Attachment A Performance Work Statement.pdf

ATTACHMENT A

PERFORMANCE WORK STATEMENT

Title: Post Closing Portfolio Management (PCPM) Support

I. Background.

The U.S. Department of Housing and Urban Development (HUD), Office of Affordable Housing Preservation (OAHP) has a need to provide Post Closing Portfolio Management (PCPM) and Surplus Cash Analysis (SCA) for the support HUD-held debt generated by several HUD programs. HUD requires support for HUD’s Project Managers (PMs) nationwide in analyzing certain unique loans that have been and will be created and held by HUD under:

1) The M2M Program

2) An earlier pilot program known as the Portfolio Re-Engineering

Demonstration Program (or “Demo Program”)

3) The Partial Payment of Claim (PPC) Program.

The M2M Program was established in the Multifamily Assisted Housing Reform and Affordability Act (MAHRA) was created to restructure the FHA-insured or HUD-held mortgage loans on a large number of privately owned properties with above-market rents and expiring project-based Section 8 Housing Assistance Payment (HAP) Contracts. The PPC Program is conducted pursuant to authority found at the Code of Federal Regulations (CFR), Title 24, and Section 207.258(b).

II. M2M Program Brief Overview.

When the expiring Housing Assistance Payment (HAP) Contracts for a property are determined to be above the market rate, the property owner is required to participate in the Mark-to-Market Restructuring Program in order to receive a new project-based HAP Contract. Generally, as a result of participation in the M2M Program or the Demo Program, the above market rate subsidized rents are reduced to market rate and the existing property debt is restructured to a size supportable by the cash flow generated at the market rate rent level. The expected cash flow is determined by a re-underwriting, which analyzes and evaluates the property’s capital needs and operating expenses to ensure that the property can be financially viable and remain in good physical condition based on projected net income at market rents.

A partial payment of claim against the Federal Housing Administration (FHA) Insurance Fund is made for any difference between the total sources at closing (the new first mortgage proceeds, together with any required Owner funds and eligible property accounts) and total uses (payoff of the existing FHA-insured mortgage and funding for all eligible uses, including rehabilitation escrows, initial deposit to replacement reserves, approved closing costs, etc.) In the M2M Restructuring process, the partial claim amount is not forgiven, but is captured in a new mortgage note or notes payable to HUD and secured in a subordinate lien position to any new first-mortgage financing on the property. A payment may be due annually on these new notes as defined in the legal documents arising from the restructuring transaction. The payment for each of these HUD-held notes (if required) is calculated at a specific fixed percentage of the property’s annual surplus cash, and is calculated and shown in the year-end financial statements for a property.

HUD is restructuring another group of loans, known as PPC Loans, using a process similar to a M2M restructuring. However, they are not part of the M2M Program and are governed by different rules and requirements under the Code of Federal Regulations (CFR), Title 24, Section 207.258(b). In a PPC restructuring, the existing property debt is restructured to an amount the property can sustain with the cash flow after operating expenses and contributions to the reserve for replacements account. In addition, capital needs and operating expenses are analyzed and are underwritten to ensure that the property is financially and physically sound. In the PPC Program there is no programmatic requirement to reduce the rents but the property’s physical requirements and financial viability are considered when determining the amount of the Partial Payment of Claim (PPC). Once the PPC amount is determined and the property Owner agrees to repay that amount to HUD by executing a new HUD-held note. The M2M rules for determining the amount of annual payment due is applied unless unique circumstances require a different treatment.

III. Post-Closing Portfolio Management Activities.

The primary task under this contract is a review and analysis of each property’s Annual Financial Statement (AFS) to verify the surplus cash calculation, and to confirm that HUD received the correct payment.

1. The M2M Portfolio: The M2M portfolio consists of approximately two thousand five hundred (2,500) loans associated with approximately one thousand five hundred (1,500) properties. An analysis is performed each year for each property. Additional properties are added at a rate of approximately twenty (20) to thirty (30) per year.

Certain events, including but not limited to, loan payoffs and note sales, may reduce the volume of this piece of the PCPM portfolio servicing.

2. The Demo Program Portfolio: Prior to commencement of the M2M Loan Program, a demonstration program known as the Portfolio Re-Engineering Demonstration Program

(Demo Program) was administered, under which the debt on approximately one hundred thirty (130) properties was restructured. While the loan documents and the debt restructurings of the demonstration loans have many features in common with the permanent M2M Program, there are also many unique features of these loans that require individual analyses. The size of this portfolio will not increase and no additional assets can or will be added to this group.

3. The PPC Portfolio: As described in the overview above, these properties are not a part of the M2M Program, but they have features in common since there are one or more HUD-held mortgages that require calculation of annual payments to HUD. As with M2M Loans, annual payments to repay these HUD-held mortgages is made by the property using a portion of the property’s annual surplus cash as calculated in the year-end financial statements and based on the outcome of the property’s operations. Currently the PPC portfolio contains approximately forty (40) loans. HUD expects this number to grow at a rate of approximately twenty-five (25) loans per year.

