Report to the Ranking Minority

Member, Subcommittee on Housing and

Transportation, Committee on Banking,

Housing, and Urban Affairs, U.S. Senate

United States General Accounting Office

GAO

October 2001 SINGLE-FAMILY

HOUSING

Current Information

Systems Do Not Fully

Support the Business

Processes at HUD's

Homeownership

Centers

GAO-02-44
Page i GAO-02-44 Homeownership Center Information Systems

Letter 1

Results in Brief 2

Background 4

Homeownership Centers Use Numerous Systems to Support Their

Operations 8

Current Information and Telephone Systems Do Not Fully Support

Center Operations 12

HUD’s Plans to Improve Its Single-Family Information Systems Are

in the Early Stages 21

Conclusions 24

Recommendations for Executive Action 25

Agency Comments and Our Evaluation 26

Scope and Methodology 27

Appendix I Objectives, Scope, and Methodology 29

Appendix II Comments From the Department of Housing and

Urban Development 31

Appendix III GAO Contacts and Staff Acknowledgments 34

GAO Contacts 34

Acknowledgments 34

Tables

Table 1: Seven Major Single-Family Information Systems Used at

HUD’s Homeownership Centers 9

Table 2: Steps the Four Homeownership Centers Follow Each

Quarter to Target Lenders for Monitoring Reviews 14

Figures

Figure 1: Single-Family Information Systems That Support the

Origination of FHA-Insured Loans 11

Contents
Page ii GAO-02-44 Homeownership Center Information Systems

Abbreviations

ARRTS Approval/Recertification/Review Tracking System

CHUMS Computerized Homes Underwriting Management System

FHA Federal Housing Administration

FHAC FHA Connection

HUD Department of Housing and Urban Development

NW Neighborhood Watch

OMB Office of Management and Budget

SAMS Single Family Acquired Asset Management System

SFDW Single Family Data Warehouse

SFIS Single Family Insurance System

URS Underwriting Reports System
Page 1 GAO-02-44 Homeownership Center Information Systems

October 24, 2001

The Honorable Wayne Allard

Ranking Minority Member, Subcommittee

 on Housing and Transportation

Committee on Banking, Housing,

 and Urban Affairs

United States Senate

Dear Senator Allard:

The Department of Housing and Urban Development’s (HUD) Federal

Housing Administration (FHA) relies on more than 20 different

information systems as it annually insures billions of dollars in home

mortgage loans made by private lenders. FHA’s mission is to expand

homeownership in the United States by assuming 100 percent of the risk

for mortgages it insures. To carry out its mission, FHA relies on private

lenders to determine borrowers’ creditworthiness and to make and fund

loans. FHA also relies on contractors to help assess lenders’ compliance

with its requirements and to manage and sell the properties it acquires

through foreclosure. Without careful oversight of these lenders and

contractors, FHA is vulnerable to mismanagement and fraud. The

information systems FHA uses to collect and analyze data on FHA-insured

loans and foreclosed properties are crucial to its oversight activities.

However, the White House’s fiscal year 2002 budget blueprint stated that

inadequate information systems have weakened FHA’s ability to monitor

lenders. FHA’s information and telephone systems are also essential to its

efforts to provide customer service to lenders, borrowers, and the general

public.

In 1997, HUD issued its 2020 Management Reform Plan, which provided

for downsizing and reforming the Department, including its single-family

mortgage insurance program. As part of its 2020 reforms, HUD

consolidated the single-family program’s field activities from 81 field

offices to 4 new regional homeownership centers. This consolidation

significantly altered the way FHA’s single-family program operated. One

affected area was information systems, which had been established to

support the old field office structure and had to be adapted to support the

operations of the new homeownership centers.

This is the second of two reports responding to your request that we

review HUD’s implementation of the homeownership center concept. The

United States General Accounting Office

Washington, DC 20548
Page 2 GAO-02-44 Homeownership Center Information Systems

first, issued in July 2001, discussed HUD’s efforts to resolve human capital

issues related to staffing, training, and oversight of contractors at the

homeownership centers.1

 This report focuses on the single-family

information systems used at the centers. Specifically, as agreed with your

office, we (1) describe the information systems used by the

homeownership centers, (2) analyze the effectiveness of these systems in

supporting the centers’ current operations, and (3) assess HUD’s plans for

the information systems used by the centers.

