As of December 31, 2004
Retained
Interest
Fair Value
Underlying
Securitized
Loan
Balance
Retained
Interest
Fair Value
Underlying
Securitized
Loan
Balance
FFELPStafford/PLUSloans ......................... $ 774 $ 20,371 $ 1,037 $ 27,445
Consolidation Loans(1) ............................... 483 10,272 585 7,393
Private Education Loans............................. 1,149 8,946 694 6,308
Total(2) ........................................... $ 2,406 $ 39,589 $ 2,316 $ 41,146
(1) Includes $235 million and $399 million related to the fair value of the Embedded Floor Income as of
December 31, 2005 and 2004, respectively. The decrease in the fair value of the Embedded Floor Income is
primarily due to rising interest rates during the period.
(2) Unrealized gains (pre-tax) included in accumulated other comprehensive income related to the Retained
Interests totaled $370 million and $445 million as of December 31, 2005 and 2004, respectively.
Changes in Accounting Estimates Affecting the Residual Interest in Securitized Loans
The Company updated certain assumptions during 2005 that it uses in the valuation of the Residual
Interest. The following are the significant assumption changes that were made:
As of December 31,
2005
As of December 31,
2004
FFELP Stafford/PLUS loan CPR(1) .......................... 20% – 2006 20% – 2005
15% – 2007 15% – 2006
10% – thereafter 6% – thereafter
FFELP expected credit losses (as a% of securitized loan balance
outstanding)(2) .......................................... .17% 0%
(1) The FFELP Stafford/PLUS loan CPR assumption was increased to account for the continued high levels of
Consolidation Loan activity over the last several years.
(2) Due to reintroduction of a one percent Risk Sharing loss assumption related to the reauthorization of the HEA
(see Note 4, “Allowance for Student Loan Losses” for further discussion).
Servicing and Securitization Revenue
Servicing and securitization revenue, the ongoing revenue from securitized loan pools accounted for
off-balance sheet as QSPEs, includes the interest earned on the Residual Interest and the revenue we
receive for servicing the loans in the securitization trusts. Interest income recognized on the Residual
Interest is based on our anticipated yield determined by estimating future cash flows each quarter.