IV. Activities.

This Performance Work Statement covers the three (3) portfolios described above. For each property each year, the Owner is responsible for calculating the proper surplus cash amount and remitting the correct surplus cash payment to HUD. The role of the Contractor is to conduct a Surplus Cash Analysis to ensure that each Owner correctly calculated the property’s surplus cash position and payment due to HUD, and that HUD received the correct surplus cash payment. Other tasks that may be assigned under this contract may include providing expert accounting, servicing and/or policy development advice to HUD to support both global and individual case management decisions as well as conducting training sessions for stakeholders and/or HUD staff on surplus cash analysis. Formal written documentation may be requested to support such activities.

V. Meetings.

HUD requires in-depth knowledge of the Contractor’s progress and results throughout the contract term. In addition to routine telephone and email contact with Government Technical Manager (GTM) or others, the Contractor will provide regular briefings at HUD Headquarters in Washington, D.C., or by virtual meeting technology for the purposes of:

(Initially) Establishing a mutual understanding of the contract objectives and establishing a set of goals, priorities and deadlines.

Reviewing accomplishments and progress since prior meeting, re-setting goals, priorities and deadlines.

Exploring property-specific questions or barriers to completion of surplus cash analysis assignments.

Addressing barriers to the Contractor progress with respect to the overall portfolio.

The Contractor may be required to make presentations to HUD at these meetings, as directed by the Government Technical Representative (GTR)/GTM.

Participants in these meetings shall include the Contractor staff, the GTR/GTM, and other HUD employees from time to time.

The first meeting shall be held within 15 days after the contract award.

Subsequent meetings will generally be held on the second week of each month throughout the contract period on a schedule to be determined by the GTR/GTM, in coordination with the Contractor.

VI. Program-Specific Information.

The Contractor shall work with a very refined protocol. The Contractor shall refer to the M2M Program and the PPC Program as described in the following documents attached to the Performance Work Statement.

Attachment A - Description of the Mark-to-Market Program and PPC Program Attachment B - Timeline of Activities and Deliverables for this contract Attachment C - Description of the Post-Closing Portfolio Management (PCPM)

Database - the primary tool used in performing the requirements of this contract

Attachment D - Sample Reports/outputs – Sample Reports showing the types of data the Contractor will likely be expected to generate from the PCPM database; The GTR/GTM may generate reports from the Dashboard interface

Attachment E - Glossary of Terms and Acronyms – providing the potential offerors with the vocabulary specific to the Post-Closing Portfolio Management process.

VII. Objectives.

The Contractor’s objective is to review and analyze the audited Annual Financial Statement (AFS) submitted by each property subject to this contract, and provide for each a written Surplus Cash Analysis (SCA) to the PMs and to OAHP.

The Contractor review shall focus on whether the financial statement includes the correct calculation of the surplus cash payment due to HUD based on the legal documentation for each transaction and the policy requirements for these programs.

The results of the Contractors’ review shall either confirm the property Owner’s correct calculations of the surplus cash payment amount due or reveal that the Owner’s calculation is incorrect and that an adjustment to the payment due amount is required.

Information obtained through this review will permit the Contractor to make recommendations to HUD’s PMs ensuring that the HUD receives the correct payments under the loan terms for each identified property in the M2M, Demo and PPC Programs.

The Contractor shall perform a review annually for each eligible property unless otherwise directed by the GTR/GTM. The direction to proceed with an annual review for any particular property is a decision that is by HUD in its sole discretion and any change will be communicated to the Contractor.

The Contractor shall work with the GTR/GTM to further develop and/or modify the procedures for reviewing the financial statements. Additionally, the Contractor shall make recommendations to OAHP/HUD regarding the enforcement of HUD’s rights under these programs.

VIII. Scope.

The Contractor shall review the AFS and prepare a SCA for approximately one thousand five hundred (1,500) restructured properties. HUD will provide the actual list of properties for which SCAs will be prepared and may add or remove properties from that list at its sole discretion.

Historical evidence shows that most Owners of the properties serviced pursuant to this contract submit their AFS in compliance with HUD’s requirements, accurately calculate surplus cash, and remit the appropriate payment timely. The Contractor’s annual review of the cash flow calculations contributes to this level of compliance. HUD has found that incorrect calculations can occur for reasons as varied as a simple mathematical error, unfamiliarity with the applicable HUD rules and policies, or misinterpretation of those rules. In addition to correcting simple errors, collected data from such annual reviews informs HUD of the need for specific guidance across the portfolio or for consideration of policy adjustments. The depth of review for a particular property in a specific year may vary from a limited review to a very detailed review of the AFS, based on the Contractor’s initial assessment of the AFS, the history of the property and HUD’s directions to the Contractor.

IX. Management Work Plan .

The Contractor shall submit a Management Work Plan with their proposal. The Management Work Plan will provide specific details indicating how each aspect of the statement of work is to be accomplished. The Management Work Plan shall include information on how the contract is to be organized, staffed, and managed. The Contractor shall provide information on the organization structure, methodology for managing the tasks, performance measures that will be used to monitor performance, any management tools to be used, internal review measures to ensure that quality products are delivered, methods to mitigate risk, and methods for communication. The Management Work Plan shall include the start dates, completion dates and any other major milestones for each task. The Plan shall also include a comprehensive narrative of the overall expected flow of work, tracking the performance and timeliness of the deliverables for all tasks within the acceptable time frames specified in the schedule. Deviations from the deliverable schedule must be approved in advance by the GTM.