To address these issues, we interviewed officials at HUD headquarters and

managers and information system users at all four of the Department’s

homeownership centers, located in Atlanta, Georgia; Denver, Colorado;

Philadelphia, Pennsylvania; and Santa Ana, California. We also collected

and analyzed documents related to FHA’s single-family information

systems, FHA’s single-family business processes, and HUD’s plans for

FHA’s single-family information systems. Appendix I provides additional

details on our scope and methodology.

To oversee the work of lenders and contractors and provide customer

service, FHA’s homeownership centers use more than 20 different

information systems implemented by HUD headquarters, including 7 major

systems; databases developed by the centers; and a variety of different

telephone systems. Some of these technologies were implemented before

FHA revised its single-family business practices by forming the centers

and transferring some responsibilities to lenders and contractors. Others

were implemented afterward, in large part to help FHA staff focus more on

overseeing lenders and contractors and on providing customer service.

For example, one of the seven major information systems the centers use,

the Computerized Homes Underwriting Management System (CHUMS),

was implemented in 1985 for FHA staff to track their processing of singlefamily mortgage insurance applications from receipt to approval. After

FHA delegated many of these responsibilities to lenders, HUD

implemented another major information system, the FHA Connection, to

give lenders access to the information from CHUMS and other FHA

systems that the lenders need to originate and service loans. Furthermore,

as the centers have increased their reliance on contractors, they have

developed databases to help them monitor contractors’ performance. To

 1

Single-Family Housing: Better Strategic Human Capital Management Needed at HUD’s

Homeownership Centers (GAO-01-590, July 26, 2001).

Results in Brief
Page 3 GAO-02-44 Homeownership Center Information Systems

provide customer service, the centers have acquired a variety of different

telephone systems—systems that distribute telephone calls and generate

management reports on workload.

Although homeownership center staff have developed specialized

databases to improve their ability to meet their responsibilities, neither

FHA’s single-family information systems nor its telephone systems

adequately support the centers’ efforts to oversee lenders and contractors

and provide customer service. For example:

• Effective oversight of lenders is critical to minimizing FHA’s insurance

risk, yet center staff must collect information from many different sources

to target high-risk lenders for review and to identify and investigate

potential fraud cases. This creates a greater risk of error and increases the

likelihood that problems will go unnoticed.

• FHA’s single-family information systems do not readily provide

information that the centers need to monitor contractors who are paid

millions of dollars to manage and sell the single-family properties HUD

acquires when borrowers default on loans. For example, the centers’

systems do not generate reports needed to monitor these contractors’ sale

of properties under two special programs that allow police officers and

teachers to purchase at a discount HUD-owned homes located in certain

neighborhoods. HUD’s Inspector General identified evidence of potential

fraud in these programs, causing HUD to suspend the programs for 120

days.

• The telephone systems at two of the four centers do not provide the

detailed information, such as total call volume and peak usage periods,

that staff need to provide efficient customer service.

To better ensure that FHA’s single-family information systems support

current center operations, HUD is developing a systems blueprint, or

enterprise architecture.2

 HUD’s Office of the Chief Information Officer

plans to finish defining the current capabilities of FHA’s information

systems by the fall of 2001 and to have partially defined the desired

capabilities of all the Department’s information systems by January 2002.

Although HUD has made progress in developing an enterprise

architecture, it has not yet put in place certain architecture management

 2

An enterprise architecture is an essential tool for effectively and efficiently reengineering

business processes and for implementing and evolving their supporting systems. It defines

an organization’s current (baseline) and desired (target) systems operating environments

and provides a road map for moving from one to the other.
Page 4 GAO-02-44 Homeownership Center Information Systems

controls recommended by the Chief Information Officers Council,

including forming an executive steering committee to oversee the

enterprise architecture. Concurrent with the development of an enterprise

architecture, HUD’s Office of Single Family Housing has developed plans

to replace four systems that currently support the origination of FHAinsured loans with one system that has greater capabilities. Prior to laying

the groundwork for a new loan origination system, the Office of Single

Family Housing did not assess the current loan origination processes in

place at the centers. It decided in August 2001, however, to delay

acquisition of the new system until after it has reviewed the entire loan

origination process. Since HUD has not yet completed its enterprise

architecture or examined its single-family operations, it is too soon to

assess whether these efforts will fully address the centers’ information

system needs.

