Draft_PWS_Appraisal_Services.pdf

SECTION C – DESCRIPTION/SPECIFICATIONS/WORK STATEMENT

C.1 OVERVIEW

The Rural Housing Service of Rural Development (hereinafter referred to as USDA) intends to procure contractor provided services for the purpose of:

1. 310,745 properties for single family direct portfolio of loans.

2. Providing 330,384 loans due to multiple loans for some borrowers. The Contractor selected by USDA will be awarded a contract for all existing loans and loans that require services described herein and that are originated during the period of the contract.

C.1.1 Background

Rural Development (USDA) provides loans to low and moderate income applicants located in rural geographic areas to assist them in obtaining single family housing through multiple programs. As of June 1, 2012, USDA had approximately 330,384 Direct Single Family Housing loans that represent just over 300,000 borrowers.

Section 502 Direct loans are generally secured by first mortgages on modest dwellings located on non-farm tracts of one acre or less. A limited number are larger than one acre of land with the home. The Single Family Housing Direct loans are located in each of the 50 states and U.S. territories that include Puerto Rico, Guam (and its Islands) and the Virgin Islands. Since multiple loans may exist on a single property, service may be necessary on multiple loans for one account. Approximately 15,000 single family loans are originated per year.

NOTE TO OFFERORS: Offeror’s should indicate ability to handle the default and legal services for U.S. Territories and ability to provide service on a Nationwide portfolio with and without subcontracting.

USDA currently processes all loan originations through State Offices and approximately 550 Field Offices. The Centralized Servicing Center (CSC), located in St. Louis, Missouri provides support to the field offices for loan originations and is responsible for most servicing functions. Currently the Single Family Direct loan program is 81% current.

USDA is currently utilizing MortgageServ (Loan Serv, et al) loan servicing and UNIFI loan origination system.

The focus of our centralized default management division is to minimize risk to the Federal Government and taxpayer.

It is further designed to reduce the cost associated with servicing defaulted customers.

The Foreclosure and REO portfolios are currently serviced in a “mixed servicing” environment. Approximately 60% of the states are serviced by CSC with the remainder being serviced throughout the country by the State and/or Field Offices.

All Servicing is in accordance with Code of Federal Regulations, Rural Development Handbook 3550, state laws/statutes, and Housing Act of 1949. This is required for any interested contract provider.

C.1.2 Objectives

USDA expects, with the assistance of the selected Contractor, to achieve the following goals:

• Comply with all laws, regulations, statutes and CFR that governs the Single Family Housing (SFH) Direct borrowers.

• Provide the Agency with services related to Default Management processing of at risk, defaulted, foreclosed and/or inventory properties.

• Utilize a Contractor to obtain data, services, appraised value, legal services, maintenance, preservation and disposition in a timely cost efficient manner.

• Provide a conversion cost in the event there is a conversion cost such as data base extraction for initiation of the contract.

NOTE: Award of this contract does not guarantee the Contractor any minimum number of accounts during the term of this contract, although an estimate of the number of accounts is provided.

The contractor shall be responsible for filtering the data based on mutually agreed business specifications to identify the government’s exposure to loss and/or compliance to regulations. The contractor shall provide immediate coverage for the portfolio during any transition or development phases.

The Contractor shall be national in scope since it will be supporting an USDA portfolio that is located in all 50 states as well as U.S territories. The contractor shall meet the following minimum qualifications in order to meet the servicing criteria:

• Have a minimum of five (5) years experience in the Real Estate Property Appraisals;

• Service or have serviced more than one client with a minimum of 50,000 customers;

• Service more than one client with MortgageServ using the standard or custom default programs with electronic interface and reporting; and

• Must use automated interfaces with USDA

• Vendor will not utilize overseas or foreign operations to complete work

USDA expects that the Contractor will enhance USDA’s ability to provide supervised credit in rural America in its role of lender of first opportunity.