The GTR/GTM will provide comments on the Management Work Plan within fifteen

(15) business days of the kick-off meeting. The Contractor shall submit the revised Management Work Plan to the GTR/GTM within ten (10) business days of receipt of the GTR/GTM’s comments.

The Contractor shall provide an updated Management Work Plan as directed by the GTR/GTM from time to time to reflect changes in and/or the progress of the tasks performed under the contract.

X. Tasks.

The Contractor shall perform the following steps for completing the review of M2M, DEMO and PPC annual financial statements (unless otherwise directed by the

GTR/GTM):

1. Surplus Cash Analysis (PSCA) – Steps

Task * Description Due Date

1.1 Download AFS Data Upon receipt of

the AFS

1.2 Perform a comparison of data to M2M, DEMO and/or

PPC underwriting baselines Within 30 days of AFS download

1.3 Analysis of AFS entries and variances from HUD’s

established baseline, including action recommendations for the HUD PM.

Within 60 days of AFS download

1.4 Post PSCA for HUD approval via online systems

(Dashboard Interface)

Within 90 days of AFS download

1.5 Acquire HUD Approval Within 120

days of AFS download

2. Final Surplus Cash Analysis (FSCA) – Steps

Task * Description Complete Date

2.1 Upon receiving HUD Approval, the Contractor shall work

with key parties to obtain the necessary information to reconcile any deviations from M2M or PPC baseline.

Within 60 days of

PSCA

approval

2.2 The Contractor shall reconcile and resolve property’s

surplus cash calculation and confirm proper calculation and payment or recommend adjustment of payment.

Within 120 days of

PSCA

approval

2.3 The Contractor shall post FSCA for HUD Approval Within 150 days of

PSCA

approval

2.4 The Contractor shall acquire FSCA Approval by the

GTR/GTM. The Contractor shall send a copy of FSCA to the Owner and send the Data to the Notes Servicer

Within 30 days of

FSCA

approval

*NOTE *Note: Maximum Total Processing Time from AFS download if there are no delays.

310 days

3. Support and Service

Task Description

3.1 Provide "Help Desk " Support Services Ongoing

3.2 Attend Meetings and Provide Reporting Ongoing

3.3 Accept and Complete Special Assignments As Directed

3.4 Perform SCA Re-reviews As Directed

4. Maintenance and Updates

Task Description

4.1 Provide Systems Maintenance and Updates Ongoing

4.2 Database Maintenance and Data Input Ongoing

4.3 Provide Updates and Design and Install Improvements

to the PCPM Database

As Directed

NOTE: Task numbers designated in the boxes above are associated with the detailed descriptions that appear in XI. New Property Assignments below.

XI. New Property Assignments.

At the start of this contract, the Contractor will treat each property assignment as a new assignment for the first fiscal year of review. Subsequently, new assignments are made only when there are eligible loans that have been created in new restructuring transactions through the M2M and PPC Programs. The Contractor shall provide the GTR/GTM with an acknowledgement of delivery for each property assigned by the GTR/GTM within fifteen (15) days of receipt of the assignment. The Contractor shall provide the following services:

Documents from the Restructuring Transaction Closing Binder. The legal loan documents needed for performing the required SCAs will be delivered to the Contractor by the GTR/GTM either as a paper Docket or in electronic PDF form. These loan documents are the official record of documentation relevant to each restructured property. The Contractor must maintain continuous access to these files for purposes of the SCA review.

Notice Requirement. The Contractor shall review OAHP’s file delivery upon asset assignment to ensure that the necessary documents for each property are included and shall alert the GTR/GTM to any deficiencies or missing documents within fifteen (15) days. If HUD cannot promptly provide the necessary documentation, the Contractor may request a postponement of normal processing on the assigned property until full documentation is available.

The parties to the contract acknowledge that, with respect to Demonstration Loans, significant documents may be missing, and that unique methodologies, such as historical performance, were used to establish baselines when documentation was absent. There will be no new originations or assignments of Demonstration Loans; therefore, this notice requirement does not apply to the Demonstration Loans. GTR/GTM shall provide the necessary information and criteria for analysis of these properties. There will be new originations and assignments for PPC Loans and unless otherwise instructed the PCPM process for PPCs will generally mirror M2M processing.