Given the multibillion-dollar insurance risk that FHA assumes annually, it

is critical that the agency’s information and telephone systems help it

carry out its responsibilities efficiently and effectively. However, the

information and telephone systems in use at FHA’s four homeownership

centers do not support current business processes. Although center staff

have developed methods to cope with the systems’ weaknesses (often by

performing time-consuming, manual analyses), problems with the current

information and telephone systems make it difficult for the staff to oversee

lenders and contractors and provide timely and consistent customer

support. This report contains recommendations designed to improve the

usefulness of the centers’ information and telephone systems. HUD did not

take issue with any of our findings or factual statements and only

expressed concerns about one of our recommendations.

HUD’s homeownership centers support the single-family activities of

FHA.3

 FHA insures lenders against losses on mortgages for single-family

homes. Lenders usually require mortgage insurance when a homebuyer

makes a down payment of less than 20 percent of the value of the home.

Thus, FHA plays a particularly large role in certain market segments,

including loans to low-income borrowers and first-time homebuyers,

whose cash for down payments is likely to be limited. During fiscal year

2000 alone, FHA endorsed more than 900,000 mortgages totaling about $94

 3

FHA is a unit within HUD, and the Assistant Secretary for Housing is also the Federal

Housing Commissioner.

Background
Page 5 GAO-02-44 Homeownership Center Information Systems

billion. As of June 2001, the total value of HUD’s single-family insured

portfolio was almost $498 billion. If a borrower defaults and the lender

subsequently forecloses on an FHA-insured mortgage, the lender can file

an insurance claim with FHA for the unpaid balance of the loan. When

FHA reimburses a lender for a defaulted loan, HUD receives the deed to

the foreclosed property. HUD, in turn, sells this property via one of its

management and marketing contractors to recoup as much of FHA’s

reimbursement costs as possible.

In the past, HUD carried out its single-family activities—such as

processing mortgage insurance and overseeing lenders participating in

FHA’s programs—in 81 separate field offices. As part of its 2020

Management Reform Plan announced in 1997, HUD consolidated the

single-family housing activities of its 81 field offices at 4 homeownership

centers. According to the 2020 plan, the homeownership centers would,

among other things, (1) improve service to lenders through automated

systems; (2) provide faster, more uniform, and more efficient services to

lenders, borrowers, and industry clients; and (3) improve HUD’s risk

assessment, loss mitigation,4

 and quality assurance activities.

The consolidation of activities at the four centers was carried out in

phases and was substantially completed in December 1998. The

homeownership centers are located in Atlanta, Georgia; Denver, Colorado;

Philadelphia, Pennsylvania; and Santa Ana, California, and they report

directly to HUD’s Deputy Assistant Secretary for Single Family Housing.

They perform a variety of activities that fall within three basic functions:

• Lender oversight—Many activities formerly performed by FHA staff have

been delegated to lenders, increasing the importance of the centers’

oversight of lenders’ performance. The centers are responsible for granting

direct endorsement authority to lenders participating in FHA programs.5

Before granting lenders direct endorsement authority, the centers evaluate

mortgages that the lenders have submitted as test cases using FHA’s

underwriting requirements. To ensure lenders’ continued compliance with

FHA’s mortgage requirements, the centers use two monitoring tools: (1)

desk audits of the underwriting quality of individual loans already insured

 4

FHA’s loss mitigation program seeks, among other things, to reduce the number of

foreclosures by using alternatives to foreclosure, such as loan modifications.

5

Direct endorsement authority is the ability to underwrite loans and determine their

eligibility for FHA mortgage insurance without HUD’s prior review.
Page 6 GAO-02-44 Homeownership Center Information Systems

by FHA, known as technical reviews, and (2) on-site evaluations of

lenders’ operations, known as lender reviews.

• Contractor oversight—As many activities formerly performed by FHA staff

have been transferred to contractors, the centers have become responsible

for overseeing contractors’ performance. For instance, the centers monitor

contractors hired to review loan case files and issue mortgage insurance

certificates. The centers also oversee contractors hired to manage and

market acquired single-family properties, inspect 10 percent of the

properties handled by each of the management and marketing contractors,

and review 10 percent of the management and marketing contractors’

property case files each month.

• Customer service—Each center has designated customer service staff who

respond to requests from the general public (for basic information on HUD

and FHA programs) and industry clients (for support on FHA programs,

services, and information systems). Designated program staff also provide

more advanced customer service, responding to technical questions on

loan underwriting and property disposition. In total, the centers average

almost 90,000 telephone calls a month.

