JA - 86614622Q00004 - Atch Sole Source - Black Knight 13.501(a)(1)(ii) - 07-19-22.pdf

JA No. 22-34

86614622Q00004 – Mortgage Performance Data and Analytic Products Subscription 1

RCS-R-2022-00046

JUSTIFICATION

FOR SOLE SOURCE

IAW FAR 13.501(a)(1)(ii)

86614622Q00004

Mortgage Performance Data and Analytic Products Subscription

1. REQUIRING AGENCY: U.S. Department of Housing and Urban Development

Office of the Chief Procurement Officer

307 W. 7th Street, Suite 1000

Fort Worth, TX 76102

PRISM Requisition Number: RCS-R-2022-00046

2. NATURE/DESCRIPTION OF ACTION BEING APPROVED: HUD will award a sole source contract to Black Knight Financial Services, Inc. in order to provide economic and housing finance (mortgage origination, performance, and delinquency/foreclosure) data subscriptions. This award is issued under Federal Acquisition Regulation (FAR) section

13.501(a)(1)(ii). Due to the unique and highly specialized nature of the requirement, only one source is capable of providing these services at the level of quality required by the government.

Background

The Mortgage Performance Data and Analytic products is not a new requirement. This is an online subscription service that allows the user access to mortgage performance data and analytic products to be used in analysis and research to inform public policy and provide information on trends and loan performance in U.S. mortgage markets. The

Department of Housing and Urban Development, in particular the Office of Policy

Development and Research, have an ongoing need for reliable mortgage origination, performance, delinquency/foreclosure data, and forbearance data in order to evaluate changes in housing and mortgage markets and to gauge the effectiveness of HUD’s responses to changes in those markets. HUD Economists and Policy Analysts are routinely asked to monitor, assess, or characterize the performance of population of outstanding mortgages at the national, state, MSA, or local levels. Thus, access to reliable mortgage performance data at the national, state, MSA, or local levels is necessary for responding to these requests to provide understanding of the state of the nation’s housing and furthering HUD's mission to increase homeownership, support community development and increase access to affordable housing free from discrimination.

3. DESCRIPTION OF SERVICES REQUIRED TO MEET AGENCY’S NEEDS

(INCLUDING ESTIMATED VALUE):

The contract objective is to provide the Department of Housing and Urban Development with access via a cloud hosted analytic platform (in a timely manner) to mortgage performance data, forbearance data and analytic products to be used in analysis and research to inform public policy and provide information on trends and loan performance

86614622Q00004 – Mortgage Performance Data and Analytic Products Subscription 2 in U.S. mortgage markets. Mortgage performance data with coverage of 60+% of outstanding

U.S. mortgages, will provide PD&R with real-time mortgage market metrics with which to inform policy decisions, provide timely responses to Congressional and Administration mortgage market data and performance requests, to monitor mortgage originations, modifications, delinquencies, and foreclosures, and provide data for geospatial mortgage analysis and other mortgage market research projects.

The minimum data requirement includes a database containing national loan data across all loan types in housing and mortgage markets, including GSE (FNMA, FHLMC) loans, Government loans (including GNMA, FHA, VA, USDA loans), private securitized, and

Portfolio/Whole loans, which include loans held on balance sheet by commercial banks, mortgage bankers, and credit unions, including Jumbo, Non-QM and loans bought out of

GSE and GNMA mortgage securities. Each sub-database by loan type should have a statistically significant representation of all loans in that category.

The government estimates the value of this acquisition to be $2,000,000 (Base + 4 Option years).

4. IDENTIFICATION OF STATUTORY AUTHORITY PERMITTING OTHER THAN

FULL AND OPEN COMPETITION:

FAR 13.501(a)(1)(ii) Simplified Procedures for Certain Commercial Items - 41 U.S.C. 1901-

Sole Source (including brand name) Acquisitions.

5. DEMONSTRATION THAT PROPOSED CONTRACTOR’S UNIQUE

QUALIFICATIONS OR NATURE OF THE ACQUISITION REQUIRES USE OF

AUTHORITY CITED:

Market research conducted by both PD&R and the contracting office revealed that only Black

Knight Financial services maintains a database containing all the data elements necessary to develop housing market analysis reports. There are no small businesses that meet the government’s requirements. There is only one large business that meets the government’s requirements. As previously stated, Black knight Financial Services, Inc. is uniquely positioned and best suited to perform under the requirements of this contract. Utilizing the current Black

Knight Data and Analytics, LLC (formerly McDash) will allow HUD to achieve a more complete picture of the mortgage market.

The unique and minimum requirements for this acquisition include:

a. Mortgage database including, but not limited to the following:

1. A database containing national loan data across all loan types in housing and mortgage markets, including GSE (FNMA, FHLMC) loans, Government loans (including GNMA, FHA, VA, USDA loans), private securitized, and Portfolio/Whole loans, which include loans held on balance sheet by commercial banks, mortgage bankers, and credit unions, including Jumbo, Non-QM and loans bought out of GSE and GNMA mortgage securities.