C.1.3 Current Single Family Housing Direct Loan Portfolio

As stated above, USDA currently maintains a portfolio of approximately 330,384 Direct Single Family Housing loans for 300,000 borrowers. As of June 30, 2012, the outstanding principal due on these loans was $16.9 billion. Attachment 1 details the existing portfolio by state. Approximately15,000 new single-family housing loans are originated each year from 3,500 new applications monthly. This number can go up or down depending on the needs of the public and funding.

USDA originates loans on existing dwellings and provides for the construction of single family dwellings that become permanent mortgage loans when the construction is completed. RD will provide financing to qualified borrowers for the parcel of land and provide interim disbursements during the construction period (including tribal land). USDA typically issues mortgage loans for thirty-three (33) year term, with a maximum of thirty-eight (38) years. The term of the permanent loan is shortened by the length of time the construction loan was in effect. USDA will also provide financing on manufactured housing that has been placed on a permanent foundation. Mortgages on manufactured housing cannot exceed a thirty year term.

USDA provides supervised credit to borrower’s that is intended to be temporary in nature. It is anticipated that through agency supervision borrowers will become successful homeowners and will graduate to permanent financing that is available through mortgage lenders in the private sector. Borrowers that meet USDA criteria will be reviewed every two years to determine the availability of financing through private sector. Borrowers that meet agency defined criteria will be solicited for graduation to financing in the private sector. Borrowers that meet USDA criteria will be reviewed every two years to determine the availability of financing through private sector lenders. Local supervisors are required to maintain contacts with local lenders and survey the current rates and terms that might be available to USDA borrowers who are considered eligible for graduation to private sector financing. Once the borrower has found financing in the private sector the obligation with USDA will be satisfied. Under certain situations USDA may elect to subordinate a portion of its debt to the new lending institution. When subordination occurs USDA will typically cease some servicing related activities.

C.2 Default Management of USDA Loans-Current Processes

C.2.1 Loan Servicing

USDA is currently utilizing a decentralized model for servicing foreclosure and inventory properties in approximately 40% of the country. CSC services the remainder of the country. In all states, foreclosure services are contracted through a decentralized contract acquisition process. Once a property is vacant or in the Agency’s custody through the “custodial” process and/or REO, CSC utilizes a nationwide vendor to handle the 60% of those properties that CSC has responsibility to service (this is commonly referred to as “Centralized States”).

CSC and State Office Staff currently work case files with either Office of General Counsel (OGC) and/or private attorneys in all cases.

2.2 Loan Originations

USDA is a nationwide lender. Loan originations are currently handled by field staff located in approximately 550 Local Offices that process 3,500 new applications monthly, with a current inventory of 60,000 loan applications. Local offices are responsible for all program outreach and loan origination activities including initial applicant review; loan application processing; appraisal ordering and tracking; credit report ordering and tracking’ underwriting’ loan closing activities. The Local Office Staff performs most loan origination activities, and prepares all loan documents through automation. The new loans are uploaded from the Unifi system to MortgageServ.

USDA provides payment assistance for approximately 60% of its current borrowers. During the origination process borrowers are qualified as to their ability to meet Agency guidelines. Borrowers are also qualified as to their need of financial assistance in order for them to become successful homeowners. While the typical borrower will not meet the income and down payment requirements of the private sector, borrowers must fall within specific income levels based on the size of the household established by USDA for each locale. USDA will consider multiple loans to borrowers for purchasing a home and for subsequent improvements.

Funds that are available for RH lending activities are appropriated by Congress on an annual basis. The current direct lending activity is static with funding for approximately 15,000 new loans annually. Since 1949 the new origination volume has averaged in excess of 40,000 new originations annually. During the peak lending years new originations have been in excess of 75,000 new loan originations. USDA has little control over the number of new originations closed since the funding for such financing is controlled by Congress. These volumes indicate that USDA has the ability to issue a large volume of loans in a single year.

C.3 Loan Originations-Establishing Automation for Service

USDA is not able to issue a guarantee of new origination volumes to forecast the default volume, since funding is ultimately controlled by Congress.