HUD recognized that its decision to consolidate FHA’s single-family field

activities at four homeownership centers would dramatically change its

business processes and require changes to its single-family information

systems. In its April 1998 assessment of the homeownership centers’

susceptibility to waste, fraud, abuse, and mismanagement, HUD noted the

proliferation of financial management systems within the Department and

the need to replace them with an integrated, state-of-the-art system.6

 It also

observed that two major single-family information systems would have to

be modified to reflect the new business processes at the centers. Despite

this recognition, FHA’s failure to enhance its information technology

systems to support its business processes more effectively was cited as a

material weakness in the HUD Inspector General’s last three reports on

FHA’s financial statements.7

 For example, according to the Inspector

General’s report on FHA’s fiscal year 2000 financial statements, FHA’s

inability to acquire more modern information technology has deterred its

 6

Single Family Homeownership Centers Front End Risk Assessment, Office of Single

Family Housing, Apr. 27, 1998.

7

HUD’s Inspector General contracts with independent public accountants to audit FHA’s

financial statements.
Page 7 GAO-02-44 Homeownership Center Information Systems

efforts to be a more efficient and effective housing credit provider.8 Also

according to the report, FHA will be forced to use less efficient processes

to collect and report on data until a comprehensive new integrated

information technology environment is implemented.

A best practice used in the public and private sectors to improve existing

information systems and develop new ones efficiently and effectively is

the development, maintenance, and implementation of an enterprise

architecture, also known as an information technology architecture.9

 The

Clinger-Cohen Act requires agency chief information officers to develop,

maintain, and facilitate the implementation of sound and integrated

information technology architectures.10 An agency’s architecture should be

an integrated framework for evolving or maintaining existing information

technology and acquiring new technology to achieve the agency’s strategic

and information resource management goals and better support its

business needs. According to the Office of Management and Budget

(OMB), to develop an enterprise architecture, an agency should identify

and document its business processes,11 information flows and

relationships, applications, data descriptions and relationships, and

technology infrastructure. OMB has also issued guidance that requires an

agency’s information systems investments to be consistent with its

architecture. In addition, the federal Chief Information Officers Council, in

collaboration with us and OMB, has published a framework that defines

effective architecture management controls that successful organizations

practice.12

 8

Audit of the Federal Housing Administration’s Fiscal Year 2000 Financial Statements

(2001-FO-0002, Mar. 1, 2001).

9

An enterprise architecture provides a comprehensive blueprint that systematically details

the breadth and depth of an organization’s mission-based mode of operation. Such an

architecture provides details first in logical terms, such as defining business functions,

providing high-level descriptions of information systems and their interrelationships, and

specifying information flows; and second in technical terms, such as specifying hardware,

software, data, communications, security, and performance characteristics.

10Public Law 104-106, section 5125, 110 Stat. 684 (1996).

11Enterprise architectures should contain a business process component that describes the

core business processes supporting the organization’s mission. The business process

component of the architecture must be developed by senior program managers in

conjunction with information technology managers.

12Chief Information Officers Council, A Practical Guide to Federal Enterprise

Architecture, Version 1.0 (February 2001).
Page 8 GAO-02-44 Homeownership Center Information Systems

While more than 20 different information systems support single-family

operations, the homeownership centers currently rely on 7 major

information systems to oversee lenders and contractors and provide

customer service. These seven information systems are a combination of

older systems acquired to support business processes in place before the

centers were formed and newer systems implemented to better support

current center operations and improve the usefulness of the older systems.

In addition to these major systems, the centers have developed specialized

databases to help them fulfill their missions. Also, each of the four centers

uses a different telephone system to distribute calls and track workload

data.

The seven major information systems the centers use are a combination of

legacy systems and newer systems implemented to make better use of

these legacy systems and to better support the centers’ current

operations.13 Information on the seven systems is shown in table 1.

 13A legacy system is an old system with which new technology must be compatible.

Homeownership

Centers Use

Numerous Systems to

Support Their

Operations

Systems Used Are a

Combination of Major

Systems and Less Complex

Databases Developed to

Address Gaps
Page 9 GAO-02-44 Homeownership Center Information Systems

Table 1: Seven Major Single-Family Information Systems Used at HUD’s Homeownership Centers

