This Request for Information (RFI) is solely for planning purposes and is NOT a Request for Proposals, Request for Quote, or an obligation on the part of the Government to acquire any services. Responses to the RFI are not offers, quotes, and cannot be accepted by the Government to form a binding contract. It is for market research, planning, and information purposes only and shall not be construed as a commitment by the Government to enter into a contractual agreement nor does it commit the FHFA to any course of action in the future. The Government does not intend to award a contract based solely on responses to this RFI; nor will the Government pay for information solicited hereunder. Also, this RFI does not obligate FHFA to contract for services or guarantee any respondent inclusion on a potential solicitation mailing list. Each respondent by submitting a response agrees that any cost incurred by responding to this request or in support of activities associated with this RFI shall be the sole responsibility of the respondent. FHFA will incur no liabilities whatsoever to anyone for any costs or expenses incurred by the respondent in responding to this RFI. Background The Federal Housing Finance Agency (FHFA) was created by the Housing and Economic Recovery Act of 2008 to regulate and supervise Fannie Mae, Freddie Mac, and the 11 Federal Home Loan Banks. It combined three organizations, the Office of Federal Housing Enterprise Oversight, the Federal Housing Finance Board, and a group from the Department of Housing and Urban Development, which collectively had previously regulated these government-sponsored enterprises. These institutions play critical roles in supporting our nation's housing finance system. Fannie Mae and Freddie Mac guarantee mortgage-backed securities (MBS) and hold mortgages and MBS for investment. The Federal Home Loan Banks lend money to banks and other financial institutions using mortgages as collateral and also invest in mortgage-related assets. The primary function of the FHFA is to ensure the capital adequacy and the financial safety and soundness of Fannie Mae, Freddie Mac (the Enterprises), and the 11 Federal Home Loan Banks (FHLBanks) and the FHLBanks' Office of Finance (together, the Regulated Entities); and to ensure that they discharge their housing finance mission. Additional information on FHFA and its mission can be found at: http://www.fhfa.gov. The Federal Housing Financial Agency (FHFA) is requesting information and conducting market research for a platform for credit risk modeling of private label residential and commercial mortgage-backed securities and residential whole loans. FHFA requires a platform for credit risk modeling of private label residential and commercial mortgage-backed securities and residential mortgage loans. FHFA requires comprehensive and streamlined systems that provide robust and flexible platform for performing credit risk modeling and cash flow analytics for private label structured finance transactions such as residential mortgage-backed securities (RMBS) and commercial mortgage-backed (CMBS) securities (structured finance system) and a credit risk modeling application for residential mortgage whole loans (whole loan application). FHFA seeks a stand-alone credit risk modeling application that uses FHFA provided proprietary loan level data for residential whole loans to calculate loan and portfolio level default, prepayment, and loss severity along with estimates of cash flows and credit losses. Credit risk modeling is essential to enhance the research conducted by FHFA in support of the Regulated Entities that FHFA regulates. FHFA will use this platform for proprietary analysis. The overall objective of the requirement is to provide information to the FHFA to use in supervision of the Regulated Entities [Fannie Mae, Freddie Mac, and the 11 Federal Home Loan Banks (FHLBanks) and the FHLBanks' Office of Finance--together, the Regulated Entities]. Vendors must possess substantial experience and credit risk research in both the residential and the commercial real estate mortgage loan sector and structure finance transactions. FHFA is conducting market research to identify potential solutions and sources that possess the specific expertise and capabilities to provide a structured finance system that seamlessly automates and integrates into a single desktop system containing all of the following capabilities: 1. loan level data underlying securitized residential and commercial mortgage loan transaction, 2. whole loan application including loan level default, prepayment, and loss severity risk models to calculate loan level cash flows and credit losses, 3. modeling of primary (loan-level) and pool-level mortgage insurance, 4. yield curve model, 5. transparent and forward-looking macro-economic scenarios that are an input to the loan level default, prepayment, and loss severity risk model, 6. a cash flow waterfall engine and deal library for structured finance transactions such as residential mortgage-backed securities and commercial mortgage-backed