USDA’s new Loan Origination (UNIFI)/Loan Servicing (Mortgage Serv) system will have the capability to interface with the contractor’s system for the purpose of establishing the identical data throughout the servicing environments should a loan reach a default level that requires services from contractor.

The Contractor shall utilize electronic transmission of data from the USDA loan servicing system (Attachment 2 are the system requirements)

The frequency with which automated interfaces will occur for the purposes of establishing new loans to complete data base sync for service will be monthly, however, if it is anticipated there is a mutually beneficial timeframe for this purpose that can be determined between the vendor and USDA.

All defaulted loans will be considered under service immediately upon submission by USDA to contractor.

The Contractor shall be responsible for obtaining all data to protect the Government’s interest during the default process.

C.4 Conversion

C.4.1 Accounts

Default accounts will be established for service on a case by case basis. All accounts are subject to default services and that activity is not predictive. There are two conditions under which loans will be established for service.

1. New Loans underwritten by USDA.

2. Loan already in default stages of foreclosure, bankruptcy (legal only), custodial transactions and acquired at the time of contract award.

NOTE: The “special” servicing actions that constitute USDA assistance will be defined as Re-amortization, Assumption and Delinquent Workout Agreement (DWA). The DWA is similar to the mortgage industry’s Forbearance Agreement and is established when a borrower requires more than four months to repay the arrearage on the loan.

C. 5 Requirements

C.5.1 Unusual Situations: The Contactor must report all situations that arise outside of the normal process to the Contracting Officer’s Representative or designee within 3 calendar days after the situation comes to the Contractors attention.

C.5.2 Delays. In the event that a situation arises that will prevent timely completion, the Contractor must notify the Contracting Officer’s Representative or designee within 5 business days of becoming aware of the delay. The following delays shall be considered as no fault of the contractor. The time frame of completion may be adjusted accordingly when such action occurs.

• Natural disaster which has caused substantial and immediate damage to entire area

C.5.3 Deliverables

5.3.1 Acknowledgement of Assigned Cases Within 3 working days after physical acceptance of a borrower case file, the contractor shall acknowledge receipt by written memorandum to the COR. A single memorandum may acknowledge receipt of multiple cases. Memorandums may be delivered via e-mail or electronic system.

5.3.2 Communication The contractor shall document all communication with the borrower in writing and provide a copy to the Contracting Officer’s Representative.

5.3.3 Expected Timeframes

Appraisal assignments will be classified in one of two timeframe categories at the time of engagement;

Urgent: Urgent timeframe appraisal assignment requests will be completed and delivered within 3 calendar days of the appraisal order being received.

Standard: Standard timeframe appraisal assignment requests will be completed and delivered within 5 calendar days of the appraisal order being received.

C.5.4 Appraisals - All appraisals shall be completed on forms that are Uniform Appraisal Dataset compliant. The appraiser is responsible for additional supplementation to forms to ensure the appraisal is USPAP compliant. The appraisals shall be completed giving due consideration for the following:

Location of Property: Adhere to legal description and surveys for proper location of site to avoid errors such as infringement, encroachment, etc., when appraising a property.

Use of Comparable: The use of USDA, Rural Development financed properties is allowed but they can comprise no more than one half of the sales used in the comparable sales approach. Comparables should be of the same style, and type that of subject; i.e. manufactured vs. manufactured stick built vs. stick built; poor vs. poor condition. Lack of suitable comparables must be explained and justified. All comparables must be inspected from at least the street. Use of any sale over one year must be documented as to reason and lack of more recent sales. In the case of extensively dilapidated properties which are market atypical, it may be necessary to use auction sales of similar USDA properties.

Property Improvements: In the event Rural Development provides the Contractor a list of repairs required to improve the property, these repairs shall be reflected in the appraisal process and documented in the “as-improved” appraisal report.

