Bank Update: Several Lenders Take Advantage of TALF; Rhode Island Bank Told to Stop Making Student Loans
by Randy Schmidt
Several auto lenders and the student loan giant, Sallie Mae has sold billions in loans into the Federal Government’s Term Asset- Backed Securities Loan Facility. Harley-Davidson, Ford, and Honda collectively have sold nearly $5 billion of debt financings. Sallie Mae sold over $1 billion in asset backed securities into the facility. The hope is that these sales will free additional balance capacity for the lenders and stimulate additional borrowing thereby increasing consumer spending.
On another front, Rhode Island based Union Federal Savings Bank (with ownership ties to the private student loan giant First Marblehead), was served with a cease-and-desist order this week. Federal regulators ordered the bank to stop making student loans. The bank agreed to the order and is working toward a re-capitalization plan that is less reliant on private student loans. Under the agreement, the bank must either increase its capital on hand or sell some or its entire student-loan portfolio. “We have been working diligently on addressing these issues in collaboration with the OTS. We have already taken several steps to reduce the private student loan concentration at the bank and First Marblehead has acted as a source of strength for the bank, providing capital and operational support. We are committed to continuing this progress and resolving all of these issues completely,” said Daniel M. Meyers, First Marblehead’s chief executive officer.
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