Sallie Mae 2009 Annual Report Download - page 105

Residual Interest in Securitized Receivables
The following tables summarize the fair value of our Residual Interests and the assumptions used to value
such Residual Interests, along with the underlying off-balance sheet student loans that relate to those
securitizations in securitization transactions that were treated as sales as of December 31, 2009 and 2008.
FFELP
Stafford and
PLUS
Consolidation
Loan
Trusts
(1)
Private
Education
Loan Trusts Total
As of December 31, 2009
Fair value of Residual Interests ............ $ 243 $ 791 $ 794 $ 1,828
Underlying securitized loan balance ......... 5,377 14,369 12,986 32,732
Weighted average life ................... 3.3yrs. 9.0 yrs. 6.3 yrs
Prepayment speed (annual rate)
(2)
Interim status ......................... 0% N/A 0%
Repayment status ...................... 0-14% 2-4% 2-15%
Life of loan — repayment status ........... 9% 3% 6%
Expected remaining credit losses (% of
outstanding student loan principal)
(3)(4)
. . . . . .10% .25% 5.31%
Residual cash flows discount rate ........... 10.6% 12.3% 27.5%
FFELP
Stafford and
PLUS
Consolidation
Loan
Trusts
(1)
Private
Education
Loan Trusts Total
As of December 31, 2008
Fair value of Residual Interests ............ $ 250 $ 918 $ 1,032 $ 2,200
Underlying securitized loan balance ......... 7,057 15,077 13,690 35,824
Weighted average life ................... 3.0yrs. 8.1 yrs. 6.4 yrs.
Prepayment speed (annual rate)
(2)
Interim status ......................... 0% N/A 0%
Repayment status ...................... 2-19% 1-6% 2-15%
Life of loan — repayment status ........... 12% 4% 6%
Expected remaining credit losses (% of
outstanding student loan principal)
(3)(4)
. . . . . .11% .23% 5.22%
Residual cash flows discount rate ........... 13.1% 11.9% 26.3%
(1)
Includes $569 million and $762 million related to the fair value of the Embedded Floor Income as of December 31, 2009 and
2008, respectively. Changes in the fair value of the Embedded Floor Income are primarily due to changes in the interest rates
and the pay down of the underlying loans.
(2)
The Company uses CPR curves for Residual Interest valuations that are based on seasoning (the number of months since entering
repayment). Under this methodology, a different CPR is applied to each year of a loan’s seasoning. Repayment status CPR used
is based on the number of months since first entering repayment (seasoning). Life of loan CPR is related to repayment status
only and does not include the impact of the loan while in interim status. The CPR assumption used for all periods includes the
impact of projected defaults.
(3)
Remaining expected credit losses as of the respective balance sheet date.
(4)
For Private Education Loan trusts, estimated defaults from settlement to maturity are 12.2 percent and 9.1 percent at Decem-
ber 31, 2009 and 2008, respectively. These estimated defaults do not include recoveries related to defaults but do include prior
purchases of loans at par by the Company when loans reached 180 days delinquency (prior to default) under a contingent call
option. Although these loan purchases do not result in a realized loss to the trust, the Company has included them here. Not
including these purchases in the disclosure would result in estimated defaults of 9.3 percent and 6.1 percent at December 31,
2009 and 2008, respectively.
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