Sallie Mae 2009 Annual Report Download - page 185

8. Student Loan Securitization (Continued)
Residual Interest in Securitized Receivables
The following tables summarize the fair value of the Company’s Residual Interests included in the
Company’s Retained Interest (and the assumptions used to value such Residual Interests), along with the
underlying off-balance sheet student loans that relate to those securitizations in 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
(Dollars in millions)
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 credit losses (% of 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
(Dollars in millions)
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 credit losses (% of 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 repay-
ment). Under this methodology, a different CPR is applied to each year of a loan’s seasoning. The 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 December 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.
F-58
SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts, unless otherwise stated)