MBS Legal Services Venable Ceiling JOFOC.pdf

Justification For Other Than Full and Open Competition Ginnie Mae Legal Service Contracts

JUSTIFICATION FOR OTHER THAN FULL AND OPEN

COMPETITION – UNUSUAL AND COMPELLING URGENCY

1. Agency: Department of Housing and Urban Development (HUD), Government National Mortgage Association (Ginnie Mae) Contracting Activity: Office of the Chief Procurement Officer (OCPO) Contract Number: 86543E18D00002 Contractor: Venable LLP

2. Nature or description of the action being approved:

The purpose of this justification for other than full and open competition is to support the modification of IDIQ contract 86543E18D00002 to increase the ceiling capacity by $556,557.00 to ensure continuity of services in support of Ginnie Mae’s Mortgage-Backed Securities (MBS) Program due to an unusual and compelling urgency which would result in serious injury, financial, or other to the Government. The current task order 86615620F00007 expires on May 14, 2021. Venable’s current MBS Legal Services contract has very limited capacity to apply to future task orders under the contract and a lapse in services may occur.

3. Description of supplies or services required to meet Ginnie Mae’s needs:

Venable’s contract is one of two awards on a multiple award IDIQ contract vehicle for legal services to support Ginnie Mae’s MBS program. The MBS program is a flagship program and is the dominant force providing a stable and sustainable housing finance system and ongoing homebuyer/homeowner access to credit. The program provides lenders a constant source of market liquidity and long-term funding for the Government insured or guaranteed loans of the Federal Housing Administration (FHA), U.S.

Department of Veterans Affairs (VA), Rural Housing Services (RHS), and Public and Indian Housing (PIH). This has, in turn, contributed to the continued growth and success of those government programs.

Ginnie Mae requires the assistance of outside legal counsel on a variety of legal matters related to the operation of Ginnie Mae’s MBS Program. The services include general legal assistance and advice on tax law, intellectual property, information technology, electronic commerce, banking, litigation, document review, preparing legal opinions, and review of Acknowledgement Agreements (AA). HUD does not have the expertise or capacity to provide these legal services in-house.

Since the contract was awarded on December 1, 2017, there have been several changes significantly affecting the financial sector which in turn impacts Ginnie Mae securities.

These unexpected changes led to an increase in the need for legal services to appropriately respond, which resulted in more rapid depletion of the contract capacity than anticipated.

Subsequent to the award of the contract in 2017, the use of Acknowledgement Agreements (AA) increased and became significantly more complex due to Ginnie Mae program participants (issuers) entering into more sophisticated and novel borrowing arrangements to maintain issuers’ liquidity. Recently, AAs have become even more widely used because the coronavirus (COVID-19) pandemic and related relief efforts have permitted mortgagors to temporarily pause the mortgage payments while they experience financial difficulties. Under the guaranty agreement with Ginnie Mae, issuers must continue advancing to securityholders regardless of whether they have received payments from mortgagors. Consequently, issuers are facing increasing liquidity constraints and seek additional financing-. The MBS legal services contractor reviews these increasingly complex private financing arrangements to assist Ginnie Mae in ensuring that its rights are protected, and that the issuers are able to continue to meet their advancing obligations under the Ginnie Mae program. As a result, costs for legal fees related to AA reviews have increased significantly due to increasing labor hours needed to review the increased number and complexities of the AAs. The fees for AA review work for November 2019 – September 2020 increased by approximately 153% when compared to the first 12 months of AA review work.1 We anticipate this trend to continue since the national emergency involving COVID-19 has lasted for more than a year and further strained the liquidity in the private market. This will significantly increase the need for AA reviews and legal assistance to respond to regulatory changes and shifting market forces. Without contractor legal review of AAs, Ginnie Mae would be required to stop all AA requests. This would lead to a significant disruption in the financial markets, which in turn would result in lower liquidity in the primary mortgage market, impacting borrowers and homebuyers negatively, and would significantly increase the likelihood of Ginnie Mae having to default issuers and make the payments to investors which would have a negative impact on the financial housing market.