The Contractor shall review each of the following documents, as applicable, for each newly assigned property:

M2M Documents Mortgage Restructuring Note and Mortgage/Deed of Trust Contingent Repayment Note and Mortgage/Deed of Trust M2M Assumption and Modification to Existing Note, if applicable Riders to Mortgage Restructuring Note Mortgage/Deed of Trust and

Contingent Payment Note Mortgage/Deed of Trust Recapture Agreement (if any) Regulatory Agreement and M2M Rider to the Regulatory Agreement Restructuring Commitment M2M Use Agreement Subordination Agreement, if any Green Retrofit

Program or Green Initiative Owner commitment documentation

PPC Documents Modification of First Mortgage/Deed of Trust Note and First

Mortgage/Deed of Trust HUD Use Agreement Second Mortgage/Deed of Trust Note (for PPCs or Restructurings) Second Mortgage/Deed of Trust (for PPCs or Restructurings) Amendment to Regulatory Agreement Second Regulatory Agreement for PPC mortgage

1.1 Download of Annual Financial Statement (AFS) Data.

Receipt of Property’s AFS. A property’s AFS is due to REAC in electronic form ninety (90) days after the end of the property’s fiscal year. Most of the properties in the portfolio have a fiscal year-end of December 31st.

When appropriate, on a monthly basis HUD shall provide updated financial information to the Contractor. The financial information is compiled from the property’s annual AFS. This report provides a wide range of financial data that the Contractor will use to analyze each property’s performance and the determination of the amount of the surplus cash payment owed to HUD. The Contractor shall examine the data within ten (10) days after receipt of the REAC/FASS information and notify the GTR/GTM of those properties for which an electronic statement is due but was not received.

1.2 Perform a Comparison of Data to M2M, DEMO and/or PPC Underwriting Baselines.

Review of Surplus Cash Calculation and Payment Amount. The Contractor shall review the Owner’s AFS to confirm or, in the event the Contractor disagrees with the Owner’s calculations, to independently recalculate the Owner’s determination of total Surplus Cash. This same service will be provided by the Contractor with regard to any partial year financial statements obtained unless otherwise directed by the

GTR/GTM.

Annual Payment. When the surplus cash calculation in the Audited AFS shows an annual loan payment is due, the HUD-held note requires the Owner to make the loan payment within ten (10) days after the due date for filing the AFS. The Contractor shall report the data showing the Owner’s AFS conclusion of the amount of surplus cash owed to HUD. In the SCA, the Contractor will analyze and provide data to the HUD PM showing amounts paid by the Owner toward the HUD-held debt. The Contractor will include the conclusions of their analysis as to the accuracy of the Owner’s calculations and/or sufficiency of payments received.

If the Owner defaults on any required payments or fails to make payment by the payment due date, the Contractor shall promptly report the details of the default to OAHP and the HUD Project Manager so that the GTR/GTM and the HUD PM can make an informed decision as to whether to accelerate the HUD-held or impose remedies in accordance with its terms and/or HUD policy.

1.3 Analysis of AFS Entries and Variances from HUD’s Established Baseline, including Action Recommendations for the HUD PM.

Variance Analysis.

The Contractor shall review the property’s audited financial statements for conformance with the baseline derived from the original M2M, DEMO or PPC underwriting as adjusted from year to year. Variances must be identified, and variances that deviate from established thresholds must be analyzed and reported in writing via the PSCA.

Review Guidance and Requirements.

This review shall be designed to identify any failure by the Owner to bill and collect the appropriate level of income and to identify any expenses that may materially deviate from the level that is reasonable and necessary for the proper operation of the property.

The Contractor review shall include but is not limited to, the following income/expense categories:

Operating Income Operating Expenses Real Estate Taxes Property Insurance Utilities Repairs and Maintenance Management Fees Payroll and Benefits General and Administration Security Mortgage Debt Service Escrow(s) Reserve Accounts

All reportable variances are subject to established variance thresholds that will be provided to the Contractor by the GTR/GTM on an annual basis. The Contractor shall pay particular attention to the reasonableness of any contracts where there is an identity of interest between the Owner/Management Company and the service provider.

In addition, the Contractor, as part of the PSCA, will also verify and report on the calculation of and eligibility to collect a Capital Recovery Payment (CRP) and/or Incentive Performance Fee (IPF). Additionally, if the property is part of HUD’s Green Retrofit Program (GRP) or Green Initiative Program (GI), PCPM will work with OAHP/HUD to determine whether the property has met the requirements to receive an IPF (or any additional Owner distributions) and whether the Owner is in compliance with GRP or GI programmatic requirements

When material variances (i.e. variances that deviate from OAHP’s established thresholds) is identified between the first year baseline or subsequent year baseline information and the actual operating performance in any line item of the Owner’s financial statement for the property the following activities, at a minimum, are to be included in the Contractor’s analysis:

HUD Project Management Fee - Verification that the current project management fee amount is in accordance with the M2M restructuring agreement.

Identity of Interest Contracts - Verification that such contracts are on terms at least as favorable as those obtainable from qualified, arms length Contractors for similar work, and that the quality of goods/services provided under such contracts is acceptable.

Staffing Plan - Consideration of the number and salaries/payroll cost of front line staff proposed to be charged to the property and the percentage of each staff member’s time proposed to be allocated to the property relative to the levels established in the underwriting projections.

Security/Protection - Where provided for in the underwriting, consideration of current security/protection expenses in that substantially deviate from underwriting projections

1.4 Post PSCA for HUD PM approval via online systems (Dashboard).

The Contractor shall identify any other anomalies or departures from the established underwriting and make recommendations to HUD in the PSCA. The Contractor will post the PSCA using the PCPM database web interface known as the Dashboard.

