Request for Information Regarding an Initiative To Promote Student Loan Affordability, 13327-13329 [2013-04419]
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erowe on DSK2VPTVN1PROD with NOTICES
Federal Register / Vol. 78, No. 39 / Wednesday, February 27, 2013 / Notices
SUMMARY: The New England Fishery
Management Council (Council) is
scheduling a public meeting of its
Habitat Committee to consider actions
affecting New England fisheries in the
exclusive economic zone (EEZ).
Recommendations from this group will
be brought to the full Council for formal
consideration and action, if appropriate.
DATES: This meeting will be held on
Tuesday, March 19, 2013 at 9 a.m.
ADDRESSES: The meeting will be held at
the Hawthorne Hotel, 18 Washington
Square, Salem, MA 01970; telephone:
(978) 744–4080; fax: (978) 745–9842.
Council address: New England
Fishery Management Council, 50 Water
Street, Mill 2, Newburyport, MA 01950.
FOR FURTHER INFORMATION CONTACT: Paul
J. Howard, Executive Director, New
England Fishery Management Council;
telephone: (978) 465–0492.
SUPPLEMENTARY INFORMATION: The
Habitat Committee will continue
development of management
alternatives for Omnibus EFH
Amendment 2. Regarding Dedicated
Habitat Research Areas, the Committee
will review PDT recommendations
about: (1) Implementing dedicated
habitat research areas (e.g. defining
‘‘use’’ in relation to sunset provisions),
(2) goals and objectives for specific
research areas, and (3) boundaries for
Eastern Maine and Georges Bank
DHRAs. Regarding gear modifications,
the Committee will (1) review PDT
information about gear modifications for
scallop dredges, (2) discuss other gear
modification options as needed, and (3)
discuss a gear modification research
agenda and data collection program.
The Committee will also review
recommended boundaries for a single
Habitat Management Area in the Great
South Channel. Other business may be
discussed as necessary.
Although non-emergency issues not
contained in this agenda may come
before this group for discussion, those
issues may not be the subject of formal
action during this meeting. Action will
be restricted to those issues specifically
listed in this notice and any issues
arising after publication of this notice
that require emergency action under
section 305(c) of the Magnuson-Stevens
Act, provided the public has been
notified of the Council’s intent to take
final action to address the emergency.
Special Accommodations
This meeting is physically accessible
to people with disabilities. Requests for
sign language interpretation or other
auxiliary aids should be directed to Paul
J. Howard, Executive Director, at (978)
VerDate Mar<15>2010
15:18 Feb 26, 2013
Jkt 229001
465–0492, at least 5 days prior to the
meeting date.
Authority: 16 U.S.C. 1801 et seq.
Dated: February 22, 2013.
Tracey L. Thompson,
Acting Deputy Director, Office of Sustainable
Fisheries, National Marine Fisheries Service.
[FR Doc. 2013–04509 Filed 2–26–13; 8:45 am]
BILLING CODE 3510–22–P
BUREAU OF CONSUMER FINANCIAL
PROTECTION
[Docket No. CFPB–2013–0004]
Request for Information Regarding an
Initiative To Promote Student Loan
Affordability
Bureau of Consumer Financial
Protection.
ACTION: Notice and request for
information.
AGENCY:
SUMMARY: This notice requests
information from the public to
determine options that would increase
the availability of affordable payment
plans for borrowers with existing
private student loans. Section 1035 of
the Dodd-Frank Wall Street Reform and
Consumer Protection Act (Dodd-Frank
Act) establishes an ombudsman for
student loans (Ombudsman) within the
Consumer Financial Protection Bureau
(Bureau). Among other things, the
Ombudsman is responsible for making
‘‘appropriate recommendations’’ to the
Director of the Bureau, the Secretary of
the Treasury, the Secretary of
Education, and Congress.
