First Marblehead Case Study
2. Briefly describe First Marblehead’s business
As noted in The First Marblehead Corporation June 30, 2005 10-K, First Marblehead “provides outsourcing services for private education lending in the United States.” Specifically they perform the following activities: a.) Loan Program Design b.) Loan Application Processing c.) Supervising Loan Servicing d.) Default Management Oversight e.) Securitization Process Oversight and Coordination Also, as noted in the case, First Marblehead is not a lender, guarantor or loan servicer, rather they receive fees from the services provided in connection with processing and facilitating the securitization process.
3. How does First Marblehead make money- be specific and complete, i.e. what revenue streams do they have?
First Marblehead makes money by receiving fees by providing services associated with processing and facilitating the securitization of private education loans. Specifically they receive income from the following activities: a.) Structural Advisory Fees First Marblehead receives a portion of their structural advisory fees up front, around the time of the securitization. The remainder of the structural advisory fees is received over the life of the student loan. b.) Residuals Income The residual income is received after all obligations to the groups that purchased the loan based securities from the Special Purpose Entity are met. The timing and magnitude of these payments is hard to determine and predict.
c.) Processing Fee (TRI) d.) Trust Administrative Fees Although First Marblehead is not a loan servicer, it is apparent there is a small portion of their revenue that is generated from providing some of the same services completed by loan servicers. It is likely this is done prior to the securitization being completed.
4. Describe, if you can, how a securitization works. (A picture may help.)
Securitization is the process of collecting a number of debt obligations and pooling the rights to their future
As noted in The First Marblehead Corporation June 30, 2005 10-K, First Marblehead “provides outsourcing services for private education lending in the United States.” Specifically they perform the following activities: a.) Loan Program Design b.) Loan Application Processing c.) Supervising Loan Servicing d.) Default Management Oversight e.) Securitization Process Oversight and Coordination Also, as noted in the case, First Marblehead is not a lender, guarantor or loan servicer, rather they receive fees from the services provided in connection with processing and facilitating the securitization process.
3. How does First Marblehead make money- be specific and complete, i.e. what revenue streams do they have?
First Marblehead makes money by receiving fees by providing services associated with processing and facilitating the securitization of private education loans. Specifically they receive income from the following activities: a.) Structural Advisory Fees First Marblehead receives a portion of their structural advisory fees up front, around the time of the securitization. The remainder of the structural advisory fees is received over the life of the student loan. b.) Residuals Income The residual income is received after all obligations to the groups that purchased the loan based securities from the Special Purpose Entity are met. The timing and magnitude of these payments is hard to determine and predict.
c.) Processing Fee (TRI) d.) Trust Administrative Fees Although First Marblehead is not a loan servicer, it is apparent there is a small portion of their revenue that is generated from providing some of the same services completed by loan servicers. It is likely this is done prior to the securitization being completed.
4. Describe, if you can, how a securitization works. (A picture may help.)
Securitization is the process of collecting a number of debt obligations and pooling the rights to their future