Industry_Day_Slide_11-16-18.pptx

HUD’s Multifamily Mortgage Loan Services

Industry Day U.S. Department of Housing and Urban Development (HUD) The Office of the Chief Procurement Officer

WELCOME !!!

Brooke Mondale Auditorium Suite A&B

November 16, 2018

8:00 a.m. - 5:00 p.m.

Introduction

Brenda K. Lee Contract Specialist

Remark

Ann Turner Contracting Officer

Purpose of Industry Day

Exchange information with Industry.

To improve the understanding of Government requirements and industry capabilities.

Allow potential offerors to determine how they can satisfy the Government’s requirements.

Purpose of Industry Day

Enhance the Government’s ability to obtain quality supplies and services, at reasonable prices, and increase efficiency.

Obtain price, delivery, other market information, or capabilities for planning purposes.

Rules of Engagement

The Government will consolidate all written questions received and post the “official” answers to FedBizOpps.

All capability statements shall be email to: MFLoanServces@hud.gov no later than November 23, 2018 by 4:00 p.m. EST.

All communications are limited to the Contracting Officer only!!!

Loan Services Peggy Russo Branch Chief Multifamily Notes Servicing and Michael Murphy Housing Program Manager, OAMPO

Where does Mortgage Note Services Branch (MNSB) falls in the process?

INSURANCE OPERATIONS

NOTES SERVICING

CLAIMS

Our role is to service HUD-Held Mortgages:

Conventional Notes Mark-to-Market Notes in support of the Recapitalization Division Pre-payment of claim Notes (PPC) Healthcare Notes Risk Share Property Disposition

Our Customers:

Internal (HUD Field Offices, Office of MF Asset Management Portfolio Oversight, Office of Recapitalization, Office of Healthcare Programs, Office of Asset Sales, Office of General Counsel, Multifamily Accounting) plus various entities inside and outside of the HUD environment External (Banks/Lenders/Borrowers) Contractors

Our Business New Note Set-Up & Review Billing and Collections of HUD-Held Notes Escrow Management of HUD-Held Notes Process Note Terminations Default servicing Financial Tracking & Monitoring (Property Management & Relocation)

Wallace Chochola, Wil'lwin (WCW) - 'add 5. Default Servicing and 6. Financial tracking and monitoring (Property Management and Relocation)These are critical to PD activities.

New Note Set-up Process

Types of New Notes:

New Assignments: Prior Insured Notes which defaulted and became claims Partial Payment of Claims (PPC’s): Notes which are partially paid claims Restructured Notes: Notes with terms and conditions restructured by Office of Recapitalization Risk Share: HUD and the HFA share in the risk of the mortgage.

New Note Set-up Process (continued) Procedure:

A New Note comes from MF Claims Branch.

MNSB reviews the New Assignment and sets up the note in the contractors servicing system.

Final Settlement is made by MF Claims.

MNSB reviews for accuracy and makes adjustment to note based on Final Settlement.

Servicing/Billing of HUD-Held Notes Preparation and mailing of monthly billing statements.

Collection and application of payments Escrow disbursements (Reserve for Replacement and Residual Receipts).

4. Tracking FHA advances

Note: The current Notes Servicing Contractor uses their own proprietary system to perform these tasks. All Offerors attempting to bid on this proposal must have their own system readily available.

Escrow Management of HUD-Held Notes

Types of Escrows:

Reserve for Replacement Residual Receipts Hazard Insurance Tax Escrow Maintenance:

Billing and Collection of monthly/annual escrow amounts.

Annual Property tax payments made to local taxing authority Hazard Insurance paid to insurance provider.

Reserve for Replacement and Residual Receipt reimbursements made per field office.

Investments:

Excess escrow funds can be invested, at the owners request, in T-bills or the Minority Banking Program.

Minority Bank Investment Program

Minority Bank Investment Program was started in 1992 Purpose was to invest R4R funds in the program with banks located throughout the country The Minority Bank Solicitation is an offer to do business with small banks.