1.5 Acquire HUD PM Approval of PSCA.

The HUD PM has thirty (30) days to review the PSCA and make a determination on approval. PSCA approval means that the HUD PM gives the Contractor permission to conduct additional research (as needed) in order to determine the correct surplus cash payment owed to HUD. This additional research may require input from other parties. Only after the PSCA is approved will the Contractor contact the Owner and other necessary key parties and will begin Task 2. See attachment D for sample

PSCA.

2.1 Upon receiving HUD approval, the Contractor shall work with key parties to obtain necessary information to understand AFS line items with deviations from the established variance thresholds from M2M, DEMO or PPC underwriting.

In order to collect the information to perform its review and reconciliation, the Contractor may need to contact the key parties below to provide notice and/or request information:

Property Manager Property Staff Owner’s Accountant Property Management Company Loan Servicer

HUD PM

HUD Real Estate Assessment Center (REAC)

HUD Departmental Enforcement Center (DEC) HUD Office of the General Counsel (OGC) HUD Note Servicing OAHP Rehab Escrow Administrator OAHP Offices of Portfolio Management and Preservation

At a minimum, the Contractor must contact the Owner and the Owner’s designee with requests for information by return receipt mail at least twice within forty-five (45) days of PSCA approval by HUD or until all necessary information is received from the Owner or other key parties. The Contractor shall communicate and follow-up with key parties as necessary via email and telephone until necessary information is received from the Owner or other key parties. The Contractor shall document all communications and maintain dated copies of all correspondence in accordance to HUD format.

Some PSCAs may not require additional information and the Contractor may be able to complete the FSCA with the information from the AFS and prior SCAs. In these cases, at the direction of the GTR/GTM, the Owner and/or other key parties may not have to be contacted.

2.2 – 2.3 Reconciliation and FSCA.

Based on the information collected from key parties, the Contractor reconciles and resolves property’s surplus cash calculation and confirms proper calculation and payment or recommends adjustment of payment amount due, completing the FSCA.

Once the Contractor has completed the FSCA, it shall post the FSCA for final approval by the HUD PM. (See attachment D for sample FSCA)

2.4 Approval of FSCA.

The Contractor shall acquire FSCA approval from the HUD PM. Once the FSCA is approved by the HUD PM or other HUD authorized personnel, the Contractor shall send a final copy (with cover letter) to the Owner and electronically submit all necessary information to the Notes Servicer. The Owner copy shall not include the documentation of any internal discussions between HUD staff and the Contractor regarding the outcome of the FSCA.

3.1 Help Desk Support Services.

The Contractor shall provide Help Desk support and track issues raised by the users.

The Help Desk shall provide support for the Contractor's activities including addressing questions from HUD PM, the Owner and other key parties regarding individual PSCA/FSCAs, and providing technical support and guidance for on-line systems such as the Dashboard.

The users may submit inquiries via email, faxes and telephone. The Help Desk must operate Monday through Friday from 9:30 am – 4:30 pm EST excluding Federal holidays and executive orders. The Help Desk Staff shall answer any questions concerning processing status of any SCA, any questions regarding established HUD policy for SCAs, troubleshoot and help resolve any MIS issues related to the database and its web-interface.

The Help Desk is service available to HUD personnel, the Owners and the Owners’ designees. The Contractor shall respond to all forms of inquiry received during business hours within one business day. All inquiries received after hours, on holidays or weekends shall be responded to on the next business day.

In the event that the Help Desk receives an inquiry that is outside of HUD policy or wants to verify HUD policy, the Contractor may contact the GTR/GTM for clarification and direction.

The Contractor shall maintain a log of the Help Desk inquiries with dates and resolutions and post it to the database. The Contractor shall also document all issues reported through the Help Desk that cannot be resolved and forward them to the GTR/GTM no later than the next business day.

3.2 Meeting and Reporting.

The Contactor shall participate in monthly meetings to update GTR/GTM on the status of the Contractor’s progress. These meetings may be face-to-face or by teleconference or any other virtual meeting technology. The Contractor shall provide the necessary reports, as directed by the GTR/GTM and in format acceptable by OAHP/HUD, forty eight (48) hours prior to the monthly meeting.

The Contractor shall provide regular updates to the GTR/GTM regarding the status of the PSCAs and FSCAs awaiting PM approval and of the Owner responses to requests for information through reporting and via participation in performance review meetings. Reports shall be in form and content acceptable to the GTR/GTM and shall be available via on-line access to the Dashboard interface for the database.

Frequency and content of any additional reporting is determined jointly by agreement between the Contractor and GTR/GTM.

The Contractor may be required to provide written input regarding policy discussion topics and/or the possible ramifications of policy decisions for the GTR/GTM as well as participate in conference calls, meetings, conferences and/or training to discuss issues affecting either individual properties or the portfolio as a whole.