In October 2012, the Ombudsman
presented a report, which recommended
that policymakers identify opportunities
to spur refinance and modification
activity in the private student loan
market. This notice seeks information
from market participants, consumers,
and other stakeholders in order to
provide more detailed information on
ways to encourage the development of
more affordable loan repayment
mechanisms for private student loan
borrowers.
DATES: Comments must be received on
or before April 8, 2013.
ADDRESSES: You may submit responsive
information and other comments,
identified by Docket No. CFPB–2013–
0004, by any of the following methods:
• Electronic: https://
www.regulations.gov. Follow the
instructions for submitting comments.
• Mail/Hand Delivery/Courier:
Monica Jackson, Office of the Executive
Secretary, Consumer Financial
Protection Bureau, 1700 G Street NW.,
Washington, DC 20552.
PO 00000
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13327
Instructions: The Bureau encourages
the early submission of comments. All
submissions must include the document
title and docket number. Because paper
mail in the Washington, DC area and at
the Bureau is subject to delay,
commenters are encouraged to submit
comments electronically. Please note
the number associated with any
question to which you are responding at
the top of each response (you are not
required to answer all questions to
receive consideration of your
comments). In general, all comments
received will be posted without change
to https://www.regulations.gov. In
addition, comments will be available for
public inspection and copying at 1700
G Street NW., Washington, DC 20552,
on official business days between the
hours of 10 a.m. and 5 p.m. Eastern
Time. You can make an appointment to
inspect the documents by telephoning
202–435–7275.
All submissions, including
attachments and other supporting
materials, will become part of the public
record and subject to public disclosure.
Sensitive personal information, such as
account numbers or Social Security
numbers, should not be included.
Submissions will not be edited to
remove any identifying or contact
information.
For
general inquiries, submission process
questions or any additional information,
please contact Monica Jackson, Office of
the Executive Secretary, at 202–435–
7275.
FOR FURTHER INFORMATION CONTACT:
Authority: 12 U.S.C. 5511(c).
There are
more than 38 million student loan
borrowers with over $1.1 trillion in
outstanding debt. The majority of the
market consists of loans originated
under Title IV of the Higher Education
Act. The remainder of the market
consists of private student loans. In July
2012, the Director of the Bureau and the
Secretary of Education submitted a
report to Congress detailing the private
student loan market. The report 1 found
that, as of the end of 2011, there were
more than $8 billion in defaulted
private student loan balances, with even
more in delinquency. Federal student
loans frequently provide for incomebased repayment options for borrowers
with partial financial hardship, as well
as rehabilitation options for borrowers
in default. In general, private student
SUPPLEMENTARY INFORMATION:
1 Consumer Financial Protection Bureau and
Department of Education: Report on Private Student
Loans (2012).
E:\FR\FM\27FEN1.SGM
27FEN1
13328
Federal Register / Vol. 78, No. 39 / Wednesday, February 27, 2013 / Notices
Loan Modifications
For the purposes of this request, a
loan modification refers to a
restructuring of a debt obligation agreed
to by the creditor and debtor where the
creditor agrees to a concession. In recent
years, many homeowners have sought
more affordable repayment options for
mortgage obligations to avoid
foreclosure. In such situations, some
creditors may have an economic
incentive to modify the loan, as the net
present value (NPV) of the restructured
debt may be greater in value than the
value of the collateral after foreclosure
costs. However, in other situations, with
respect to securitized debt obligations
secured by residential real estate,
subordinated note holders might be
unwilling to approve a change in terms.
Given the potential impact foreclosures
can have on the financial system and
local economies, many policymakers
pursued policies designed to encourage
alternative repayment options for
mortgage borrowers.
The private student loan market might
also benefit from further loan
modification activity. Even with
concessions, creditors might increase
the NPV of distressed loans through
such modifications. However, the
market for private student loans differs
from the market for residential
mortgages. Private student loans are not
secured by collateral and have generally
lower outstanding balances relative to
mortgages. These differences might
fundamentally impact creditors’
economic calculus for determining
whether to offer a change in repayment
terms.