Information system Acronym Purpose Types of uses Year implemented

Single Family

Insurance System

SFIS Contains detailed case information on all

FHA-insured single-family properties

Used to research the history of

an FHA-insured loan

1983

Computerized

Homes Underwriting

Management

System

CHUMS Records the processing of single-family

mortgage insurance applications, from

initial receipt through endorsement

Used to process applications for

FHA insurance

1985

Single Family

Acquired Asset

Management

System

SAMS Tracks acquired single-family properties

from acquisition to sale

Used to manage properties

acquired through foreclosure

1995

Approval/

Recertification/

Review Tracking

System

ARRTS Tracks the status of application and

recertification packages received from

lenders and reviews conducted of

approved lenders

Used to approve and recertify

lenders and to track reviews of

lenders

1995

Single Family Data

Warehousea

SFDW Provides critical single-family business

data from eight single-family systems

Used to obtain case-level

information covering all the

processes in the mortgage

insurance life cycle

1996

FHA Connection FHAC Gives approved FHA lenders real-time

access to FHA systems

Used by lenders to originate and

service loans

1997

Neighborhood

Watch

NW Displays loan performance data by loan

types and geographic areas

Used to monitor lender default

rates

1998

Note: Many other systems support single-family operations. They include the Institution Master File,

which is a list of institutions that have been approved to participate in FHA’s mortgage insurance

programs, and the Consolidated Single Family Statistical System, which is HUD’s comprehensive

reporting system for the FHA single-family mortgage portfolio.

a

HUD officials do not consider the Single Family Data Warehouse to be an information system in the

traditional sense because it is a warehouse that pulls data from other information systems. We

included it in the list of major information systems, however, because it is one of the major tools that

the centers use to accomplish their functions.

Source: HUD data.

Of these seven systems, three are legacy systems that were implemented

well before the homeownership centers were established—the Single

Family Insurance System (SFIS), the Computerized Homes Underwriting

Management System (CHUMS), and the Single Family Acquired Asset

Management System (SAMS). Since these three legacy systems were

implemented, FHA’s single-family business processes have changed

dramatically. For instance, when CHUMS was implemented, FHA staff

were responsible for all aspects of FHA’s mortgage insurance operations,

such as evaluating and processing applications for mortgage insurance.

Since then, FHA has increasingly delegated responsibility for the loan

underwriting process to lenders, and FHA staff have assumed the role of

verifying the underwriting process for completeness and compliance with
Page 10 GAO-02-44 Homeownership Center Information Systems

FHA policies and regulations.14 Similarly, when SAMS was implemented,

FHA staff were responsible for managing and selling properties acquired

through foreclosure. Since the formation of the centers, the management

and sale of these properties has been contracted out.

The four newer systems that the centers use were implemented to improve

the usefulness of the legacy systems and better support the centers’

current operations. HUD headquarters created the Single Family Data

Warehouse to allow staff to query data from CHUMS, SAMS, and several

other smaller legacy systems. Updated monthly, it provides historical caselevel information that staff can use to complete trend analyses. As more

responsibilities were delegated to lenders, headquarters created the FHA

Connection to give lenders direct access to information in CHUMS and

other FHA systems. Lenders can use the FHA Connection to request an

FHA case number and assign an appraiser, among other things.

Headquarters implemented the Approval/Recertification/Review Tracking

System (ARRTS) and Neighborhood Watch to help FHA staff monitor

lenders’ performance. Figure 1 illustrates the number of information

systems used to support just one aspect of the centers’ operations, the

origination of FHA-insured loans.

 14Underwriting refers to a risk analysis that uses information collected during the

origination process to decide whether to approve a loan.
Page 11 GAO-02-44 Homeownership Center Information Systems

Figure 1: Single-Family Information Systems That Support the Origination of FHA-Insured Loans

Note: The support systems perform a variety of functions not covered by the major systems, including

providing information on the claim or default history of an individual, tracking insurance claims filed,

and listing institutions that have been approved to participate in FHA’s mortgage insurance programs.

Source: HUD’s Office of Single Family Housing.

In addition to the information systems provided by HUD headquarters,

staff at each of the four homeownership centers have developed

databases, including spreadsheets, to help them perform tasks that the

headquarters-provided systems do not effectively support. The Denver

center has developed 15 databases and the Philadelphia center 10

databases to enhance their staffs’ ability to track various program

functions. One of these databases was designed to help FHA staff oversee

contractors hired to perform desk audits of the underwriting quality of

individual loans already insured by FHA, known as technical reviews. In

our April 2000 report on lender oversight, we reported that the centers

lacked the necessary information systems to readily identify and track the
Page 12 GAO-02-44 Homeownership Center Information Systems

technical review ratings of new direct endorsement lenders.15 Since our

report was issued, all four centers have implemented the Underwriting

Reports System (URS), a Microsoft Access database developed by the

Denver center that, among other things, tracks the performance of lenders

with direct endorsement authority and the performance of the contractors

hired to perform technical reviews. The centers have also started using the

Inspection Tracking System, another Microsoft Access database developed

by the Denver center, to monitor the performance of contractors hired to

manage and market the properties HUD acquires through foreclosure. This

system is used to assign cases to property inspectors hired to inspect 10

percent of the properties handled by each of the management and

marketing contractors and to track the results of their inspections.

