STFA SOW .pdf

STATEMENT OF WORK

Capital Markets Securitized Transactions Financial Advisor

The Government National Mortgage Association (Ginnie Mae) is a wholly owned corporate instrumentality of the United States within the Department of Housing and Urban Development

(HUD). Its powers are prescribed generally by Title III of the National Housing Act, as amended

(12 U.S.C. 1716 et seq.). Through its single-class and multiclass Mortgage-Backed Securities

(MBS) programs, Ginnie Mae guarantees privately issued securities backed by pools of mortgages insured or guaranteed by the Federal Housing Administration (FHA), the Department of Veterans Affairs (VA), the Department of Agriculture’s Rural Housing Service RHS, or

HUD’s Native American Program (PIH). Holders of these MBSs receive a monthly “pass-through” of principal and interest payments on the pool of mortgages backing the securities, less amounts to cover servicing costs and certain Ginnie Mae fees. Ginnie Mae guarantees the registered holder the timely payment of scheduled monthly principal and interest payments, loan prepayments and early recoveries of principal on the underlying mortgages. If borrowers fail to make timely payments on their mortgages, the issuers must make the timely payments to the registered holders, using their own resources.

Through its Multiclass Securities and MBS Programs, Ginnie Mae provides a structure for channeling funds from the nation’s capital markets into the housing market. Multiclass securities products include Real Estate Mortgage Investment Conduit (REMIC) Securities and Platinum

Securities. The U.S. Government’s full faith and credit guaranty backing the securities makes them widely accepted in those sectors of the capital markets that otherwise would not be likely to supply funds to the mortgage market. The funds received through the sale of the securities are used to make residential and other mortgage loans. Through this process, the program serves to increase the overall supply of credit available for housing and helps to ensure that credit is available at reasonable interest rates.

This contract will contribute toward the Ginnie Mae program by providing highly complex securitized mortgage, mortgage derivative, and mortgage related product expertise to ensure that

Ginnie Mae designs, develops and issues new Ginnie Mae securities that are favorably received by the market and significantly contribute towards Ginnie Mae’s mission to support expanded affordable housing in America by providing an efficient government-guaranteed secondary market vehicle linking the capital markets with Federal housing markets.

Ginnie Mae requires a contract that shall provide for full service capital markets guidance and expertise on executing and operating Ginnie Mae’s Multiclass Securities Program.

The services listed in the Statement of Work (SOW) must be performed for the benefit of Ginnie

Mae and to ensure the continued smooth operation of the Ginnie Mae Securities Program. One of the functions of the Securitized Transaction Financial Advisor (“Contractor”) will be to provide a series of Agreed-Upon Procedures letters that Ginnie Mae can rely on to assure that

Ginnie Mae Multiclass Securities are issued in accordance with the policies of Ginnie Mae and do not subject the government to any undue risks.

Ginnie Mae requires these services on its Multiclass Securities Program. The Multiclass

Securities Program increases liquidity of Ginnie Mae MBS in the secondary-mortgage market.

i. The Ginnie Mae REMIC products allow the private sector to combine restructured cash flows from Ginnie Mae MBS (including Home Equity Conversion Mortgage backed

MBS) and other permissible REMIC securities to be tailored to meet investor’s preferences.

ii. The Ginnie Mae Callable Trust products permit one investor to receive the cash flows from the underlying MBS, while another investor has the right to buy the underlying

MBS, under certain circumstances, thereby calling or terminating the Callable Trust.

iii. The Ginnie Mae Stripped Mortgage Backed Securities (SMBS) Trust program complements the REMIC program and involves the allocation of principal and interest from pass-through securities in differing proportions than exist in the underlying mortgage loans. The SMBS Trust program can add value to investors by creating unique price-yield relationships enabling investors to: (1) better hedge prepayment risk, (2) manage portfolio convexity, control duration gap, as well as achieve desired hedging positions within the mortgage sector.

iv. The Ginnie Mae Excess Yield Mortgage Backed Securities (XMBS) Trust program is a companion program to the SMBS Trust program. The XMBS Trust program seeks to allow its issuers to securitize a portion of the servicing fees they earn on Ginnie Mae pools. Allowing the securitization of a portion of the servicing fees will reduce costs in several ways: 1) it would reduce the amount of capital tied up in Mortgage Servicing

Rights (“MSRs”) as an asset on issuers’ balance sheets by allowing issuers to “cash out” a portion of the servicing, 2) it would allow Issuers to recognize income earlier, thus reducing earnings volatility that results from accounting rules that require income adjustments reflecting changes in MSRs, and 3) it would reduce the need to employ costly hedging tools to offset changes in MSR values.