There are also some important
similarities between the two markets. As
with mortgage origination, student loan
originators often access funding through
the asset-backed securities (ABS)
market. In 2012, public filings reveal
that more than $4 billion of private
student loan asset-backed securities
were issued. Like in the mortgage
market, private student loan
underwriting practices have
significantly improved since the
economic downturn, which may limit
the level of distress for future borrowers.
Another notable similarity is the
employment of third-party loan
servicers unaffiliated with the original
lender, though this practice is less
prevalent in the private student loan
market than in the mortgage market.
Borrowers of federal student loans
have a number of options to modify the
terms of their obligations to ensure an
affordable payment plan. For example,
borrowers with a partial financial
hardship can elect the Income-Based
Repayment plan, which caps payments
on eligible student loans as a percentage
of income above 150% of the poverty
line. Borrowers in default can
rehabilitate many federal student loans
by making ‘‘reasonable and affordable’’
payments in a consistent, timely fashion
for a specified period. There are also
provisions to adjust the status of a
rehabilitated federal student loan on a
consumer’s credit report.
Available data indicate that, in recent
years, there has been limited
modification activity in the private
student loan market. There are a number
of potential impediments to offering
alternative repayment options. Some of
these may include: (a) Accounting
guidelines that add complexity when
offering alternative repayment options
without charging off the loan; 3 (b)
2 Consumer Financial Protection Bureau: Annual
Report of the CFPB Student Loan Ombudsman
(2012).
3 See, for example, CNBE Policy Guidance 2010–
02, issued by the Office of the Comptroller of the
Currency in August 2010.
erowe on DSK2VPTVN1PROD with NOTICES
loans do not offer similar modified
repayment options.
The Dodd-Frank Act requires the
Secretary of the Treasury to designate an
Ombudsman within the Bureau. The
Dodd-Frank Act requires that the
Ombudsman present an annual report
describing the activities of the
Ombudsman during the prior year,
compile and analyze data on borrower
complaints regarding private
educational loans, and make
appropriate recommendations to
policymakers. In October 2012, the
Ombudsman released an annual report.2
The report, among other things,
analyzed complaints and other input
from private student loan borrowers,
and noted that many consumers
reported difficulties negotiating
repayment plans with their lenders and
servicers in times of financial difficulty,
as well as challenges finding refinance
options. Included in the report was a
recommendation that policymakers
identify options to spur the availability
of loan modification and refinance
options for student loan borrowers.
Some policymakers have sought
changes to the treatment of private
student loans in the bankruptcy code.
This policy option is not the primary
subject of this Request for Information.
Rather, this request seeks information
on options to increase the level of
affordable repayment options for both
pre-default and post-default borrowers
in distress who wish to repay their loans
but may be lacking near-term ability to
service their obligations.
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15:18 Feb 26, 2013
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PO 00000
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Fmt 4703
Sfmt 4703
operational and information technology
limitations among loan servicers; and (c)
incentive mismatch among trustees,
administrators, and/or noteholders in
ABS trusts and loan servicers.
Impacts on Individual Borrowers and
the Public
Policymakers have employed various
measures to prevent foreclosures among
American homeowners and to mitigate
resulting risks to the public and the
broader economy. Examples of these
risks include increased stress on insured
depository institutions and decreased
home values of properties proximate to
foreclosed homes—both of which can
lead to further distress. Given the
relative size of the private student loan
market and the nature of the product,
private student borrower distress is
unlikely to contribute to similar,
significant systemic risk. However,
distress among borrowers with all types
of student loans may cause other
negative effects in the broader economy.
For example, the Department of
Treasury’s Office of Financial Research
described in its recent annual report
that student loan debt might dampen
consumption.4 Changes in the
household headship rates, automobile
sales, and homeownership by younger
Americans might also be impacted by
student debt levels. Should these risks
be significant, policymakers may wish
to consider partnerships between the
federal government and the private
sector to increase the availability of
alternative repayment options and
reduce the levels of delinquency and
default.