In light of the changes to the financial market that is resulting in a higher volume of MBS legal work than reasonably anticipated, additional funds in the amount of $556,557.00 are required to ensure that legal services for Ginnie Mae can continue uninterrupted until a new contract vehicle for these services can be put into place through the use of competitive procedures.

4. Identification of the statutory authority permitting Other Than Full and Open Competition:

41 U.S.C §3304(a)(2) and FAR 6.302-2 – Unusual and Compelling Urgency.

5. A demonstration that the proposed contractor’s unique qualifications or the nature of the acquisition requires use of the authority cited.

Venable is uniquely qualified due to its extensive and expansive knowledge of AAs, the Ginnie Mae AA review process, and possesses no known conflict of interest issues to prevent it from reviewing Ginnie Mae AAs. Venable has worked on Ginnie Mae AAs for several years and has been the contractor reviewing these agreements for all the AA task orders that have been issued under this contract. Under previous contracts with Ginnie

1 Fees from January 2018 – December 2018 totaled $208,915.00. Fees from Nov 2019 – September 2020 totaled $529,851.00.

Mae, Venable also worked on and helped create the AA review process used by Ginnie Mae today. Venable understands Ginnie Mae’s MBS program and would be able to start and continue the AA review work immediately. Work would not be delayed since they would not need time to familiarize themselves with Ginnie Mae’s program, the AA process, and the current AAs that are being reviewed. Unlike the other contractor under the Ginnie Mae MBS Legal Services contracts, Venable does not have any conflict of interest issues that would prevent it from performing work related to the AA reviews.

6. A description of the efforts made to ensure that offers are solicited from as many potential sources as practicable, including whether a notice was or will be published as required by FAR 5.2, and, if not, which exception under 5.202 applies.

In accordance with FAR 5.202(a)(6), the proposed contract action is an order placed under Subpart 16.5 and, therefore, will not be published in accordance with the requirements of

FAR 5.2.

7. The anticipated cost to the Government is fair and reasonable.

The Contracting Officer has determined that the anticipated cost to the Government will be fair and reasonable. The Government will compare the prices submitted for the resulting modification to the existing IDIQ contract and to the Independent Government Cost Estimate to determine the proposed cost to be fair and reasonable. The Independent Government Cost Estimate is consistent with current contract price ranges, adjusted for the period of performance of one year. We estimate the cost for this increase to cover the review of AAs for the next year.

8. A description of the market research conducted (see FAR Part 10) and the results or a statement of the reason market research was not conducted:

Due to the basis and nature of this request under Unusual and Compelling Urgency (FAR 6.302-2), full market research was not conducted. Based on the need to maintain continuity of services until a new contract is competitively awarded, no vendors other than the current multiple award IDIQ contract holders can immediately perform the tasks.

9. Any other facts supporting the use of other full and open competition:

The ceiling maximum must be increased in order for Venable to be able to bid on new mission critical task order relating to AA reviews. Five task orders were awarded last year and out of the five, Venable won four (4):

1. 86615620F00007 POP: 05/15/2020 – 05/14/2021; $685,062.50; Acknowledgement

Agreements

2. 86615620F00008 POP: 07/22/2020 – 07/21/2021; $545,850.00; London Inter-bank

Offered Rate (LIBOR)

3. 86615620F00009 POP: 08/07/2020 – 08/06/2021; $483,625.00; Legislative and

Regulatory Assistance II

4. 86615620F00010 POP: 08/24/2020 – 08/23/2021; $265,675.00; Financing Entity Pilot II

AA review work is a significant portion of what Ginnie Mae requires from its MBS legal advisors. The government must ensure that its contract has enough funds to address this need. The award amount for the current AA review task order was $685,062.50. This was a significant percentage of the remaining capacity on Venable’s MBS Legal Services contract.

Venable has been the only IDIQ contract holder to submit offers for the AA review work and has been awarded all of the AA review task orders issued under the MBS Legal Services multiple award IDIQ thus far. Increasing the ceiling would allow Venable to participate and potentially be awarded the next AA work especially since the government is facing a non-existent capacity issue. This would allow the government to continue its mission critical AA work. If Venable is unable to compete for the upcoming AA task order, a break in service may occur. This would be disastrous to the program, as it could lead to a significant disruption in the financial markets. Given the government’s efforts to protect homeownership and housing stability in the United States during the pandemic, there are forbearance and foreclosure protections that allow mortgagors to temporarily pause mortgage payments. For Ginnie Mae issuers, this presents a significant financial burden as they are still required to meet Ginnie Mae requirements of making payments to the investors regardless of whether mortgagors made any payments. Consequently, issuers are facing increasing liquidity constraints in the millions and seek additional financing.

