First Marblehead Gets BofA Extension

The companies prolong a loan deal.
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First Marblehead (FMD) signed a two-year agreement to securitize Bank of America (BAC) - Get Report-originated private student loans.

The Boston-based student lender said the deal extends through May 31, 2008, an exclusive agreement that was due to expire next month.The pact also amends terms and conditions under which loans are sold into securitization transactions that First Marblehead structures and administers.

First Marblehead said the agreement amends the marketing fee and loan premium due to Bank of America and offers a pricing incentive for Bank of America should volume exceed a specified threshold.

The news comes just a few months after Bank of America's decision to opt out of the automatic-renewal provision on a contract

sent First Marblehead shares plunging. The stock has since more than recovered.

In September, Daniel Meyers resigned as First Marblehead's CEO after it was discovered that he had exchanged $32,000 in gifts with Kathy Cannon, who at the time was a senior vice president in BofA's student loan operation. A few weeks before Meyers' resignation, BofA officials asked Cannon to leave the bank for violating its policies on avoiding conflicts of interest.

At the time of the dispute, Wall Street suspected the decision by BofA not to automatically renew the student loan contract may have signaled that the nation's second-largest bank was either trying to renegotiate the terms of the agreement or buying itself time to find an alternative serving firm.

First Marblehead was halted late Tuesday after rising 96 cents to $44.31.