The Ombudsman seeks information in
order to provide policymakers with
further details on potential ways to
increase payment affordability for
private student loan borrowers in
distress and on the risks of failing to do
so. The deadline for submission of
comments is April 8, 2013.
The Bureau encourages comments
from the public, including:
• Consumers;
• Financial institutions, including
lenders and loan servicers;
• Nationally recognized statistical
rating organizations (NRSROs);
• Private student loan asset-backed
trust administrators;
• Institutions of higher education;
• Credit reporting agencies;
• Debt collectors;
• Housing finance professionals;
• Manufacturers of automobiles and
other financed goods;
• Brokers and service providers in the
residential real estate industry;
4 Department of the Treasury, Office of Financial
Research: Annual Report to Congress (2012).
E:\FR\FM\27FEN1.SGM
27FEN1
Federal Register / Vol. 78, No. 39 / Wednesday, February 27, 2013 / Notices
• Professional associations, such as
those representing health professionals
and teachers;
• Providers of financial counseling;
and
• Other interested parties.
The Bureau is interested in responses
in the following general areas, as well as
specific questions below. Please feel free
to respond to any of the questions
outlined below.
Scope of Borrower Hardship
1 What are the primary drivers of
private student loan borrower distress?
a What characteristics might predict
distress at loan origination?
b What characteristics might predict
distress for borrowers who complete a
program of study?
c What characteristics might predict
distress during repayment?
d What are typical debt-to-income
ratios of borrowers in distress?
2 How do borrowers in distress
typically stay current with their private
student loans? To what extent do
borrowers reduce consumption or adjust
living arrangements to meet obligations?
a Do borrowers seek to reduce
payments on federal student loans in
order to make payments on private
student loans?
b To what extent do borrowers in
distress accrue other debt (credit cards,
family loans) to meet private student
loan obligations?
c To what extent do borrowers in
distress forego ‘‘other nonessential
expenses’’ to meet private student loan
obligations?
Current Options for Borrowers with
Hardship
erowe on DSK2VPTVN1PROD with NOTICES
3 What options currently exist for
borrowers to permanently or
temporarily lower monthly payments on
private student loan obligations? To
what extent have these affordable
repayment options cured delinquencies?
4 How do lenders typically evaluate
whether or not a borrower qualifies for
these affordable repayment options? If
lenders make use of financial models,
what are the key drivers of these
models?
5 Do lenders work directly with cosigners to modify terms? If so, how?
6 What is the incidence or
expectation of re-default rates among
restructured private student loans?
Past and Existing Loan Modification
Programs for Other Types of Debt
7 What are some examples of loan
modification programs sponsored by a
public entity or the private sector that
have been successful? Which features of
these programs might be applicable to a
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13329
student loan affordability program?
Which features of these programs might
not be appropriate for a student loan
affordability program?
Dated: February 20, 2013.
Garry Reeder,
Chief of Staff, Bureau of Consumer Financial
Protection.
Servicing Infrastructure
[FR Doc. 2013–04419 Filed 2–26–13; 8:45 am]
BILLING CODE 4810–AM–P
8 Is the servicing infrastructure
utilized by major lenders flexible
enough to process loan modifications at
scale? What are the limitations of these
servicing platforms? Are those
limitations capable of being overcome?
What are the estimated costs of
overcoming those limitations?
9 What are the key differences
between servicing of student loans
compared to servicing of residential
mortgages that must be considered
when crafting an affordability program?
Consumer Reporting and Credit Scoring
10 How are payments plans for
defaulted private and federal student
loans currently reported to consumer
reporting agencies? How are
rehabilitated federal student loans
reported by consumer reporting
agencies, and how does that reporting
affect credit scores?
Lender Participation
11 How might an affordability
program sponsored by a public entity
mitigate moral hazard and selection
bias?