Under this contract the Contractor shall serve as transaction advisor for all of Ginnie Mae’s multiclass financial products. As other MBS, mortgage derivatives, and mortgage related securities are implemented the Contractor shall perform similar services for these products. If new products are added, the unit pricing to perform tasks b through f for the new products may be subject to negotiation.

TASKS

Line Item 0101

a. Transition-in: The Contractor shall “shadow” for two months all transactions that occur during the transition to become familiar with the process. The Contractor shall also perform all Securitized Financial Advisor functions enumerated in the Multiclass

Securities Guides which can be found at http://ginniemae.gov/guide/mcsguide.asp?subTitle=Investors during the shadowing period as dry runs. In addition, the Contractor shall work with the incumbent

Contractor on the list of all outstanding issues relating to Ginnie Mae’s Multiclass securities. The Contractor shall submit a transition plan two (2) business days after the contract is awarded. The transition plan shall describe the approach to transition tasks and materials from the outgoing Contractor. The plan shall include a schedule of briefings, including dates, times and resource allocations required to fully transition all materials and information. Additionally, the transition plan shall include an extensive list of questions and issues the Contractor proposes to address with the outgoing

Contractor.

Line Item 0102, 0103, 0104, and if exercised 0201,0202, 0203, 0301, 0302, 0303, 0401, 0402, 0403, 0501, 0502, 0503

All effort associated with executing transactions is included in the fixed price per transaction for above noted line items. All effort associated with tasks b-g, including all effort associated with acting as Ginnie Mae’s deal manager are included in the fixed transaction price. No effort associated with monthly transaction will be paid under line item 0105, 0204, 0304, 0404 or

0504.

b. No later than the Final Structure Date, the Contractor shall review the Checklist (as published in the Ginnie Mae Multiclass Securities Guide) with the potential Sponsor.

After discussing the proposed transaction, recommend whether the proposed transaction conforms to Ginnie Mae’s policies and whether it is in Ginnie Mae’s best interest to price the transaction. After Ginnie Mae assigns a deal number to the transaction, the Contractor shall provide an Agreed-Upon Procedures Letter to the

Recipient (Ginnie Mae) and (Ginnie Mae Transaction Process – Phase I: Pricing) document in substantially the same form as cited in the Multiclass Securities Guides which can be found at http://ginniemae.gov/guide/mcsguide.asp?subTitle=Investors.

c. After the Final Structure Date, the Contractor shall act as deal manager for Ginnie Mae.

The Contractor shall advise Ginnie Mae of any apparent instances of non-compliance relating to Ginnie Mae policy and guidelines published in the Multiclass Securities

Guide. The Contractor shall also review and proofread all offering documents and

Sponsor Agreements for completeness and accuracy. This proofreading task shall include text, CUSIP numbers, and other numbers printed within the text of the disclosure documents. The Contractor shall electronically submit a daily status update to Ginnie Mae for each deal to facilitate the complete, accurate, and timely creation of each transaction for printing; this update should document the progress of each deal and highlight the printing-related issues, if any, of each deal. In order to clear the offering documents for printing, the Contractor shall provide an Agreed-Upon Procedures Letter to the Recipient (Ginnie Mae’s Legal Advisor) and (Ginnie Mae Transaction Process –

Phase II: Offering Circular Supplement) document in substantially the same form as cited in the Multiclass Securities Guide which can be found at http://ginniemae.gov/guide/mcsguide.asp?subTitle=Investors. The Contractor shall http://ginniemae.gov/guide/mcsguide.asp?subTitle=Investors http://ginniemae.gov/guide/mcsguide.asp?subTitle=Investors post a REMIC Relay File to eAccess for each transaction shortly after the securities structure has been finalized.

d. Before the transaction closes, the Contractor shall review and proofread all closing documents with the exception of legal opinions for completeness and accuracy and determine that they comply with the terms of the Guide. The Contractor shall electronically submit a daily status update to Ginnie Mae for each deal to facilitate the complete, accurate, and timely creation of each transaction for settlement. The update shall document the progress of each deal and highlight the settlement related issues, if any, of each deal. The update may be prepared in the Contractor’s own format. In order to close the transaction, the Contractor must provide an Agreed-Upon Procedures

Letter to the Recipient (Ginnie Mae’s Legal Advisor) and (Ginnie Mae Transaction

Process – Phase III: Closing) in substantially the same form as cited in the Multiclass

Securities Guides which can be found at http://ginniemae.gov/guide/mcsguide.asp?subTitle=Investors. The Contractor shall complete and deliver a Monthly Guaranty Fees receipt confirmation document. The