Each homeownership center was responsible for acquiring its own

telephone system to meet the center’s communications needs and track

workload data. As a result, each center uses a different system. These

telephone systems distribute calls to customer service and program staff

and track data on calls received. The centers use the reports that these

systems generate to manage their customer service workload. For

example, the Philadelphia center uses 10 reports to create management

and performance charts that show, among other things, the total number

of calls answered daily by the center in a given month and the average

number of calls each individual answered per day in a given month. In

addition, the Denver center uses weekly reports on abandoned calls and

call activity to manage its workload. Each center provides headquarters

with monthly data on the number and types of calls received.

The willingness of the homeownership centers’ staff to learn and use

multiple information systems and develop specialized databases to meet

their responsibilities demonstrates a commitment to accomplishing

critical tasks. However, the information and telephone systems the centers

use have not kept pace with changes in single-family business processes

and workload. Therefore, these systems do not adequately support the

centers’ efforts to oversee lenders and contractors and provide customer

service. Although the systems collect wide-ranging data on single-family

 15Single-Family Housing: Stronger Oversight of FHA Lenders Could Reduce HUD’s

Insurance Risk (GAO/RCED-00-112, Apr. 28, 2000).

Different Telephone

Systems Are Used to

Provide Customer Service

Current Information

and Telephone

Systems Do Not Fully

Support Center

Operations
Page 13 GAO-02-44 Homeownership Center Information Systems

operations, center staff often must use multiple systems or manipulate the

data in order to obtain the information needed to carry out their missions.

For example, they must use data from multiple sources to identify highrisk lenders for monitoring reviews and identify and investigate potential

fraud cases. Further, the information systems do not readily provide

center staff with all the data they need to monitor contractor performance

and manage contracting costs. Regarding customer service, inadequate

telephone systems and the limited reporting capabilities of some

information systems have made it difficult for center staff to provide

service to both their external and internal customers.

FHA’s single-family information systems do not effectively help center

staff target high-risk lenders for review or identify and investigate

potential fraud cases—two activities integral to lowering insurance risk. In

response to our recommendations, HUD recently incorporated risk factors

when monitoring the performance of lenders. Center staff must now

consider factors such as lenders’ default rates and loan volume,

borrowers’ complaints, and reports of fraudulent activity when selecting

lenders for review. However, they must go to multiple sources to obtain

this information. As shown in table 2, the centers must compile data from

three information systems and several nonautomated sources in order to

develop the list of lenders to be reviewed each quarter. Although center

staff are able to identify lenders for review using these multiple sources,

center staff could logically save valuable time each quarter and be better

assured that they are identifying the lenders of highest risk if this

information were more integrated.

High-Risk and Fraudulent

Lenders Are Not Easily

Identified
Page 14 GAO-02-44 Homeownership Center Information Systems

Table 2: Steps the Four Homeownership Centers Follow Each Quarter to Target Lenders for Monitoring Reviews

Step Information source

Identify the 200 lenders in the center’s jurisdiction with the highest default and claim

rates and export the data to a spreadsheet

Neighborhood Watch

Add the following information about the 200 lenders to the spreadsheet:

Date of last review to identify the lender branches that have been reviewed

during the 18-month period prior to the beginning of the quarter

Neighborhood Watch

Percentage of overall “poor” ratings each lender received as a result of

postendorsement technical reviewsa

Neighborhood Watch

Information on any complaints, referrals, or documented evidence of

irregularities related to the lender

ARRTS and various nonautomated sources

Add the following types of lenders to the spreadsheet:

Lenders randomly selected from the universe of all FHA-approved lenders each

fiscal yearb

HUD headquarters

203(k) lenders targeted for reviewcNeighborhood Watch

Title I lenders targeted for reviewdBorrower complaints and referralse

Note any lenders that have experienced a spike in volume—a 100 percent increase

in origination volume over a 12-month period

CHUMS

Analyze the data and prioritize the lenders for review

a

Postendorsement technical reviews are desk audits performed to evaluate the underwriting quality of

loans insured by FHA.

b

No more than 15 percent of the lenders that a center reviews each year can be randomly chosen

lenders.

c

The 203(k) Home Rehabilitation Mortgage Insurance program combines, in one insured mortgage,

the funds needed to purchase and rehabilitate a single-family home.

d

The Title I mortgage insurance program insures loans used to finance property improvements or the

purchase of manufactured homes.

e

Staff must rely on borrower complaints and referrals, as well as other factors, to identify Title I

lenders for review because there is no computerized monitoring of the Title I program in place.