Borrower Awareness
12 What are some examples of
modification or refinance initiatives that
successfully made borrowers aware of a
new program? Which features of these
programs are applicable in the private
student loan market?
13 What are the most effective
communication mechanisms to reach
borrowers in distress?
Spillovers
14 How do student loan payments
impact access to mortgage credit? How
does student debt impact a consumer’s
ability to accumulate a down payment?
How does student debt impact a
consumer’s ability to meet debt-toincome requirements for FHA-insured
and private sector mortgages?
15 To what extent does student loan
debt impact the market for automobiles?
How does student loan debt impact a
consumer’s ability to secure an auto
loan?
16 What evidence exists about the
impact of student loan debt on
consumption, savings, homeownership,
household formation, entrepreneurship,
and other indicators of economic
health?
PO 00000
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DEPARTMENT OF DEFENSE
Department of the Air Force
U.S. Air Force Academy Board of
Visitors Notice of Meeting
U.S. Air Force Academy Board
of Visitors.
ACTION: Meeting notice.
AGENCY:
SUMMARY: In accordance with 10 U.S.C.
9355, the U.S. Air Force Academy
(USAFA) Board of Visitors (BoV) will
hold a meeting in Harmon Hall at the
United States Air Force Academy in
Colorado Springs, Colorado on March
15–16, 2013. The meeting will begin at
2:30 p.m. on March 15 and 9:00 a.m. on
March 16. The purpose of this meeting
is to review morale and discipline,
social climate, curriculum, instruction,
infrastructure, fiscal affairs, academic
methods, and other matters relating to
the Academy. Specific topics for this
meeting include a Forthclassmen Cadet
Focus Group, an Upperclassmen Cadet
Focus Group, an Athletic Department
Update, a Superintendent’s Update, a
Character Update, an Impact of NDAA
Requirements brief and the
Subcommittee Chair Updates. In
accordance with 5 U.S.C. 552b, as
amended, and 41 CFR 102–3.155, three
sessions of this meeting shall be closed
to the public because they involve
matters covered by subsection (c)(6) of
5 U.S.C. 552b. Public attendance at the
open portions of this USAFA BoV
meeting shall be accommodated on a
first-come, first-served basis up to the
reasonable and safe capacity of the
meeting room. In addition, any member
of the public wishing to provide input
to the USAFA BoV should submit a
written statement in accordance with 41
CFR 102–3.140(c) and section 10(a)(3) of
the Federal Advisory Committee Act
and the procedures described in this
paragraph. Written statements must
address the following details: The issue,
discussion, and a recommended course
of action. Supporting documentation
may also be included as needed to
establish the appropriate historical
context and provide any necessary
background information. Written
statements can be submitted to the
Designated Federal Officer (DFO) at the
Air Force address detailed below at any
time. However, if a written statement is
E:\FR\FM\27FEN1.SGM
27FEN1
]]>Agencies
[Federal Register Volume 78, Number 39 (Wednesday, February 27, 2013)]
[Notices]
[Pages 13327-13329]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-04419]
=======================================================================
-----------------------------------------------------------------------
BUREAU OF CONSUMER FINANCIAL PROTECTION
[Docket No. CFPB-2013-0004]
Request for Information Regarding an Initiative To Promote
Student Loan Affordability
AGENCY: Bureau of Consumer Financial Protection.
ACTION: Notice and request for information.
-----------------------------------------------------------------------
SUMMARY: This notice requests information from the public to determine
options that would increase the availability of affordable payment
plans for borrowers with existing private student loans. Section 1035
of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-
Frank Act) establishes an ombudsman for student loans (Ombudsman)
within the Consumer Financial Protection Bureau (Bureau). Among other
things, the Ombudsman is responsible for making ``appropriate
recommendations'' to the Director of the Bureau, the Secretary of the
Treasury, the Secretary of Education, and Congress.