Each sub-database by loan type should have a statistically significant representation of all loans in that category.

86614622Q00004 – Mortgage Performance Data and Analytic Products Subscription 3

2. At least 33+ million active first lien mortgages or at least 62% of the mortgage market, and 218+ million mortgage loans in database.

3. Data fields: credit score; delinquency status; interest rate; loan balance; original loan amount; loan-to-value ratio (LTV); loan age; ARM indicator; negative amortization indicator; loan purpose; property type; geography – state, county, MSA, zip-code; payment history; origination date; mortgage type; product type; investor; documentation status;

occupancy; pre-payment penalty status; payment – principal, interest, taxes, & insurance;

foreclosure status; mortgage insurance provider; AUS; charge off amount; loss mitigation status - mod type, workout type, duration of mod, interest rate before/after mod, remaining term before/after mod, P&I before/after mod and other similar fields.

4. Continuous time series mortgage performance data (delinquencies, foreclosures, and REO) for prime and subprime mortgages that allows HUD to track individual loans or loan cohorts from 2004 to present.

5. Loss Mitigation Module and forbearance data.

6. Cloud-Based Platform

Data must be available on a cloud-based data analytic platform. The platform must provide service of storage and analytics for primary mortgage-market and performance data, and mortgage-performance (including but not limited to forbearance) data report mentioned in this document. The platform will support multiple languages (for example, SQL, R, Python, and Scala) and be capable of statistical summaries, and data science, including but not limited to pre-configured analytics. It must have the capability to upload, join, develop, query and view data sets; ad hoc reporting and analytics development; portability of visual, data, and code outputs; multiple export options for exporting data and analysis; (cloud- hosted) speed & flexibility to display results & visualizations. The platform must also directly integrate with BI tools such as Power BI and Tableau, in order to facilitate end-to-end analytic creation, execution and reporting.

Within the platform, there must be multitude of pre-built queries and workspaces provided to HUD to facilitate ease of data use.

7. Online access to mortgage data, with monthly data updates, and User IDs for fifteen

(15) HUD staff/contractors.

8. Monthly Download of Loan Level Data File.

9. Monthly Data Summary Reports:

(a) Warehouse Distribution Report;

(b) Market Summary Trends;

(c) Delinquency and Migration Analysis Report;

(d) Monthly Overview-Traditional Products;

86614622Q00004 – Mortgage Performance Data and Analytic Products Subscription 4

(e) Monthly Overview-Exotic Products.

b. User Support

1. Contractor will provide point of contact with 24-hour response time to assist data users and analysts with respect to data results, the online interface, downloadable data files, prewritten or HUD written queries or other questions. writing of queries, including prewritten and HUD analyst written queries and guidance and support as needed by HUD.

2. Training with respect to (1) use of AP platform, (2). loan level downloading and, (3) the use and writing of queries, including prewritten and HUD analyst written queries.

3. Monthly conference calls summarizing/analyzing new data releases.

4. AP User IDs for 15 HUD staff/contractors.

6. DESCRIPTION OF EFFORTS MADE TO ENSURE THAT OFFERS ARE

SOLICITED FROM AS MANY POTENTIAL SOURCES AS PRACTICABLE,

INCLUDING WHETHER A NOTICE WAS OR WILL BE PUBLICIZED AS

REQUIRED BY SUBPART 5.2 AND, IF NOT, WHICH EXCEPTION UNDER 5.202

APPLIES:

A Notice of Intent (NOI) was posted on Sam.gov May 5, 2022 and a second NOI was issued on

June 13, 2022. See paragraph 8 for results of the Notice of Intent.

7. DETERMINATION BY THE CONTRACTING OFFICER THAT THE

ANTICIPATED COST TO THE GOVERNMENT WILL BE FAIR AND REASONABLE:

The Contracting Officer will ensure that the price received is deemed fair and reasonable in accordance with FAR 13.106-3(a)(2). It is anticipated that the government will receive a fair and reasonable price when compared to the prices offered to the contractor’s commercial and noncommercial customers.

8. DESCRIPTION OF MARKET RESEARCH EFFORTS CONDUCTED AND THE

RESULTS OR A STATEMENT OF THE REASON MARKET RESEARCH WAS NOT

CONDUCTED:

This requirement is expected to exceed the simplified acquisition threshold. A Notice of Intent to

Sole Source was posted on Sam.gov on May 5, 2022, with a response required by May 19, 2022.

The purpose for the notice was to determine if there were any other businesses with the capability to provide economic, demographic and housing data subscriptions to a database that contains the most complete data and tools for analyzing the single-family housing market nationwide, and to determine whether this acquisition could be set-aside for small businesses.

86614622Q00004 – Mortgage Performance Data and Analytic Products Subscription 5

On 19 May 2022 there was one response to the posted notice from Recursion an 8(a)-minority owned small business and EDWOSB challenging the intention of a sole source award to Black

Knight for mortgage data and analytics. Recursion stated that they could meet HUD’s requirement for both online tools and analytical platform. They requested that the U. S.