Without the help of AAs to address issuers’ liquidity constraints, issuers have an increased likelihood that it will not have the funds to meet programmatic obligations thereby increasing the likelihood that it will be defaulted by Ginnie Mae. If Ginnie Mae defaults an issuer, Ginnie Mae will then incur inordinate expenses of servicing the defaulted issuer’s portfolio, which includes, but is not limited to, engaging its Master Subservicer contractors to service the portfolio, pay security holders and monies due under the securities, and cover servicing expenses. These payments can amount to billions of dollars to the U.S. government that could have been otherwise avoided. Further, if issuers begin defaulting on their obligations, the financial markets will react negatively to this as it is a sign of financial and housing instability. If investor confidence is lost, they will either stop investing in Ginnie Mae securities or charge higher fees for their investment. This eventuality will result in an illiquid market since investors are critical to making a liquid market. If investors stop investing or their fees are cost prohibitive, the issuer will not have the financial wherewithal to continue to extend loans. This would be the reverse of Congress’ statutory mandate for Ginnie Mae-to create liquidity in the secondary mortgage market, as it will not create liquidity. A break in service of any duration could lead to an issuer’s inability to advance and its ability to extend loans which the effects could be felt immediately. This would require Ginnie Mae to use its own funds at Treasury to cover the advances that can very well likely be in the billions and potentially cause an issuer default that otherwise could be avoided had they had the requisite liquidity to meet their advancing obligations, as well as their ability to originate loans, which would be an extraordinary event for the program and the market.

Since Venable was awarded 4 of the 5 task orders issued in FY2020, most of its capacity is expended and obligated towards those specific task orders and cannot be used for any new task orders at this time. The additional ceiling amount is needed to ensure that Venable may continue providing services to Ginnie Mae’s mission critical work.

If there are no viable, reliable, responsible sources available to provide these services relating to AA reviews, the risk to the nation’s housing and financial markets would be insurmountable as the liquidity needed to extend mortgages to borrowers would be significantly strained. Without financing to support the housing market, borrowers would have more difficulty getting mortgages and the negative effects of a hindered housing market would trigger an even more costly economic crisis for the nation. In order to ensure that there is a viable, reliable, and responsible sources available to provide these services, it is in the best interest of the government to ensure that contracts are in place to ensure that these services continue without interruption.

(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.

The current task order is set to expire on May 14, 2021. The government is currently in the process of re-competing the contracts but even with the most aggressive schedule, the government does not expect to complete the process prior to the expiration of the existing task order, which is expected to cause both a lapse and interruption in legal services. The government anticipates that a new, competitively awarded contract will be in place before the next AA task order expires in one year.

10. A listing of the sources, if any, that expressed, in writing, an interest in the acquisition.

None at this time.

(11) A statement of the actions, if any, the agency may take to remove or overcome any barriers to competition before any subsequent acquisition for the services or supplies are required.

It has always been the program’s desire to promote full and open competition to the maximum extent possible. As such, the procurement strategy for the re-compete of the entire legal service contract in support of Ginnie Mae’s MBS program is to acquire these services using full and open competition.

CERTIFICATIONS:

I certify that the facts and representations under my cognizance which are included in this justification and which form a basis for this justification are complete and accurate.

TECHNICAL COGNIZANCE: (If applicable)

(Signature)__ _______________________Phone: 202-402-4280 Date: 5/11/2021

(Printed) Name and Title:___Kimberly Yeh, COR______________________________

CONTRACTING OFFICER CERTIFICATION REQUIRED BY FAR 6.303-2(a)(12)

I certify that this justification is accurate and complete to the best of my knowledge and belief.

(Signature) Phone Date ________

(Printed) Name and Title _________________________________________________