In October 2012, the Ombudsman presented a report, which
recommended that policymakers identify opportunities to spur refinance
and modification activity in the private student loan market. This
notice seeks information from market participants, consumers, and other
stakeholders in order to provide more detailed information on ways to
encourage the development of more affordable loan repayment mechanisms
for private student loan borrowers.
DATES: Comments must be received on or before April 8, 2013.
ADDRESSES: You may submit responsive information and other comments,
identified by Docket No. CFPB-2013-0004, by any of the following
methods:
Electronic: https://www.regulations.gov. Follow the
instructions for submitting comments.
Mail/Hand Delivery/Courier: Monica Jackson, Office of the
Executive Secretary, Consumer Financial Protection Bureau, 1700 G
Street NW., Washington, DC 20552.
Instructions: The Bureau encourages the early submission of
comments. All submissions must include the document title and docket
number. Because paper mail in the Washington, DC area and at the Bureau
is subject to delay, commenters are encouraged to submit comments
electronically. Please note the number associated with any question to
which you are responding at the top of each response (you are not
required to answer all questions to receive consideration of your
comments). In general, all comments received will be posted without
change to https://www.regulations.gov. In addition, comments will be
available for public inspection and copying at 1700 G Street NW.,
Washington, DC 20552, on official business days between the hours of 10
a.m. and 5 p.m. Eastern Time. You can make an appointment to inspect
the documents by telephoning 202-435-7275.
All submissions, including attachments and other supporting
materials, will become part of the public record and subject to public
disclosure. Sensitive personal information, such as account numbers or
Social Security numbers, should not be included. Submissions will not
be edited to remove any identifying or contact information.
FOR FURTHER INFORMATION CONTACT: For general inquiries, submission
process questions or any additional information, please contact Monica
Jackson, Office of the Executive Secretary, at 202-435-7275.
Authority: 12 U.S.C. 5511(c).
SUPPLEMENTARY INFORMATION: There are more than 38 million student loan
borrowers with over $1.1 trillion in outstanding debt. The majority of
the market consists of loans originated under Title IV of the Higher
Education Act. The remainder of the market consists of private student
loans. In July 2012, the Director of the Bureau and the Secretary of
Education submitted a report to Congress detailing the private student
loan market. The report \1\ found that, as of the end of 2011, there
were more than $8 billion in defaulted private student loan balances,
with even more in delinquency. Federal student loans frequently provide
for income-based repayment options for borrowers with partial financial
hardship, as well as rehabilitation options for borrowers in default.
In general, private student
[[Page 13328]]
loans do not offer similar modified repayment options.
---------------------------------------------------------------------------
\1\ Consumer Financial Protection Bureau and Department of
Education: Report on Private Student Loans (2012).
---------------------------------------------------------------------------
The Dodd-Frank Act requires the Secretary of the Treasury to
designate an Ombudsman within the Bureau. The Dodd-Frank Act requires
that the Ombudsman present an annual report describing the activities
of the Ombudsman during the prior year, compile and analyze data on
borrower complaints regarding private educational loans, and make
appropriate recommendations to policymakers. In October 2012, the
Ombudsman released an annual report.\2\ The report, among other things,
analyzed complaints and other input from private student loan
borrowers, and noted that many consumers reported difficulties
negotiating repayment plans with their lenders and servicers in times
of financial difficulty, as well as challenges finding refinance
options. Included in the report was a recommendation that policymakers
identify options to spur the availability of loan modification and
refinance options for student loan borrowers.
---------------------------------------------------------------------------
\2\ Consumer Financial Protection Bureau: Annual Report of the
CFPB Student Loan Ombudsman (2012).
---------------------------------------------------------------------------
Some policymakers have sought changes to the treatment of private
student loans in the bankruptcy code. This policy option is not the
primary subject of this Request for Information. Rather, this request
seeks information on options to increase the level of affordable
repayment options for both pre-default and post-default borrowers in
distress who wish to repay their loans but may be lacking near-term
ability to service their obligations.