The Contractor shall submit a monthly “Summary Letter” along with a specified series of Asset Management Reports (reports are upon request by GTR/GTM). This letter will be created in portable document format (pdf) form and delivered by email to the GTR, GTM and the Director of Portfolio Management. The “Summary

Letter” shall highlight the significant events for the current reporting period (month) and may include:

a. Status of PSCAs and FSCAs in progress and completed.

b. Principal and Interest received during the reporting period.

c. Number, face amount and estimated value of additional loans added during the reporting period.

d. Number, unpaid principal balance, accrued interest, and estimated value of loans as of the end of the reporting period.

e. Any emerging trends affecting the properties or loans.

f. Comments on other factors affecting the performance of the properties or loans.

As directed by the GTR/GTM, the Summary Letter may require the attachment of the following Asset Management Reports:

M2M Loan Mortgage Status Report M2M Surplus Cash Report; and M2M Monthly Portfolio Summary Report PPC Loan Mortgage Status Report PPC Surplus Cash Report) PPC Monthly Portfolio Summary Report

The Contractor shall insure that its reporting system within the database has the ability to generate and send reports by any unique data field within the database. The database, as maintained and implemented by the Contractor, will include the ability to generate graphs in form and content defined by HUD, reflecting key performance data by Loan, Property, Loan Group and total for all Properties. Typically this letter should be received by HUD no later than the twentieth of each month (required within thirty days) to be used as a planning tool for the subsequent month.

3.3 Special Assignments.

At the direction of the GTR/GTM, the Contractor may be tasked with special assignments that require coordination with the HUD PM and/ or other key parties on a case-by-case basis. Other special assignments may include providing training for HUD PMs in support of the contract, additional negotiations with the Owner or management agent, additional forensic accounting analysis and other actions as requested by the

GTR/GTM.

3.4 Surplus Cash Analysis Re-reviews.

The Owners may dispute the conclusions of a finalized surplus cash analysis (FSCA) raising an issue or issues that HUD may wish to revisit. At the direction of the GTR/GTM, the Contractor shall review the Owner complaint and examine any additional documentation provided in support of its position. If it is determined that the Owner’s position has merit, the Contractor shall revise the FSCA and the GTR/GTM will determine if additional compensation will be paid to the Contractor on a case by case basis. Some revisions may affect prior or subsequent FSCAs and these will also required revision.

4.1 Provide Systems Maintenance and Updates.

The Contractor shall maintain the system software, develop and install updates as necessary to allow for effective use and continuous operation. This includes maintaining an effective interface with HUD when HUD systems are upgraded or changed. The Contractor shall maintain the PCPM Database including all data for the properties. GTR/GTM and OAHP/HUD staff shall have access to the database and records via the Dashboard interface.

4.2 Database Maintenance and Data Input.

The Post-Closing Portfolio Management (PCPM) Database has been developed to enable efficient and consistent review of property performance and adherence to the terms of the M2M restructuring. Because of the unique and specific terms of the M2M restructuring process, the PCPM database was designed to assemble all relevant property data and M2M underwriting terms/data in one comprehensive and specific database. The PCPM database must continue to evolve to incorporate the most current policies and procedures of the OAHP M2M Post-Closing Portfolio Management process and those of the other PCPM portfolios. The software development is the responsibility of the PCPM Contractor with the input, guidance and expertise of both the OAHP staff and the PCPM Contractor. As the policies and procedures evolve, change or are enhanced from time to time, the PCPM Contractor will be required to continue the updating of the PCPM database to incorporate these evolving business rules.

The PCPM Database applications enable key PCPM tasks such as:

Annual Surplus Cash Analysis (SCA) processing including variance analysis, workflow tracking and management Production of the official SCA documents Creation of the monthly billing data file for use by the OAHP Loan

Servicer Ability to track and provide status of OAHP requests for special assignments and requests for re-reviews as well as conclusions of these requests and any subsequent approvals by OAHP.

SCA status tracking based on oversight responsibility, region, and office

Ad-hoc reporting SCA process tracking and invoicing User access management

Data Input Sources.

The PCPM Database contains data imported from several different sources:

REAC/FASS submissions; REMS data regarding property status including PM comments; M2M baseline data imported from underwriting models and brought forward each fiscal year with the Operating Cost Adjustment Factor (OCAF) applied; and data regarding all loans associated with each property and any payments or accruals that may occur on any M2M loans. This imported data is delivered to the Contractor each month. The PCPM Database contains software utilities that automate some of the steps to import these data files. Other importing steps require an understanding of the database structures and the incoming data.

Below is a brief summary of the approximate quantities of data records maintained in the PCPM Database:

1,720 Property records 4,400 Loan records 13,000 FASS/REAC submission records 250,000 Monthly payment records 364,000 HUD Comment records

In addition to raw record counts, this data contains a significant number of fields that are not fixed-length fields (e.g. varchar or memo fields) that are not stored as efficiently as fixed-length data fields. The Contractor will be required to address needs associated with this structure.

Data Export Requirements. The PCPM database provides critical data to the HUD Loan Servicer, which uses the data to invoice property Owners for loan obligations. Data updates are coordinated between separate systems to insure that all parties are using the same monthly data release, and data output formats must meet the input specs for the receiving system. The PCPM Contractor works with OAHP and staff from the loan servicer to reconcile the data monthly if data anomalies occur.