Depreciation: Adjustments to the cost approach and the sales comparison analysis that reflect a decrease in value of a structure or other improvements to the site due to physical, functional and/or external obsolescence will be determined.

Appraisal must contain sufficient information to detail how condition description was determined.

Approaches to Value: The market data approach (comparable sales) and the cost approach shall be considered in the final estimate of value. The cost approach is required on all homes less than 10 years old or when considered to accurately reflect value. On homes more than 10 years old, site value is still required. The cost approach is intended to support the sales and/or income approaches. It is not to be used for insurance purposes.

Each appraisal will be submitted electronically. Comparable properties do not need to be identified by deed book and page number. The appraiser is required to ensure that comparable sales are closed transactions recorded in the appropriate Courthouse. When so instructed, leveraged lenders will be listed as users.

Subject Inspection: All loan making, recapture, and Inventory/vacant property appraisal will require an interior inspection. Every effort will be made to perform an interior inspection on foreclosure appraisal. The reason for failure to perform an interior inspection will be documented. At a minimum, the exterior and site will be fully inspected. Rural Development does not accept drive by appraisals. On all foreclosure appraisals where an interior inspection is not possible, the extraordinary assumption must be that the interior condition is poor to fair due to lack of maintenance, unless clear evidence to the contrary is presented.

A complete appraisal report must contain the following:

1. Appropriate appraisal form as noted above. Use of three comparables is a minimum requirement. When net and gross adjustments significantly exceed 15% and 25% suggested guidelines, use of additional comparables is encouraged to provide support of value conclusion. Adjustments exceeding guidelines should be explained.

2. Every effort must be made to attempt to inspect interior of all properties. When it is necessary to complete Form 1075 or Form 2055 on foreclosures only, appraiser must document efforts to gain access to properties.

3. Provide color photographs of the subject property. This will include front, rear/side views as well as street scene.

Front view color photographs of comparable sales used must also be included. MLS photos may be used only to supplement appraiser’s photos.

4. A map indicating the location of the subject and comparable properties.

5. Sketch showing dimensions of subject.

6. Actual age of property must be determined.

7. Appraisal must conform with USPAP Standards 1 and 2.

All appraisals are subject to Agency review for quality review and valuation confirmation. Any deviation from these standards may require contractor to revisit property at no additional charge.

Appraisals may be ordered through other contractor relationships established as Foreclosure/Legal/Management and Marketing/Management and Brokerage.

C.5.5 Status Report The contractor shall provide a monthly case status report by the 10th calendar day after completion of the month. Reports must include: Order number, Name of borrower, loan number, property address, date of order, status of the account and date appraisal completion is expected.

C.6 STANDARDS

C.6.1 Statutes, Laws and Regulations. All legal, enforcement and collection actions on the part of the contractor must be in compliance and consistent with all Federal, State and local statutes, regulations and ethical standards which apply to the liquidation of real estate collateral and collection of debt. These include but are not limited to:

• Privacy Act of 1974, as amended (5 U.S.C. 552a)

• The Fair Debt Collection Practices Act (15 U.S.C. 1692 st seq.)

• The Debt Collection Act of 1982, as amended (P.L. 97-365)

• The American Bar Association Model Rules and Professional Responsibility (1983)

These statutes and standards, as well as other applicable Federal, State and local laws and regulations pertaining to the Government as a whole are incorporated by reference in this Performance Work Statement and are considered as a part of the contract. Violation of applicable law, regulation or ethical standards shall be cause for termination of the contract for default.

C.6.2 Clarification of Statutes, Regulation These statutes and standards, as well as other applicable Federal and State laws and regulations pertaining to the Government as a whole are incorporated by reference into this agreement and are considered a part of any resulting order. Violation of applicable law, regulation or ethical standards shall be cause for termination of this agreement or orders issued in accordance with this agreement.

C.6.3 USDA Role Rural Development will provide, upon request, any regulation and discussion of the same necessary to execute the duties under this agreement. FmHA/Rural Development Instructions/Regulations are available for review, on request, at the Rural Development Area Office nearest the contractor’s office and online at http://www.rurdev.usda.gov/RegulationsAndGuidance.html.

