Sallie Mae 2014 Annual Report Download - page 135

SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)
16.
Arrangements with Navient Corporation (Continued)
• Pursuant to a tax sharing agreement, Navient has agreed to indemnify us for $283 million in deferred taxes that the
Company will be legally responsible for but that relate to gains recognized by the Company’s predecessor on debt
repurchases made prior to the Spin-Off. The remaining amount of this indemnification at December 31, 2014 is $224
million. In addition, Navient has agreed to indemnify us for tax assessments incurred related to identified uncertain tax
positions taken prior to the date of the Spin-Off. At December 31, 2014, we have recorded a receivable of $16 million
related to this indemnification.
• Navient has responsibility to assume new or ongoing litigation matters relating to the conduct of most pre-Spin-Off
SLM businesses operated or conducted prior to the Spin-Off.
• At the time of this filing, the Bank remains subject to a Consent Order, Order to Pay Restitution and Order to Pay Civil
Money Penalty dated May 13, 2014 issued by the FDIC (the “2014 FDIC Order”). The 2014 FDIC Order replaces a
prior cease and desist order jointly issued in August 2008 by the FDIC and the Utah Department of Financial
Institutions (“UDFI”) which was terminated on July 15, 2014. Specifically, on May 13, 2014, the Bank reached
settlements with the FDIC and the Department of Justice (the “DOJ”) regarding disclosures and assessments of certain
late fees, as well as compliance with the Servicemembers Civil Relief Act (“SCRA”). The DOJ Order was approved by
the U.S. District Court for the District of Delaware on September 29, 2014. Under the FDIC’s 2014 Order, the Bank
agreed to pay $3.3 million in fines and oversee the refund of up to $30 million in late fees assessed on loans owned or
originated by the Bank since its inception in November 2005. Navient is responsible for funding all liabilities,
restitution and compensation under orders such as these, other than fines directly levied against the Bank.
Long-Term Arrangements
The Loan Servicing and Administration Agreement governs the terms by which Navient provides servicing,
administration and collection services for the Bank’s portfolio of FFELP Loans and Private Education Loans, as well as
servicing history information with respect to Private Education Loans previously serviced by Navient and access to certain
promissory notes in Navient’ s possession. The loan servicing and administration agreement has a fixed term with a renewal
option in favor of the Bank.
The Data Sharing Agreement states the Bank will continue to have the right to obtain from Navient certain post-Spin-Off
performance data relating to Private Education Loans owned or serviced by Navient to support and facilitate ongoing
underwriting, originations, forecasting, performance and reserve analyses.
The Tax Sharing Agreement governs the respective rights, responsibilities and obligations of the Company and Navient
after the Spin-Off relating to taxes, including with respect to the payment of taxes, the preparation and filing of tax returns and
the conduct of tax contests. Under this agreement, each party is generally liable for taxes attributable to its business. The
agreement also addresses the allocation of tax liabilities that are incurred as a result of the Spin-Off and related transactions.
Additionally, the agreement restricts the parties from taking certain actions that could prevent the Spin-Off from qualifying for
the anticipated tax treatment.
Amended Loan Participation and Purchase Agreement
Prior to the Spin-Off, the Bank sold substantially all of its Private Education Loans to several former affiliates, now
subsidiaries of Navient (collectively, the “Purchasers”), pursuant to this agreement. This agreement predates the Spin-Off but
has been significantly amended and reduced in scope in connection with the Spin-Off. Post-Spin-Off, the Bank retains only the
right to require the Purchasers to purchase loans (at fair value) for which the borrower also has a separate lending relationship
with Navient (“Split Loans”) when the Split Loans either (1) are more than 90 days past due; (2) have been restructured; (3)
have been granted a hardship forbearance or more than 6 months of administrative forbearance; or (4) have a borrower or
cosigner who has filed for bankruptcy. At December 31, 2014, we held approximately $117 million of Split Loans.
During the year ended December 31, 2014, the Bank separately sold loans to the Purchasers in the amount of $804,733 in
principal and $5,683 in accrued interest income. During the years ended December 31, 2013 and 2012, the Bank sold loans to
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