Database Security. The PCPM Database and related applications must be maintained in a secure environment. All user access must be tightly controlled, allowing only properly credentialed users to view and change data. The PCPM Contractor is responsible for user management, including creating login credentials and assigning system access rights for different user categories.

Database and Application Maintenance. The on-going operation and maintenance of the PCPM database includes: database vendor recommended practices for optimal operation of the database wherever possible, the regular backup of the database and proper storage of the backup media, appropriate security implementation and monitoring, and structural changes and modifications as needed.

The PCPM Contractor is responsible for the development and management of the web applications that provide the front-end interface (Dashboard) for the PCPM database. This includes development and testing, maintenance, hosting services, and data compatibility between the online applications and the Microsoft Access front-end application.

Currently, the PCPM Database utilizes Microsoft SQL Server 2008 R2 as the database server. The user interfaces include a Microsoft Access-based client and two web-based applications.

Administration, maintenance and on-going development of the PCPM Database requires experience and proficiency with the following:

Microsoft SQL Server 2008 R2 Microsoft Windows Server 2003 Microsoft Access including use of Visual Basic for Applications

(VBA)

Visual Studio 2010

4.3 Provide Updates and Design and Install Improvements to the PCPM Database

The PCPM Contractor also makes recommendations to OAHP regarding the PCPM database and any advisable changes or modifications as well as responds to requests from OAHP for changes or modifications to the PCPM database.

508 Standards. The purpose of this part is to implement Section 508 of the Rehabilitation Act of 1973, as amended (29 U.S.C. 794d). Section 508 requires that when Federal agencies develop, procure, maintain, or use electronic and information technology, Federal employees with disabilities have access to and use of information and data that is comparable to the access and use by Federal employees who are not individuals with disabilities, unless an undue burden would be imposed on the agency.

Section 508 also requires that individuals with disabilities, who are members of the public seeking information or services from a Federal Agency, have access to and use of information and data that is comparable to that provided to the public who are not individuals with disabilities, unless an undue burden would be imposed on the agency.

http://www.section508.gov/index.cfm?fuseAction=stdsdoc

XII. Deliverables/Reporting Requirements.

A. Preliminary SCA (PSCA) The Contractor shall deliver, within ninety (90) days of receiving AFS data from HUD, a preliminary SCA (PSCA) for each property in the assigned portfolio to the appropriate HUD PM via the Dashboard for approval.

B. Final SCA (FSCA) Upon acquiring HUD PM Approval of PSCA, the Contractor shall deliver, within one hundred fifty (150) days of PSCA approval, a Final SCA (FSCA) for http://www.section508.gov/index.cfm?fuseAction=stdsdoc each property in the assigned portfolio to the appropriate HUD PM via the PCPM Dashboard for approval.

C. FSCA (hard copy) Upon acquiring HUD PM Approval of the FSCA, the Contractor shall deliver a hard copy of the FSCA (Owner version) to the Owner of record and as specified by the GTR. Necessary data to the Notes Servicer within 30 days of FSCA approval by HUD PM

D. Correspondence Records The Contractor shall maintain and be able to provide HUD with documentation for all correspondence sent to an Owner of record and/or other key parties as well as of the approved PSCA and FSCA for each property. These documents are to be available online and on demand via the Dashboard. (See Attachment D for sample FSCA/PSCA documents).

XIII. Records Access.

The Contractor shall maintain the database and project records with respect to the Properties. OAHP/HUD shall have access to the database and records via the Dashboard interface.

A. Data Receipt and Import - In addition to administering and maintaining the database, the Contractor shall provide monthly import of data per the requirements determined by the GTR/GTM. Currently this data includes the following:

1. REAC/FASS Submission Data - On a monthly basis, the Contractor will receive data that represents the Owner’s AFS submission. This data is produced by HUD and delivered to the Contractor in accordance with mutually agreed upon data file specifications. The Contractor shall demonstrate cooperation in reaching consensus on the method of delivery of the data file. If HUD unilaterally changes the data file specifications, the Contractor shall promptly notify the GTR/GTM of the necessary changes or modifications to the database and request approval. This data must be imported into the database for use in performing the Contractor’s analysis of property performance and correct computation of the PCPM portfolio note payments. Upon receipt and import of each submission record, the corresponding baseline data (see item 4 below) record elements must be increased per the appropriate Operating Cost Adjustment Factor (OCAF) and a subsequent matching record created in the database.

2. OAHP Data Updates - On a monthly basis, the Contractor shall receive and import data compiled by OAHP that represents additional information that is required to perform the Contractor’s analysis of property performance and correct computation of the PCPM portfolio note payments. This data includes the HUD PM’s comments entered into internal HUD data systems, PASS score data and other additional elements.

3. Loan Servicer Data - On a monthly basis, on or around the 1st day of the month, the Contractor shall receive data that represents the Loan Servicer’s receipt of payments on PCPM portfolio notes.

4. Baseline Data - Upon assignment of new properties to be added to the portfolio, data is produced by the GTR/GTM and delivered to the Contractor that represents basic property identifiers (REMS ID number, relevant FHA numbers, etc.), responsible property agents (HUD PMs, Ownership representatives, etc.) and other general property information. Included in this initial data set is each property’s underwriting model. This data is imported into the database and elements of it provide the “baseline” information used in each annual property analysis.