C.7 Automated Interfaces

C.7.1. Automated Interfaces – data delivery

1. Automated transfer of appraisal amounts to mortgage servicing platform

2. Automated transfer of appraisal report

3. Automated billing will also be a requirement; electronic file to update system

C.7.2 Servicing System - The Loan Servicing System will reside on an IBM mainframe platform located in Kansas City, Missouri with fail over service in St. Louis, Missouri. The servicing of the loans will occur in the Centralized Servicing Center in St. Louis, Missouri.

This interface shall include USDA’ account number and the identification number that has been established by the Contractor identifying the individual loan. This data will be utilized by USDA to update the data base on the Loan Servicing System that captures any unique identifier(s) used by contractor.

http://www.rurdev.usda.gov/RegulationsAndGuidance.html

Records that fail to update during the processing of this electronic transmission will be reviewed by USDA staff. When it is determined that the update cannot occur, USDA staff will communicate the error to the appropriate default management representative. The Contractor shall correct the error and provide corrected data within ten (10) calendar days of receipt of the information.

C.7.3 Automated Interfaces-On Line System Access

The Contractor shall have an on-line system that provides remote access directly to its data base from Government issued computers and located at USDA offices or remote telework locations. It is anticipated that these computers will be located at the centralized default operations in St. Louis, Missouri.

Access to the on-line system provided by the Contractor shall utilize the AT&T FTS 2000 phone system that is currently used by USDA. Phone lines will be provided by USDA at its expense.

The on-line system (Web portal/site preferable) provided by the Contractor shall allow USDA staff to establish new service orders, update of data records on existing loans under service and cancel service for loans that are either paid off or established incorrectly. The system shall be available during normal business hours defined as 6 a.m. until 6 p.m., Central Standard Time, Monday through Saturday. Entries made by USDA shall be effective on the date that the file either, created, maintained or deleted.

The master file maintained by the Contractor shall be updated on a daily basis however entries made by USDA staff shall not be impacted by the Contractor’s update schedule and shall be the effective date as of the actual date the transaction was completed by the USDA employee, (eg; if USDA changes the loan status from active to inactive prior to the cutoff date, and the master file is not updated until after the cutoff date, the change in status will be considered to have been completed as of the actual date that USDA staff made the change.

The Contractor’s on-line system shall have the capability to distinguish between transactions entered by the Contractor’s staff, and transactions entered by USDA staff. This will enable USDA to determine errors made by Agency staff so that appropriate corrective action can be taken.

The Contractor’s on-line system shall have a security system that prevents unauthorized access. The Contractor shall identify for USDA any entities that provide access to the data base via the on-line system.

The Contractor shall assure that all USDA loans under service are accessible via the on-line system.

The Contractor’s on-line system shall indicate the user identification code of the individual responsible for each transaction on-line. The Contractor’s on-line system shall provide the ability to capture and view the date that transactions occurred, and the ‘before and after’ value of the data fields that have been changed. The Contractor shall furnish USDA with a monthly report that details all on-line activity performed by Agency staff. This report should display the USDA account number, the type of maintenance performed and the date the maintenance occurred. The On Line System shall provide report sort selection criteria such as account number, maintenance type and maintenance date.

The on-line system shall capture the transaction data, including expenses per loan and be available in an established report for costing purposes.

The contractor must interface with two business groups besides the USDA which are legal, Management/Maintenance and Brokerage vendors working for the USDA under separate contracts. The vendors will update systems timely.

Execute with Rural Development an Interconnection Security Agreement (ISA) and/or Memorandum of Understanding (MOU) as defined in the National Institute of Standards and Technology 800-47, Security Guide for Interconnecting Information Technology Systems. Review of the ISA/MOU must be perform annually or whenever a significant change occurs to ensure they are operating properly and are providing appropriate levels of protection. Documentation of the completion of the review is required. Any amendments to the interconnection service agreement will be coordinated through the appropriate approval authorities for each organization.