The last Solicitation was completed in 2000 Solicitations were sent to banks from a list provided by Treasury Once the solicitation responses were received, a review was performed on each package Eleven (11) banks were chosen to participate Currently, we have funds invested in eight (7) banks These banks provide higher interest points than T-Bills Each bank can manage $240,000 per note as regulated by FDIC Currently there are $33 million reserve for replacement escrows invested in the Minority Bank Program

TERMINATIONS

Types of Terminations:

Prepayments Payment in Full via Cash Flow Maturity Restructure Asset (Note) Sales Foreclosure Deed-in-Lieu/Quit Claim Deed

Terminations (continued) Procedure:

Termination request comes to MNSB.

Approval request is forwarded to Program Office (OAMPO, Recap, OHP) Once approved, funds are collected from the owner.

After note is paid-in-full, the Satisfaction Process Begins Release documents are prepared by the Office of General Counsel.

MNSB ensures compliance with Program Office’s Terms & Conditions.

MNSB executes Satisfaction of Mortgage and Program Office executes Release of Regulatory Agreement Remaining escrows are released to the owner.

Legal documents and releases are sent to the owner

Other Functions of the MNSB Participation in Asset Sales Coordination with MF Asset Sales Office Provide servicing information for due diligence packages Calculating and preparing closing payment notices.

Collection of bid money.

Bankruptcies Coordination with Department of Justice to facilitate bankruptcies Collection of bankruptcies settlement Foreclosures Coordination with Property Disposition Receipt and Disbursement of Foreclosure Income & Expenses Track, file, and maintain Universal Commercial Code (UCC) agreements on all notes Credit reporting to credit bureaus (Delinquencies)

Reserve Disbursements 359 - $9 Million Approx. 1,900 Notes $ 2.1 Billion in Assets

FY 2018 Activity thru September 2018

MF Notes Portfolio

M2M Program Overview Curtail above-market rent payments for FHA-insured multifamily properties with expiring Section 8 (HAP) contracts Reduce rents to area market levels Restructured Debt through Partial Payment of claim (PPC) Properties have one or more Cash-Flow Notes

Demo Program Overview Approximately 110 properties from the Demonstration Program Established prior to the permanent M2M program.

Contain one or more loans in first to fourth lien position Loan Docs are not standard format

Post Closing Portfolio Management Reviews Owner’s Annual Financial Statement (AFS), Maximizes the value of M2M and Demo Notes by ensuring HUD receives the correct surplus cash payment Identifies significant variances, makes necessary adjustments, and computes the surplus cash due Sends SCA computation to Notes Servicer for Billing

Accounting

Hind Ciappina General Ledger Deputy Director

FHA Accounting Services

The Office of the Housing-FHA Comptroller requires for its financial operation an automated system that supports internal control, fund control, cash management, and recording of all transaction that comply with the following:

Generally Accepted Accounting Principles (GAAP) Federal Accounting Standards Advisory Board (FASAB) U.S. Standard General Ledger (USSGL) Credit Reform ACT OF 1990 Office of Management and Budget (OMB):

OMB Circular A-123, A-129, and A-136 FHA Posting Model

USSGL Chart of Account Generate and record detailed accounting transactions for foreclosure expenses related to Mortgagee-in-Possession (MIP) and HUD-owned properties as well as obligations and disbursements Maintain Note assets inventory Prepare Claims to Notes reconciliation Process New Note Assignments

FHA Posting Model

Accounting Services Performed by Notes Servicing Contractor Generate and record detailed accounting transactions for foreclosure expenses related to Mortgagee-in-Possession (MIP) and HUD-owned properties as well as obligations and disbursements Record transactions related to Federal Financing Bank (FFB) Maintain note assets inventory Process new note assignments

CASH DISBURSEMENTS

The system shall send daily disbursement files to FHA Subsidiary Ledger (FHASL) and Treasury. The types of disbursements:

Authorized taxes Tax penalties Releases from Reserves, include investment deposits Foreclosure costs Operating expenses Contract funding obligations 557 transfers 1081 Transfers

CASH COLLECTIONS

Collections are received daily, by Servicing and the Contractor, for the mortgage payments due on the accounts. The type of collections:

Interest on mortgage principal (MIP) Escrow advances Service charges Internal Transfers 557 transfers 1081 Transfers Subsidy Payments Tax Refunds Interest Earned on Invested Funds

MONTH – END AND YEAR–END

CLOSE PROCESS

Close property disposition ledger on the 1st business day prior to the Multifamily Loan Servicing closing.