Source: HUD’s Office of Single Family Housing.

Not only do FHA’s single-family information systems not facilitate the

identification of high-risk lenders, they also do not help the centers

identify predatory lending schemes before they become a major problem.

Property flipping—buying a home at a low price and reselling it at an

inflated price within a short time, often after making only cosmetic

improvements—is one example of fraud in FHA loan origination activities.

While property flipping is not always illegal, most known FHA cases

involved fraudulent documentation provided by the lender and/or

appraiser, which is illegal. The HUD Inspector General testified in June

2000 that these fraudulent property flipping activities could have been

more quickly identified and the losses minimized had appropriate controls
Page 15 GAO-02-44 Homeownership Center Information Systems

been in place.16 Similarly, according to the HUD Inspector General’s report

on FHA’s fiscal year 2000 financial statements, FHA must continue to

place more emphasis on early warning and loss prevention for singlefamily insured mortgages, including increasing its use and analysis of

available data to monitor lenders.17 Although the report states that FHA

has improved its early warning and loss prevention processes, it notes that

the Inspector General has still found a high risk of fraud concentrated in

certain geographic areas.

FHA’s single-family information systems also do not facilitate investigation

of predatory lending schemes once they have been identified. To protect

FHA borrowers from abusive mortgage practices such as illegal property

flipping, HUD has designated certain low-income neighborhoods with

higher-than-normal foreclosure rates as “hot zones.” Under this new

initiative, applications for FHA-insured loans in these hot zones, located in

Atlanta, Baltimore, Chicago, Los Angeles, and New York, receive increased

scrutiny. Because the centers’ current information systems were not

designed to support this new initiative, the centers had to develop the

following manual procedures for identifying potential fraud cases and

tracking the results of property flip checks:

• The centers have to perform up to three different searches to determine if

properties for which FHA insurance has been requested have been flipped.

Center staff search a commercial system containing property deed

information, state and county web sites containing information on

property transactions, and SAMS to determine if a property has been sold

twice within 12 months, with the latest sales price exceeding the prior

sales price by more than 30 percent. When searching each system or site,

HUD staff must enter variations of the address (e.g., 135 N. Main, 135

North Main, and 135 N Main) to ensure a thorough search.

• Some of the reports the centers need to review hot zone cases have to be

generated manually. For example, to create a list of properties to be

checked in one hot zone, an Atlanta official has to pull two standard

CHUMS reports—one listing cases by county and one listing cases by

state—and merge them outside the system. Because it is not possible to

extract information from ARRTS by zip code, a Santa Ana official must

 16Statement of Susan Gaffney, Inspector General, Department of Housing and Urban

Development Before the United States Senate Permanent Subcommittee on

Investigations, Committee on Governmental Affairs, June 30, 2000.

172001-FO-0002.
Page 16 GAO-02-44 Homeownership Center Information Systems

pull up information for the entire center, check each entry in the relevant

state to determine if it is in one of the hot zone zip codes, and manually

prepare a list.

• Once they have researched hot zone cases, the centers use a special

database to track the results of their reviews. The Philadelphia center

developed the Predatory Lending Monitoring System for use by all the

centers to ensure that the results of their reviews in the designated hot

zones are uniformly recorded. This system records case information and

generates reports for HUD headquarters.

It is a credit to the centers’ staff that they have developed these manual

processes to investigate potential fraud. Automating all or part of these

processes, however, might enable the homeownership centers to extend

their flip checks beyond the five hot zones and prevent additional fraud.

Although the centers have expanded their use of contractors, their

information systems do not readily provide some of the performance data

needed to monitor these contractors or the procurement and financial

data needed to manage contract costs. For instance, center staff cannot

always easily obtain the data they need to monitor endorsement

contractors hired to review loan case files and issue mortgage insurance

certificates. The Atlanta official responsible for overseeing these

contractors has developed spreadsheets to help him use CHUMS data

more effectively to gauge contractors’ performance, but to obtain and

analyze the data he must go through a multi-step process. He first transfers

standard CHUMS hard-copy reports to a disk for analysis. He then creates

spreadsheets that highlight weekly production trends, such as how many

days it takes the contractor’s staff, on average, to process mortgage

insurance applications and how many errors the contractor’s staff have

made. He uses this information to determine where bottlenecks are

occurring and whether the endorsement contractor is making the same

mistakes repeatedly. This effort is commendable, but it could be avoided if

the CHUMS system readily generated this information.