securities, used to facilitate the calculation of loan pool, deal, and bond/CUSIP level cash flows and credit losses at monthly frequency, 7. bond/CUSIP valuation capability for calculating CUSIP level cashflows, credit losses, and other credit analytics, 8. a fully automated facility to calibrate the output of default, prepayment, and loss severity risk models for residential mortgage loans to the recent/historical performance for the related pool/deal, 9. a fully automated facility to calibrate the output of default, prepayment, and loss severity risk models for modified residential mortgage loans to the recent/historical performance of modified loans, and 10. a fully automated Monte-Carlo simulation of forward looking macro-economic paths capable of calculating CUSIP level probability distribution of credit valuation (present value) and credit losses for structured finance transactions. FHFA requires that the fully integrated structured finance system provide credit valuation (present value) for a single CUSIP for a single macro-economic scenario along with associated time series of future pool, deal, and tranche level cash flows and credit losses. These valuations must be calculated quickly and efficiently by inputting a CUSIP number. The platform must provide all of the above ten seamlessly integrated capabilities for the following structured finance sectors (structured finance system) and provide a stand-alone credit risk modeling application for residential whole loans (whole loan application): a. Residential mortgage-backed securities b. Commercial mortgage-backed securities c. Residential mortgage whole loans The structured finance system must have fully integrated and streamlined each of the then capabilities identified above as relevant. FHFA does not want a structured finance that does not requires FHFA to interact with multiple vendors to meet its requirement. FHFA is seeking a single, integrated solution. The vendor must have demonstrated experience and credit risk research in RMBS, CMBS, and the underlying mortgage loan sectors. The underlying default, prepayment, and loss severity risk models must have been sufficiently tested in a production environment. FHFA requires that the residential whole loan credit risk modeling application seamlessly integrate and streamline the following: 1. Loan-level data; 2. Forward looking MSA/CBSA-, state-, and national-level macroeconomic scenarios; 3. Yield curve model; 4. Econometric models to simulate national, state, and MSA/CBSA level economic variables such as unemployment rate and home prices that are inputs to the loan level risk models; 5. Loan level default, prepayment, and loss severity risk models to cover: fixed rate loans, ARMs, hybrid ARMs, interest-only loans, negative amortization loans, new originations, seasoned loans, first and second liens, home equity loans, HELOCs, prime, alt-A, and subprime loans; 6. Loan level (primary) and pool-level mortgage insurance; 7. Loan valuation capability for calculating loan level cash-flows, credit losses, and other credit analytics; 8. a facility to calibrate the output of default, prepayment, and loss severity risk models for residential mortgage loans to the recent/historical portfolio performance; 9. a facility to calibrate the output of default, prepayment, and loss severity risk models for modified residential mortgage loans to the recent/historical performance of modified loans, and 10. a Monte-Carlo simulation of forward looking macro-economic paths capable of calculating loan and portfolio level probability distribution of credit valuation (present value) and credit losses. Residential whole loan credit risk modeling application must have standard macroeconomic scenarios (https://www.economy.com/products/alternative-scenarios/standard-scenarios) from Moody's Analytics built in and fully automated to produce cash-flows and credit losses. Residential whole loan credit risk modeling application must have U.S. Federal Reserve CCAR macroeconomic scenarios built in and fully automated to produce cashflows and credit losses. Residential whole loan credit risk modeling application must have a fully automated facility to produce cash-flows and credit losses under FHFA input forward looking MSA/CBSA, state, and national level macroeconomic scenarios. Residential whole loan credit risk modeling application must generate loan and portfolio level projected future cashflows, performance history (such as CDR, CPR, and loss severity), and credit losses at the monthly frequency. Residential whole loan credit risk modeling application must provide all output under a single scenario and multiple scenarios using a built in and fully automated mechanism such as with the execution of a macro that requires no intermediate user action. The fully automated Monte-Carlo simulation must provide probability distribution of credit valuation (present value) and credit losses for a single loan and for a portfolio of loans using a built in and fully automated mechanism such as with the execution of a macro that requires no intermediate user