5. Data Export for Loan Servicer - On a monthly basis, the Contractor shall produce and transmit to the Loan Servicer a data file, per specifications agreed to by the Contractor and Loan Servicer and approved by HUD, that represents each note in the portfolio and includes the most recent FASS payment amount (labeled as the AFS Amount) and any FSCA amounts (labeled as the SCA Amount). The Contractor shall demonstrate cooperation in reaching a consensus on the method of delivery of the data file. This data file must include a column that indicates conditions/reasons for changes to previous AFS Amounts and SCA Amounts (AFS refilings, TPA’s, etc.) as determined by the GTR/GTM, REAC/FASS and the Contractor. (This data file is used by the Loan Servicer to produce billing statements for loans and any appropriate invoices/refunds). The incumbent Contractor will provide a data dictionary to the new PCPM Contractor.

6. Database Structure - The Contractor shall maintain the database supplied to the Contractor and described above at the start of this contract, and is responsible to ensure the functionality of the database to meet the requirements of this contract. The Contractor is responsible for the operation of the database from the point of execution of this contract until contract expiration. The database shall include the capability to generate all reports discussed throughout this Statement of Work. As directed by the GTR/GTM, the Contractor is required transmit or provide a copy of the database upon request, but no more than four (4) times annually. The Contractor shall take reasonable measures to ensure that the database is protected from computer viruses and otherwise appropriately secured as required by HUD Security procedures while the Contractor maintains it and transmits it to the

GTR/GTM.

XIV. Transition Plan and Transition Out.

The Contractor shall provide a transition plan to the GTR/GTM sixty (60) days prior to the expiration of the contract. The plan shall provide a description of the transition activities to be carried out and a timeline for the implementation and completion of all final transition activities. If applicable, the successor Contractor and out-going Contractor shall work together to implement an orderly, secure and efficient transition of the contract. This includes transitioning operations, PCPM database, HUD furnished property/data if applicable, desk guides, manuals, materials and any data relative to this contract.

The Contractor shall label all processed and unprocessed documents, files and other materials and return them to GTM in a timely manner and, shall submit an electronic copy, in addition to one hard copy of the Transition Plan to the Contracting Officer and one each to the GTR/GTM sixty (60) days before contract expiration.

A smooth and orderly transition between the Contractor and a predecessor or successor Contractor is necessary to ensure minimum disruption to vital Government business. The Contractor shall cooperate fully in the transition.

The Contractor shall adhere to the same professional and ethical standards of conduct required of Government personnel. The Contractor shall NOT:

Discuss with unauthorized persons any information obtained in the performance of work under this contract;

Conduct business not directly related to this contract on Government premises;

Use computer systems and/or other Government facilities for company or personal business other than work related under the contract.

Recruit on Government premises or otherwise act to disrupt official Government business.

XV. Quality Control Plan.

The Contractor shall submit the Quality Control Plan with their proposal and shall consist of the following:

A. The QCP shall describe the methods to be used for identifying and preventing defects in the quality of updates supplied to the Government.

B. The Contractor shall describe the process to correct defects. The Contractor is required to certify in writing that these defects have been corrected.

C. The Contractor shall identify the records that refer to document inspections and corrective actions taken. The records of inspections, including test documents run by the Contractor shall be kept and made available to the CO or the designed representative upon request throughout the contract performance period.

XVI. Modifications and Upgrades to the Structure of the Database.

The contract includes an hourly rate for modifications to the structure of the database if needed from time to time. The Contractor shall provide, as requested by the GTR/GTM, improvements to the interfaces permitting online, web-based access for all OAHP users and the GTR/GTM, and online reporting features permitting OAHP staff to formulate queries and retrieve data in various forms without the necessity of obtaining a report from the Contractor.

XVII. Schedule.

1 Post PSCA to the Dashboard for HUD PM Approval Within 90 Days from download of

AFS

2 Post FSCA to the Dashboard for HUD PM Approval Within 270 days from download of

AFS

Send Final Copy of FSCA sent to the Owner of record and data to Notes servicer

Within 310 days from download of

AFS

3 Provide Help Desk Support Within 60 days of contract initiation

4 Manage Systems Maintenance and Updates Ongoing

XVIII. HUD Furnished Property.

PCPM Database - Dashboard Interface During the course of the contract, the Contractor is required to maintain a back-up of the database. The PCPM Database is the property of HUD and shall be returned at the end of this contract in a format determined by HUD. No duplication of records contained in the database is permitted by the Contractor or any of the Contractor’s affiliates.

Confidentiality of Information The Contractor shall not release any information concerning any of the support to be provided under the terms of this contract. All of the work performed is considered confidential and subject to the Privacy Act. All personnel shall sign a Confidentiality and Non-Disclosure Agreement, agreeing not to disclose any confidential information.

XIX. Travel.

The Contractor is required to interact with HUD staff at Washington DC Headquarters and may be required to attend monthly meetings, events and training as requested by the GTR/GTM.

The Contractor shall not be reimbursed for any local travel incurred during the performance of this contract.

Attachment A…