Loan Modifications
For the purposes of this request, a loan modification refers to a
restructuring of a debt obligation agreed to by the creditor and debtor
where the creditor agrees to a concession. In recent years, many
homeowners have sought more affordable repayment options for mortgage
obligations to avoid foreclosure. In such situations, some creditors
may have an economic incentive to modify the loan, as the net present
value (NPV) of the restructured debt may be greater in value than the
value of the collateral after foreclosure costs. However, in other
situations, with respect to securitized debt obligations secured by
residential real estate, subordinated note holders might be unwilling
to approve a change in terms. Given the potential impact foreclosures
can have on the financial system and local economies, many policymakers
pursued policies designed to encourage alternative repayment options
for mortgage borrowers.
The private student loan market might also benefit from further
loan modification activity. Even with concessions, creditors might
increase the NPV of distressed loans through such modifications.
However, the market for private student loans differs from the market
for residential mortgages. Private student loans are not secured by
collateral and have generally lower outstanding balances relative to
mortgages. These differences might fundamentally impact creditors'
economic calculus for determining whether to offer a change in
repayment terms.
There are also some important similarities between the two markets.
As with mortgage origination, student loan originators often access
funding through the asset-backed securities (ABS) market. In 2012,
public filings reveal that more than $4 billion of private student loan
asset-backed securities were issued. Like in the mortgage market,
private student loan underwriting practices have significantly improved
since the economic downturn, which may limit the level of distress for
future borrowers. Another notable similarity is the employment of
third-party loan servicers unaffiliated with the original lender,
though this practice is less prevalent in the private student loan
market than in the mortgage market.
Borrowers of federal student loans have a number of options to
modify the terms of their obligations to ensure an affordable payment
plan. For example, borrowers with a partial financial hardship can
elect the Income-Based Repayment plan, which caps payments on eligible
student loans as a percentage of income above 150% of the poverty line.
Borrowers in default can rehabilitate many federal student loans by
making ``reasonable and affordable'' payments in a consistent, timely
fashion for a specified period. There are also provisions to adjust the
status of a rehabilitated federal student loan on a consumer's credit
report.
Available data indicate that, in recent years, there has been
limited modification activity in the private student loan market. There
are a number of potential impediments to offering alternative repayment
options. Some of these may include: (a) Accounting guidelines that add
complexity when offering alternative repayment options without charging
off the loan; \3\ (b) operational and information technology
limitations among loan servicers; and (c) incentive mismatch among
trustees, administrators, and/or noteholders in ABS trusts and loan
servicers.
---------------------------------------------------------------------------
\3\ See, for example, CNBE Policy Guidance 2010-02, issued by
the Office of the Comptroller of the Currency in August 2010.
---------------------------------------------------------------------------
Impacts on Individual Borrowers and the Public
Policymakers have employed various measures to prevent foreclosures
among American homeowners and to mitigate resulting risks to the public
and the broader economy. Examples of these risks include increased
stress on insured depository institutions and decreased home values of
properties proximate to foreclosed homes--both of which can lead to
further distress. Given the relative size of the private student loan
market and the nature of the product, private student borrower distress
is unlikely to contribute to similar, significant systemic risk.
However, distress among borrowers with all types of student loans may
cause other negative effects in the broader economy. For example, the
Department of Treasury's Office of Financial Research described in its
recent annual report that student loan debt might dampen
consumption.\4\ Changes in the household headship rates, automobile
sales, and homeownership by younger Americans might also be impacted by
student debt levels. Should these risks be significant, policymakers
may wish to consider partnerships between the federal government and
the private sector to increase the availability of alternative
repayment options and reduce the levels of delinquency and default.
---------------------------------------------------------------------------
\4\ Department of the Treasury, Office of Financial Research:
Annual Report to Congress (2012).
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The Ombudsman seeks information in order to provide policymakers
with further details on potential ways to increase payment
affordability for private student loan borrowers in distress and on the
risks of failing to do so. The deadline for submission of comments is
April 8, 2013.