action. The output from Monte-Carlo simulation must include credit valuation (present value) and credit losses corresponding to user specified percentiles of the probability distribution using a built in and fully automated mechanism such as with the execution of a macro that requires no intermediate user action. The output from whole loan application for each scenario and Monte Carlo simulation must include comprehensive information within the following categories as: 1) A summary for the loans including stratification tables for underlying variables such as: FICO score, loan-to-value ratio (LTV), LTV for second lien, combined LTV, Delinquency status, debt-to-income ratio (DTI), loan term/maturity, documentation level, occupancy type, loan size, property type, loan purpose, etc., 2) A pool/portfolio level summary including: total loan balance, average loan balance, total number of loans, weighted average (WA) FICO score, WA LTV, WA combined LTV, WA coupon/rate, WA gross margin, WA DTI, WA original term, WA interest only (IO) term, % fixed rate, % ARM, % full documentation, % prime, % subprime, % first lien, % interest only, % negative amortization, % balloon, % HELOC, % modified, etc. 3) Loan and portfolio level output including: default, prepayment, loss severity, expected loss, original LTV and CLTV, original appraisal amount, updated LTV and CLTV, FICO score, current balance, maximum draw down amount (for lines of credit), price, MSA/CBSA, state, lien position, original term/maturity, amortization term, IO term, documentation level, coupon rate, loan purpose, etc. 4) Projected future performance (such as CDR, CPR, and loss severity), and 5) Probability distribution of losses along with mean, standard distribution, and percentiles from Monte Carlo simulation. Residential whole loan credit risk modeling application must provide means to input default, prepayment, and loss severity assumptions, modify model projected performance, and flexibility of modifying other vendor assumptions. Based on positive market research results, FHFA may formulate a subsequent procurement strategy and solicitation. FHFA is seeking a single contractor who can meet the requirements outlined in the draft Statement of Work. The specific purpose of this request is to accomplish the following: 1. Identify the capabilities and strategies of potential companies meeting FHFA's objectives and requirements including experience and past performance. Vendors must possess substantial experience and credit risk research in both the residential and the commercial real estate mortgage loan sector and structure finance transactions. 2. Verify that the work requirements and objectives are clear, reasonable, and attainable. 3. Gather information that can be used to inform, formulate, and enhance a procurement strategy and solicitation. It is particularly important for FHFA to understand the pricing model for an entity to provide the requirements described in this RFI/Sources Sought Notice. Information and Input Requested It is FHFA's intent to use information gathered in response to this Notice to 1) assist in its market research to determine whether capabilities exist in the market place for these services and 2) to identify potential sources capable of meeting the requirements of the Government. Interested parties shall provide a detailed description of its offering that addresses the referenced requirements, describes capabilities, and demonstrated experience and credit risk research in RMBS, CMBS, and the underlying mortgage loan sectors. Responses should also include: • A complete overview of capabilities that addresses all of the above stated requirements and capabilities. • Your firm's size status for North American Industry Classification System (NAICS) number. If you are uncertain of your size status, please see the Small Business Administration's site for more details: http://www.sba.gov/content/table-small-business-size-standards. • Please address suggested pricing structures or any other best practices the FHFA should consider when drafting its solicitation. • A list of clients or experience in these areas with a client point of contact, name, phone number, and email. • Is your firm a GSA schedule holder or Government-Wide Acquisition Contract (GWAC)? If so, include contract number, and Government POC name, phone, and email. Please do NOT include any non-disclosure restrictions; state your submission is for evaluation purposes only; or submit other similar restrictions. FHFA is conducting market research and may share your inputs with FHFA personnel to develop a potential, future solicitation. Such restrictions eliminate that utility. Please submit a response to this RFI/Sources Sought by 1 PM Eastern Daylight Time on June 22, 2015 via email to
[email protected] . Questions or requests for clarification may be made to Deirdre Eischens at 202-649-3783 or via email at
[email protected]. If this does become a firm requirement, and the FHFA does decide issue an RFP or RFQ, you will be advised. FHFA appreciates your time in responding to this matter.