FAIR LENDING REVIEW OF GOVERNMENT-SPONSORED ENTERPRISES (GSE)

This is a SOURCES SOUGHT NOTICE to determine the availability and capability of qualified small businesses (including certified 8(a), Small Disadvantaged, HUBZone firms; veteran and service-disabled veteran-owned small businesses, and women-owned small businesses) to provide a Fair Lending Review of Government-Sponsored Enterprises (GSE) Underwriting Systems. The Period of Performance is a base period plus 4 one year option periods. Performance of the work shall be done onsite, located at HUD Headquarter, Washington DC The Department of Housing and Urban Development (HUD) is responsible for reviewing and commenting on the underwriting and appraisal guidelines of Fannie Mae and Freddie Mac, the two major government-sponsored enterprises (GSEs) in the conventional secondary mortgage market, to determine their compliance with federal fair lending laws.HUD conducts regulatory reviews that examine the fair lending implications of all aspects of these guidelines, with particular focus on the automated mortgage scoring systems that have been implemented by the GSEs and made available by GSEs to lenders for use in mortgage underwriting. HUD's regulatory review includes detailed examination of the structure of the mortgage scoring models used within the GSEs' automated underwriting systems, the process through which the models were developed, and the GSEs' use of the models. Automated underwriting systems make a quantitative evaluation of creditworthiness based on borrower credit history; information about the mortgage loan and property; and the borrower's financial status. The review includes examination of the GSEs' own analyses of the systems for possible discriminatory effects, and examination of the impacts of the models based on data collected over the past few years. It includes components that will better define appropriate fair lending performance criteria for secondary market enterprises and develop appropriate methodology for assessing performance. Finally, it will identify an appropriate program of HUD long-term monitoring to address key issues, such as risk-based pricing. Support HUD staff in its regulatory review of Fannie Mae and Freddie Mac's automated underwriting systems. Participate with HUD staff in examining information from the GSEs on the structure of their automated underwriting systems, their development of the systems, their application of the systems in the mortgage loan purchase process, the possible discriminatory effects of the systems, and their business purposes. Assignments range from developing statistical models for fair lending compliance analysis to assisting HUD in reviewing files and documents gathered during the review process. HUD will assist in determining the GSEs' compliance with federal fair lending laws. HUD will provide guidance on the legal standards for establishing liability under these laws. Develop a comprehensive and detailed methodology for analyzing the information and data received from the GSEs to determine whether these legal standards have been met. The approach should be well-grounded in the existing economics literature on lending discrimination and may involve examining the practices used by regulatory agencies and the GSE to measure fair lending compliance. The type of work to be performed may include: Development of research methodologies at the conceptual and applied levels; Developing and testing economic models; Cleaning and/or entering data provided by HUD; Statistical analyses of data ranging in sophistication from simple cross-tabulations to multivariate techniques; Evaluation and synthesis of analytical results at both the technical and policy relevant levels; Providing literature reviews to HUD on relevant fields. Providing industry know-how and industry expertise in assisting HUD in the review. Review of GSE Analyses HUD staff will jointly review GSE descriptive information and supporting analyses in order to acquire a comprehensive understanding of the GSEs mortgage scoring systems, recent changes in these systems, and any implications for regulatory issues or the in-depth analysis. Some key elements of the review of descriptive materials and supporting analyses include: What data bases were used to develop the scorecard and the coverage, geographic and otherwise, of those data bases; The process by which the GSEs selected variables for possible inclusion in the scorecard; whether the data on which the mortgage scorecard was developed represent the likely mortgage applicants, the extent to which minorities were represented in the data; and identifying variables that may raise fair lending issues such as geographic variables or other variables highly correlated with protected classes. What analyses the GSEs conducted of the impacts of the mortgage scorecard and its components on minority groups and the findings of those analyses; and The process for selecting cutoff points for the different risk classifications (e.g., "accept," "refer with caution"). The extent to which the scorecard serves the GSEs' business purposes such as by predicting default risk, and the GSEs' documentation of its effectiveness. Analysis of Loan-Level Quantitative data While this list is not comprehensive, it illustrates the issues and questions that HUD seeks to address with the loan level data provided by the GSEs. a)Mortgage scorecard development analysis. Such an analysis could cover several basic questions about the operational impact of the scorecard. Some examples include: What is the distribution of mortgage scores and risk classifications by borrower and neighborhood characteristics (race, income, neighborhood) What is the distribution of loan and underwriting characteristics by race? This descriptive information will be very helpful in any analysis of disparate impact. What are the most important component variables (i.e., credit history scores or mortgage application variables such as LTV) in the mortgage scorecard? Do the credit history variables have different impacts than the traditional mortgage application variables? How do the credit history data vary by race and other borrower characteristics? Essentially, this descriptive analysis could cover issues such as those in the Federal Reserve studies of credit scoring. b) Testing for alternative model specification that could be used for scorecard. This is to examine whether some alternative model specifications, such as adding different variables or interactions could succeed in reducing adverse impacts on minorities yet maintain the overall productiveness of the scorecards. c) Testing for alternative cutoff levels that could be used for scorecard decisions. This is