Contractor shall compile a list of all transactions scheduled to close each month, and the associated guaranty fees. On the settlement date, the Contractor shall confirm that the ACH of the guaranty fees has been initiated, by coordinating with the Ginnie Mae

Office of the Treasurer. The monthly guaranty fees receipt document that confirms that the ACH for guaranty fees have been initiated, or identifies any issues with the collection of guaranty fees shall be delivered by 4:30PM on the settlement date.

e. The Contractor shall provide post-settlement expertise to address and resolve issues and problems on all previously issued Ginnie Mae multiclass transactions. Specifically, the

Contractor shall work with the, Pool Processing Agent, REMIC Information Agent, Platinum Trustee, and Sponsors to recommend product enhancements that will improve the pricing, liquidity, settlement, clearance, and broaden the investor base for all Ginnie

Mae securities. The objective here is to provide Ginnie Mae with improved securities intelligence on multiclass transactions once deals have been closed. This is chiefly a transaction surveillance function that will permit Ginnie Mae to continue to evaluate the performance of its Multiclass Securities.

Line Item 0105 and if exercised 0204, 0304, 0404 and 0504

f. The Contractor shall provide and update the Ginnie Mae desk manuals so that the

Ginnie Mae Multiclass Securities program and other structured securities programs that may be implemented during the term of this contract operate effectively and efficiently.

The updates include any revisions to the shortfall funding provisions known as the buffer, as well as other procedures.

g. The Contractor should be available when called upon by Ginnie Mae or program participants to research and discuss ad-hoc/ one off market topics not already covered in line Items 0102, 0103, 0104, and if exercised 0201,0202, 0203, 0301, 0302, 0303, 0401, 0402, 0403, 0501, 0502 and 0503.

h. The Contractor shall review the Multiclass Securities Guide, the Base Offering Circular and the Offering Circular Supplement Template on an annual basis and assist HUD

Office of General Counsel and Legal Advisor with the update, as necessary, based on current or desired practices.

i. The Contractor shall assist Ginnie Mae with Capital Markets updates on a monthly, quarterly, semi-annual and annual basis (or as requested).

j. The Contractor shall conduct annual onsite reviews of Ginnie Mae Trustees that participate in the Ginnie Mae Multiclass Securities Program as part of the Trustee’s annual recertification process.

k. The Contractor will provide Ginnie Mae Capital Markets with an update review and assessment of the usage of derivative products, specifically interest rate caps and corridors in Ginnie Mae Multiclass Securities.

l. The Contractor will work with Ginnie Mae Capital Markets to develop a procedure for analyzing and making decisions on new structural features as proposed by Sponsors.

m. The Contractor will provide Ginnie Mae Capital Markets with an update review and assessment of the usage of derivative products, specifically interest rate caps and corridors in Ginnie Mae Multiclass Securities.

n. The Contractor will work with Ginnie Mae Capital Markets to develop a procedure for analyzing and making decisions on new structural features as proposed by Sponsors.

o. The Contractor shall advise and make recommendations to Ginnie Mae to develop policies/strategies for limiting its exposure related to the issuance of volatile securities or securities that are especially sensitive to changes in interest rates or prepayment rates. The Contractor shall also assist and recommend steps to limit the likelihood that the more volatile securities will be acquired by unsophisticated investors. This task does not include advice/recommendations related to specific transactions presented to

Ginnie Mae. All efforts associated with ongoing monthly transactions are included in the fixed price transaction fees under items 0102, 0103, 0104, 0201, 0202, 0203, 0301, 0302, 0303, 0401, 0402, 0403, 0501, 0502 and 0503.

p. The Contractor shall provide second opinions in writing and provide oral presentations to Ginnie Mae as requested on new and existing securities products, program structures, operations, procedures, and guarantee fees. Second opinions shall include market intelligence as it relates to new and existing products.

q. The Contractor shall participate in and make recommendations to Ginnie Mae regarding the implementation of additional or augmented systems, reports, research, and data dissemination that may improve the liquidity or operations of Ginnie Mae mortgage-backed securities, mortgage derivatives, and mortgage-related securities.

r. On an ongoing basis, the Contractor shall monitor domestic and international capital markets and advise Ginnie Mae of any impacts to its programs. The Contractor shall also advise Ginnie Mae concerning industry developments, such as SIFMA and other similar MBS/Asset Backed Security industry associations, and provide professional top tier advice for interfacing with the industry.

s. The Contractor shall provide Ginnie Mae with quarterly or semiannual (based on market conditions) written and/or oral presentations (including written handouts) regarding Ginnie Mae Securities. The presentations shall include the effect of the