C.7.4 Documentation

The Contractor shall provide an online link of User documentation that will be necessary for USDA staff to effectively utilize the on-line system. The Contractor shall provide updates automated, as changes occur and shall be delivered to USDA concurrently with deliveries to your client base.

C.7.5 Online Training

The Contractor shall provide on-site training of USDA staff in the operation of the On-Line System. This training shall consist of a minimum of two sessions, and will be held in St. Louis Missouri.

C.7.6 Training

The Contractor shall provide on-site training of USDA personnel of the on-line system.

This includes but is not limited to:

a. Screen navigation

b. Data elements

c. Data updates

d. Establishment of service

e. Cancellation of service

f. Report options

g. Report ordering

h. Access to vendor data

i. General information available on the system

C.7 Management Training

The Contractor shall provide on-site management training of USDA staff related to the processing of default management information provided by the Contractor. This training shall also include the utilization of Contractor forms and any internal contractor operating procedures. The purpose of the training is to provide management with necessary skills and knowledge to process within the default management contract system. This should include but not be limited to:

a. Methods of bill remittance

b. Reports that accompany bill remittance

c. Procedures for remittance balancing

d. Procedures for filing claims, losses due to contract error

e. Requirements for processing electronic transmissions of data

f. Various services

Training shall consist of a maximum number of twenty USDA staff per training session. Each session shall be one day in length. All material required shall be both produced and provided by the Contractor.

C.8.1 Default Remittances-System Interface-Methods

The Contractor shall be responsible for providing bills for all loans that have been identified as under service in one monthly bill prior to the agreed upon cutoff dates.

The Contractor shall provide bill to USDA in one basic format:

1. Automated File (Electronic Transmission)

2. Refunds should be automated to USDA as well as all claim funds.

Invoice that will be paid to the Contractor in an automated format and include a wire covering the amounts owed in conjunction with invoice.

C.8.2 Sub Contractor Bills and Remittances-Contractor Responsibility

The Contractor shall be responsible for processing and rewarding to the sub contractors all remittances. Should the Contractor fail to forward remittances to the subcontractors and the remittances have been processed accurately and in a timely manner by USDA, the Contractor shall be responsible for all penalties and interest due to sub contractors.

C.8.3 Bills/Remittances-Delivery Address

USDA will furnish the Contractor with a mailing address where bills and information are to be delivered. Changes in these addresses shall be made only with the authorization of the Contracting Officer’s Representative.

C.8.4 Invoice -Delivery Schedule

The Contractor shall furnish all invoice information to USDA with sufficient lead time as to allow adequate processing time for Agency staff. The following schedule shall be adopted and adhered to by the Contractor as the shortest time frame for the delivery of bills to USDA:

30 days from date service is performed

C.8.5 Liability for Late Payment – All liability resides with contractor for late payment to subcontractors.

C.8.6 Transfer To Follow-On Contract

After expiration of this contract, if the Contractor on the present contract is not selected for a follow-on contract, the Contractor shall cooperate in the conversion of the files to the Contractor for the follow-on contract.

This shall include, but not be limited to, the following:

• Attend periodic status meetings

• Furnish written responses to outstanding issues or problems

• Furnish support staff to assist in the operation of software

• Provide electronic transmission of all data related to USDA loans in a format selected by USDA

• Resolve and correct all identified issues surrounding loans under service

• Provide interpretation of both system and loan level documentation

Provide technical assistance during the transfer of service that includes, but may not be limited to, the following:

• Clarification of appraisal service

• System overview to users, operators, or management personnel

• Providing instructions for developing the test files, tables, and batch Job Control Language (JCL) that parallel a snapshot of USDA production and providing supplementary documentation as needed

• Provide transmissions of data from the incumbent’s data base to the follow-on Contractor’s data base

C.8.7 Contingency Plan

• Business resumption/contingency plan in the event of a system failure.