Notes ledger shall be closed by the 2nd business day of each month.

All transactions shall interface with FHASL on a daily basis by providing automated data files to complete the month end close processes prior to the normal 2nd business day of each month, respectively when preceded by a Federal Holiday.

All transactions shall flow through the system in accordance with the FHA Posting Model entry events and USSGL Accounts.

Reconciliations and Reports Reconciliations:

Cash reconciliations A/R and A/P deferred reconciliations Budgetary and proprietary reconciliations Reports:

Trial balance Inventory report Notes set up report Treasury Report on Receivables (TROR)

INTERFACE PROCESS FLOW

Treasury

SFTP FILE FORMAT EXAMPLE

A daily file in the format of a .dat file received from the contractor's system with financial transactions to be interfaced with Federal Housing Subsidiary Ledger (FHASL).

Links FASAB: http://www.fasab.gov/ COLLECTION INFORMATION REPOSITORY (CIR): https://www.fiscal.treasury.gov/ PAY.GOV: https://www.pay.gov/ Treasury Financial Manual (TFM): https://tfm.fiscal.treasury.gov

NON-TREASURY DISBURSEMENT OFFICE(NTDO)

https://www.fms.treas.gov/ntdo/index.jsp

Property Disposition

Wil'Lwin Wallace Chochola Senior Realty Specialist Multifamily Housing Property Disposition Division

What we do...

Foreclosure Sales HUD-owned Sales Post Foreclosure Monitoring/Enforcement Post-closing Receipts and Deposits Property Management Tenant Relocations Property Disposition continued

What we need:

Tracking Systems, Receipt & Payment Vehicles Budgets Foreclosure Sale Property Management Tenant Receipts & Deposits Utility and Vendor Disbursements Lockbox Management Accounting Recording and Reconciliations Other work required to accomplish Task 4 Property Disposition Continued

The Contractor provides the following specific functions to support the tracking and monitoring of tenant relocation and the management and sale of HUD’s Multifamily Property Disposition Portfolio:

Provide an accounts payable system by project in sufficient detail to fully support all outstanding bills.

Maintain information on all vendors and allow flexibility for subsequent adjustments to the information required.

Process properly authorized and approved invoices.

Comply with the Prompt Payment Act, Public Law 97-177, including computation, payment and monthly reporting on the amount of penalties under the Act.

Provide adequate internal control over disbursements. Maintain information on all vendors and allow flexibility for subsequent adjustments to the information required.

Maintain all accounting records of tenant relocation and multifamily project operations in accordance with HUD requirement, Federal Generally Accepted Accounting Principles and Credit Reform.

Provide complete and comprehensive tenant relocation and project accounting information using the accrual method of accounting.

Maintain an annual Operating and Rehabilitation Budget of HUD-owned and Mortgagee-in-Possession (MIP) projects.

Perform monthly reconciliation to verify all account balances.

Provide on-line access to all transaction history data from the commencement date of the contract to expiration of the contract

Produce a monthly trial balance for each project by the third working day of each month

Update accounting records to reflect collections (receivables) and disbursements (payables)

Ensure that the contract Property Manager maintains project employee payroll related information and reimburse the contract Property Manager for authorized wages, expenses and fringe benefits.

(NOTE: Currently, PM contractor is responsible for all on-site payroll and benefits as part of their fee.)

Provide on-line tenant relocation reports, general purpose management reports, annual reports and project pipeline reports and inventory reports (a listing of required reports will be made available).

Provide special reports for section 202 loans section 312 loans, or other direct loans.

Maintain a database for tracking properties through the foreclosure process.

Maintain a database for tenants of all occupied units in HUD-owned and Mortgagee-In-Possession (MIP) properties.

Special Requirements

Michael Murphy Housing Program Manager Office of Asset Management and Portfolio Oversight

12/1/2018

HUD’s IT Security Policy and Procedures

FIPS FISMA NIST RMF

FedRAMP and NIST SP 800-145

SSAE 19

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