The Bureau encourages comments from the public, including:
Consumers;
Financial institutions, including lenders and loan
servicers;
Nationally recognized statistical rating organizations
(NRSROs);
Private student loan asset-backed trust administrators;
Institutions of higher education;
Credit reporting agencies;
Debt collectors;
Housing finance professionals;
Manufacturers of automobiles and other financed goods;
Brokers and service providers in the residential real
estate industry;
[[Page 13329]]
Professional associations, such as those representing
health professionals and teachers;
Providers of financial counseling; and
Other interested parties.
The Bureau is interested in responses in the following general
areas, as well as specific questions below. Please feel free to respond
to any of the questions outlined below.
Scope of Borrower Hardship
1 What are the primary drivers of private student loan borrower
distress?
a What characteristics might predict distress at loan origination?
b What characteristics might predict distress for borrowers who
complete a program of study?
c What characteristics might predict distress during repayment?
d What are typical debt-to-income ratios of borrowers in distress?
2 How do borrowers in distress typically stay current with their
private student loans? To what extent do borrowers reduce consumption
or adjust living arrangements to meet obligations?
a Do borrowers seek to reduce payments on federal student loans in
order to make payments on private student loans?
b To what extent do borrowers in distress accrue other debt (credit
cards, family loans) to meet private student loan obligations?
c To what extent do borrowers in distress forego ``other
nonessential expenses'' to meet private student loan obligations?
Current Options for Borrowers with Hardship
3 What options currently exist for borrowers to permanently or
temporarily lower monthly payments on private student loan obligations?
To what extent have these affordable repayment options cured
delinquencies?
4 How do lenders typically evaluate whether or not a borrower
qualifies for these affordable repayment options? If lenders make use
of financial models, what are the key drivers of these models?
5 Do lenders work directly with co-signers to modify terms? If so,
how?
6 What is the incidence or expectation of re-default rates among
restructured private student loans?
Past and Existing Loan Modification Programs for Other Types of Debt
7 What are some examples of loan modification programs sponsored by
a public entity or the private sector that have been successful? Which
features of these programs might be applicable to a student loan
affordability program? Which features of these programs might not be
appropriate for a student loan affordability program?
Servicing Infrastructure
8 Is the servicing infrastructure utilized by major lenders
flexible enough to process loan modifications at scale? What are the
limitations of these servicing platforms? Are those limitations capable
of being overcome? What are the estimated costs of overcoming those
limitations?
9 What are the key differences between servicing of student loans
compared to servicing of residential mortgages that must be considered
when crafting an affordability program?
Consumer Reporting and Credit Scoring
10 How are payments plans for defaulted private and federal student
loans currently reported to consumer reporting agencies? How are
rehabilitated federal student loans reported by consumer reporting
agencies, and how does that reporting affect credit scores?
Lender Participation
11 How might an affordability program sponsored by a public entity
mitigate moral hazard and selection bias?
Borrower Awareness
12 What are some examples of modification or refinance initiatives
that successfully made borrowers aware of a new program? Which features
of these programs are applicable in the private student loan market?
13 What are the most effective communication mechanisms to reach
borrowers in distress?
Spillovers
14 How do student loan payments impact access to mortgage credit?
How does student debt impact a consumer's ability to accumulate a down
payment? How does student debt impact a consumer's ability to meet
debt-to-income requirements for FHA-insured and private sector
mortgages?
15 To what extent does student loan debt impact the market for
automobiles? How does student loan debt impact a consumer's ability to
secure an auto loan?
16 What evidence exists about the impact of student loan debt on
consumption, savings, homeownership, household formation,
entrepreneurship, and other indicators of economic health?
Dated: February 20, 2013.
Garry Reeder,
Chief of Staff, Bureau of Consumer Financial Protection.
[FR Doc. 2013-04419 Filed 2-26-13; 8:45 am]
BILLING CODE 4810-AM-P