Ginnie Mae Multiclass Securities Program and other structured securities that may be implemented during the term of this contract on the relative pricing of Ginnie Mae

Multiclass mortgage-backed securities, mortgage derivatives, and mortgage-related securities and their effects on FHA, VA, and RHS financing costs. In addition, the presentations shall include the relative value of Ginnie Mae Securities vis-à-vis the

Agencies and private-label issuers.

t. The Contractor shall arrange, provide support and participate in sessions, forums, focus groups, conventions, etc. that are relevant to mortgage securities. Specifically, the

Contractor shall assist Ginnie Mae in researching, developing, organizing, and coordinating creative conference content solutions (e.g., agendas, workshops, attendance composition strategies, delegates, speakers, etc.) for Ginnie Mae sponsored and/or Ginnie Mae participating events of the highest quality. The aforementioned conferences will primarily have an educational focus with the aim of delivering timely, vital information to institutional investors in a clear thought-provoking manner, concerning the performance characteristics of Ginnie Mae securities. In addition to the educational content, the Contractor shall work with Ginnie Mae to achieve a well-balanced audience composition to achieve successful conference sponsorship or participation. The Contractor shall assist Ginnie Mae to achieve an appropriate balance of fund manager, plan sponsors, dealers, brokers, mortgage bankers, investment bankers, practitioners, academics, etc. to ensure that Ginnie Mae related topics are presented and discussed from multiple perspectives. Ginnie Mae's sponsorship and/or participation activities should serve a dual purpose: (a) to educate investors about the latest developments concerning the relevant characteristics of Ginnie Mae securities and (b) to provide an opportunity to meet existing and potential clientele for the purpose of generating new business relationships. In addition, the Contractor shall review drafts of handbooks, APM’s, forms, web content, and other such materials relating to work under this contract.

Line Item 0106

u. Transition-out: The Contractor shall permit the subsequent Contractor to shadow the process, perform the steps listed herein in the contract, inquire about outstanding issues and ask other technical questions and provide all deliverables. The Contractor shall provide Ginnie Mae and the subsequent Contractor a list of all outstanding issues relating to Ginnie Mae Multiclass securities and must facilitate a seamless transition to the subsequent Contract. The Contractor shall also develop, document and execute a transition plan that may be used to transition tasks and materials to an incoming

Contractor, or to the Government. This requirement shall apply to each performance period assigned under the contract. The transition plan will incorporate an inventory of all deliverables under this contract. The plan shall include a schedule of briefings, including dates and time and resources allotted, that will be required to fully transition all materials developed to the incoming Contractor. The plan shall be submitted at least

30 days prior to the expiration date of the current contract.

All Line Items

v. Corrective Action Plan: As described in paragraph E.6, the Contractor shall provide a

Corrective Action Plan for each deliverable that does not meet the Contract’s quality requirements. The Corrective Action Plan shall establish procedures for correcting the defects in the non-conforming deliverable and for improving internal quality control so that future deliverables fully conform with the Contract’s quality requirements.

INFORMATION TECHNOLOGY

The Contractor shall perform all IT-related functions if required in the Statement of Work

(SOW) using a combination of Ginnie Mae Government-furnished Property (GFP) and

Contractor-furnished Property (CFP). The functions described in this statement of work maintaining Ginnie Mae data, various records and databases in a compliant, secure, and efficient manner. The Contractor shall enhance, develop, maintain and manage Ginnie Mae’s proprietary data and automated systems. The Contractor shall provide other necessary support services required by Ginnie Mae. In carrying out these functions, the Contractor shall, unless otherwise proved in Section H of this contract, provide its own automated and/or manual systems to ensure secure access, accurate and timely processing and reporting for each activity covered in the statement of work.

Tasks

The Contractor shall:

(a) Be in compliance with IT security requirements and comply with all terms and conditions of the contract throughout the term of the contract with respect to all data and information technology requirements. The Contractor shall use, maintain, enhance, develop and upgrade all information technology (hardware, software and connectivity) and system documentation under this contract in accordance with federal laws, regulations, and best commercial practices. This includes, but is not limited to, the Federal Information

Security Management Act (FISMA), the Clinger-Cohen Act, the Government Paperwork

Reduction Act, the Government Paperwork Elimination Act, Office of Management and

Budget Circulars A-130, A-127, and A-123, and Department of Housing and Urban

Development regulations, handbooks and policies, applicable Ginnie Mae handbooks, policies, procedures now existing or adopted in the future. The Contractor shall continue to perform all information technology work under this statement of work in accordance with all current and new applicable statutes, regulations, policies or guides as they evolve over the term of the contract.

(b) Review and update system documentation to ensure accuracy, compliance and completeness.