Department of Housing and Urban Development (HUD) evaluate Recursion’s capabilities before making the award decision. After review of the NOI, it was determined that the minimum requirements had to be clarified.

On 13 June 2022 the U. S. Department of Housing and Urban Development (HUD) republished the Notice of Intent (NOI) to clarify the minimum requirements. Recursion resubmitted based on the clarified minimum requirements.

On 29 June 2022 Recursion’s capabilities were evaluated and they did not satisfy the minimum requirements for (1) data requirements, (2) cloud-based platform, for the following main reasons.

(1) Data requirements:

The minimum requirements is: A database containing national loan data across all loan types in housing and mortgage markets, including GSE (FNMA, FHLMC) loans, Government loans (including GNMA, FHA, VA, USDA loans), private securitized, and

Portfolio/Whole loans, which include loans held on balance sheet by commercial banks, mortgage bankers, and credit unions, including Jumbo, Non-QM and loans bought out of

GSE and GNMA mortgage securities. Each sub-database by loan type should have a statistically significant representation of all loans in that category.

Although Recursion is capable of providing loans and loan types of GSE loans and

Government loans through combination of all 6 Analyzer data sets, Recursion is incapable of providing loans and loan types from “private securitized, and

Portfolio/Whole loans, which include loans held on balance sheet by commercial banks, mortgage bankers, and credit unions, including Jumbo, Non-QM and loans bought out of GSE and GNMA mortgage securities.” updated monthly. Their data base (combining all

6 analyzers data sets) is incomplete and is lacking a big chunk of national data. Hence they do not satisfy the minimum data requirements.

In addition, Recursion is incapable of providing prime and subprime loans which is needed for

HUD’s production of Treasury/HUD secretary scorecard monthly reports.

(2) Cloud-based platform:

The purpose of HUD’s subscription to cloud-based platform is to satisfy these 3 needs: data delivery, data storage and analytics. Currently, HUD is subscribing to McDash data. In addition, HUD is also hiring contractor programmers (one senior and one junior engineer) to help with SFT downloading data from McDash to HUD server (both the engineers and HUD server are costly). The engineers also do the uploading and updating of the 6 McDash files.

86614622Q00004 – Mortgage Performance Data and Analytic Products Subscription 6

The purpose of this present contract with McDash is to save HUD money. HUD’s subscription to the cloud platform is to satisfy these 3 needs: data delivery, data storage and analytics. And this eliminates HUDs storage, and engineers’ costs for downloading and updating etc. McDash charged HUD off the shelf fees for storage, delivery, downloading and updating since they have the expertise and providing the data. It comes as a package.

If we use the cloud platform of a third-party vendor other than Mcdash. HUD will still need to do downloading data from SFT sites of McDash to HUD server, then the 3rd party vendor will have to download McDash data onto their cloud platform and then do the updating and design the analytics particularly just for HUD. Each step costs money, in addition to storage costs. Since the data structure of the McDash data is very complicated (it takes one senior and on junior engineer to work on it), the third party vendor will need get training from McDash and there is a training costs and training time which can cause delay. At this point of time, we also need the 3rd party (Recursion) to show/demonstrate that they have the personnel with the needed engineering expertise. However, getting this service from McDash is off the shelf and cost effective and time effective. There are also managerial and legal considerations and costs since McDash data is propriety data and transferring data from one party to another will need verification, and if there are data errors, HUD will need to find out who is responsible.

To the best of our knowledge, Black Knight Data and Analytics, LLC is the only firm that can provide HUD with this data.

9. ANY OTHER FACTS SUPPORTING THE USE OF OTHER THAN FULL AND

OPEN COMPETITION: (i) Explanation of why technical data packages, specifications, engineering descriptions, statements of work, or purchase descriptions suitable for full and open competition have not been developed or are not available. (ii) When 6.302-1 is cited for follow-on acquisitions as described in 6.302-

1(a)(2)(ii), an estimate of the cost to the Government that would be duplicated and how the estimate was derived.

(iii) When 6.302-2 is cited, data, estimated cost, or other rationale as to the extent and nature of the harm to the

Government.

There are no other facts other than the facts stated in paragraphs 5 – 8 above.

10. LISTING OF THE SOURCES, IF ANY, THAT EXPRESSED, IN WRITING, AN

INTEREST IN THE ACQUISITION:

Recursion was the only other source that expressed interest in this acquisition.

11. STATEMENT OF ACTIONS TO REMOVE OR OVERCOME ANY BARRIERS TO

COMPETITION BEFORE ANY SUBSEQUENT ACQUISITIONS:

The Office of the Chief Procurement Officer (OCPO) will work closely with PD&R to monitor the commercial market for new sources that become available to provide economic, demographic and housing data subscriptions to databases that contain the most complete data and tools for analyzing the single-family housing market nationwide.

86614622Q00004 – Mortgage Performance Data and Analytic Products Subscription 7

12. CONTRACTING OFFICERS CERTIFICATION:

I certify that the facts contained in this justification are complete and accurate to the best of my knowledge and belief.

Prepared/Approved By:

Cathy J. Baker

Contracting Officer