to examine whether some alternative cutoff levels used in scorecard decisions could succeed in reducing adverse impacts on minorities yet still serve the legitimate business requirements of the GSEs. d) Overrides. Do overrides (ad hoc adjustments to the model) to the model result in improper discrimination? Do they serve a business purpose? e) Manual Underwriting. Perform a direct analysis of loan-level data on those loans that are purchased by the GSEs without use of automated underwriting systems to determine operational impacts of manual underwriting in terms of loan and borrower characteristics for purchased loans. f) Examine variations in interest rates and guarantee fees. The data should reveal the degree that guarantee fees vary, and if they do, how they vary across borrower and neighborhood characteristics. g) Examine the agencies' lending for multi-family properties. This includes, among other tasks, identifying differences from the underwriting standards for single family properties, identifying fair lending issues raised by multi-family lending standards, and testing for improper discrimination. h) Examine the GSEs' purchase of loans secured by properties on Native American land. i) Business Purposes. Key issues include how well the scorecard predicts mortgage defaults, and whether the scorecard is equally predictive across races. POSSIBLE FHA ANALYSES At HUD's discretion, this contract may be extended to cover a fair lending review of the Federal Housing Administration (FHA). Support HUD staff in its regulatory review of the FHA's automated underwriting system (the "TOTAL scorecard"), its manual underwriting processes, and other aspects of its mortgage underwriting. HUD anticipates that any FHA review will mainly consist of smaller, discrete tasks such tasks as fair lending analyses of FHA Mortgagee Letters which announce changes in FHA lending standards and policies. Work products include project management and planning documents such as a Management and Work Plan, Monthly Management Reports, and a Research Design and Analysis Plan; written presentations of research findings and recommendations in the form of memos, draft reports, interim reports, and final reports; statistical tables and figures; computer code, data sets, and documentation; and briefings and presentations to HUD, GSEs, and other stakeholders Qualifications may include a doctorate in economics or a related field; knowledge of advanced economic and statistical methods; a record of producing high-quality research and technical reports; and extensive knowledge of the mortgage industry, as demonstrated by business, regulatory, or research experience. Interested small business offerors are encouraged to respond to this notice. However, be advised that generic capability statements are not sufficient for effective review of the respondents' capacity and capability to perform the specific work as required. Response must directly demonstrate the company's capability, experience, and/or ability to marshal resources to effectively and efficiently perform the tasks described above in sufficient level of detail to allow definitive review of the capability statement and evidence that the contractor can satisfy the minimum requirements listed above in compliance with FAR 52.219-14 ("Limitations of Subcontracting"). Failure to definitively address each of these requirements will result in a finding that respondent lacks capability to perform the work. Responses to this notice shall be limited to ten pages, and must include: 1. Company name, mailing address, e-mail address, telephone and FAX numbers, website address (if available), and the name, telephone number, and e-mail address of a point of contact having the authority and knowledge to clarify responses with Government representatives. 2. Name, title, telephone number, and e-mail addresses of individuals who can verify the demonstrated capabilities identified in the responses. 3. Business size for NAICS XXXX (size standard $ or number of employees) and status, if qualified as 8(a) firm (must be certified by SBA), Small Disadvantaged Business (must be certified by SBA), Woman-Owned Small Business, HUBZone firm (must be certified by SBA), and/or Service-Disabled Veteran-Owned Small Business (must be listed in the VetBiz Vendor Information Pages). 4. DUNS number, CAGE Code, Tax Identification Number, and company structure (Corporation, LLC, partnership, joint venture, etc.). Companies also must be registered in the System for Award Management (SAM, at www.sam.gov) to be considered as potential sources. 5. Identification of the firm's GSA Schedule contract(s) by Schedule number and contract number and SINs that are applicable to this potential requirement are also requested. 6. If the company has a Government approved accounting system, please identify the agency that approved the system. Please submit copies of any documentation such as letters or certificates to indicate the firm's status (see item #3, above) Teaming arrangements are acceptable, and the information required above on the company responding to this announcement should also be provided for each entity expected to be teammates of the respondent for performance of this work. To the maximum extent possible, please submit non-proprietary information.Any proprietary information submitted should be identified as such and will be properly protected from disclosure. This notice is for PLANNING PURPOSES ONLY, and does not constitute an INVITATION FOR BIDS, A REQUEST FOR PROPOSALS, A SOLICITATION, AND A REQUEST FOR QUOTES, or an indication the Government will contract for the items contained in this announcement. This request is not to be construed as a commitment on the part of the Government to award a contract, nor does the Government intend to pay for any information submitted as a result of this request. The Government will not reimburse respondents for any cost associated with submission of the information being requested or reimburse expenses incurred to interested parties for responses to this announcement. RESPONSES TO THIS ANNOUNCEMENT WILL NOT BE RETURNED, NOR ANY ENSUING DISCUSSIONS OR DEBRIEFINGS OF ANY RESPONSES. However, information obtained as a result of this announcement may be reflected in the subsequent solicitation, and HUD may contact one or more respondents for clarifications and to enhance the Government understands. This announcement is Government market research, and may result in revisions in both its requirements and its acquisition strategy based on industry responses. RESPONDENTS MUST SUBMIT CAPABILITY STATEMENT VIA E-MAIL to Sarah Heyward at [email protected] no later than June 10, 2015, 12:00 PM Eastern Time forconsideration.