Sallie Mae 2011 Annual Report Download - page 127

SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. Significant Accounting Policies (Continued)
Prior to the adoption on January 1, 2010 of the new accounting guidance that eliminated the concept of
QSPEs, in certain securitizations there were terms present within the deal structure that resulted in such
securitizations not qualifying for sale treatment by failing to meet the criteria required for the securitization entity
(trust) to be a QSPE. Accordingly, these securitization trusts were accounted for as VIEs. Because we were
considered the primary beneficiary in such VIEs, the transfer was deemed a financing and the trust was
consolidated in our financial statements. The terms present in these structures that prevented sale treatment were:
(1) we hold rights that can affect the remarketing of specific trust bonds that are not significantly limited in
nature, (2) the trust has the right to enter into interest rate cap agreements after its settlement date that do not
relate to the reissuance of third-party beneficial interests or (3) we hold an unconditional call option related to a
certain percentage of trust assets.
Subsequent to the adoption of the new accounting guidance regarding consolidations and the transfers of
financial instruments on January 1, 2010, all of our securitizations trusts that had previously been accounted for
off-balance sheet were consolidated. In addition, we have consolidated all subsequent securitization trusts
pursuant to the new consolidation accounting guidance. See “Consolidation” of this Note 2 for additional
information regarding the accounting rules for consolidation and the effect of the application of the new guidance
as we are the primary beneficiary of these trusts.
Irrespective of whether a securitization receives sale or on-balance sheet treatment, our continuing
involvement with our securitization trusts is generally limited to:
• Owning the equity certificates of certain trusts.
• The servicing of the student loan assets within the securitization trusts, on both a pre- and post-default
basis.
• Our acting as administrator for the securitization transactions we sponsored, which includes
remarketing certain bonds at future dates.
• Our responsibilities relative to representation and warranty violations and the reimbursement of
borrower benefits.
• The reimbursement to the trust of borrower benefits afforded the borrowers of student loans that have
been securitized.
• Certain back-to-back derivatives entered into by us contemporaneously with the execution of
derivatives by certain Private Education Loan securitization trusts.
• The option held by us to buy certain delinquent loans from certain Private Education Loan
securitization trusts.
• The option to exercise the clean-up call and purchase the student loans from the trust when the asset
balance is 10 percent or less of the original loan balance.
• The option (in certain trusts) to call rate reset notes in instances where the remarketing process has
failed.
• The option (in certain trusts that were TALF eligible in 2009) to call the outstanding bonds at a
discount to par at a future date
The investors of the securitization trusts have no recourse to our other assets should there be a failure of the
trusts to pay when due. Generally, the only arrangements under which we have to provide financial support to the
trusts are:
• representation and warranty violations requiring the buyback of loans; and
• funding specific cash accounts within certain trusts related to the remarketing of certain bonds.
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