Center staff also cannot readily obtain and analyze data needed to monitor

management and marketing contractors—contractors paid millions of

dollars to manage and sell HUD’s single-family acquired properties. The

homeownership centers have a number of resources upon which they can

draw to aid them in making monthly assessments of these contractors’

performance. For instance, HUD hired third-party contractors to inspect

10 percent of the properties handled by each of the management and

marketing contractors and to review 10 percent of the management and

Systems Do Not Totally

Support Centers’ Efforts to

Assess Contractor

Performance or Manage

Contracting Costs
Page 17 GAO-02-44 Homeownership Center Information Systems

marketing contractors’ property case files each month by following a HUD

checklist. The centers also use data from SAMS in making their monthly

assessments. However, the following examples illustrate that very little of

the data the centers receive is automated in a way that facilitates analysis:

• In fiscal years 1999 and 2000, the centers received the results of thousands

of property inspections and reviews of property case files. However, a

recent HUD Inspector General report on single-family property disposition

activities at the Philadelphia center found that the results of these

inspections and file reviews are not automated in a way that enables staff

to use them effectively to monitor the performance of management and

marketing contractors.18 According to the report, deficiencies identified by

these inspections and reviews were not being included in monthly

assessment reports because center staff did not have the time to analyze

fully the results of third-party monitoring. In some cases, the staff were not

even reviewing the reports because they did not understand the results

and did not know how to use them as part of the overall monitoring

process. As a result, the Inspector General concluded that the center

needs to strengthen its monitoring of management and marketing

contractors to ensure that performance deficiencies identified by thirdparty contractors are reported and tracked.

• Several officials whom we interviewed at the Philadelphia center

questioned the usefulness of the monthly reports they received assessing

the management and marketing contractors’ property case files. According

to one center official, the summary reports provided by the original

contractor were so bad that center staff used only the last page of the

report, which indicated the number of files reviewed. In September 2000,

the Department hired a new national contractor to conduct operational,

management, and performance reviews of each management and

marketing contractor. This new contractor is required to develop and

maintain a national database file that can be used to perform detailed

analyses of the results of the reviews at various levels of risk.

• Center staff cannot obtain from SAMS the information they need to

monitor certain aspects of management and marketing contractors’

performance. One of the responsibilities the centers have delegated to

these contractors is the sale of foreclosed properties under the Officer

Next Door and Teacher Next Door programs. Under these programs, HUD

allows police officers and teachers to purchase HUD-owned homes at 50

 18Philadelphia Homeownership Center Single Family Disposition Activities (2001-PH0803, June 14, 2001).
Page 18 GAO-02-44 Homeownership Center Information Systems

percent off the list price in HUD-designated revitalization neighborhoods.19

According to one center official, SAMS does not generate reports that list

the properties sold through these two programs. Therefore, to oversee the

programs, the center must rely on its management and marketing

contractors to provide reports listing the properties sold under these

programs. Work by HUD’s Inspector General indicates that the centers’

oversight of the Officer/Teacher Next Door programs has not been

adequate. In two recent reports, the Inspector General concluded that the

two programs were at high risk for noncompliance and abuse by

homebuyers and that HUD had not established adequate management

controls over the programs.20 It found, among other things, that

homebuyers had abused the programs by not fulfilling occupancy

requirements and thus received unearned discounts of about $735,000. In

response to the first report, HUD imposed an immediate 120-day

suspension of sales under the Officer/Teacher Next Door programs,

effective April 1, 2001. On August 1, 2001, HUD announced that it would

resume these programs after having taken some corrective measures to

prevent homebuyer fraud, including a review of program procedures.

In addition to the difficulties previously discussed, the homeownership

centers also cannot readily obtain the procurement and financial data they

need to manage contract costs, which is essential to contractor oversight.

In order for the centers to manage their contracting costs, they must know

how much they are obligating for and spending on contracts. As the

following examples illustrate, however, HUD’s information systems do not

readily provide the centers with contract obligation and expenditure data:

• The centers could not readily provide us with the amounts they had

obligated for single-family contracts in fiscal years 1999 and 2000. The

Atlanta center provided us with the most complete information—reports

from HUD’s procurement system that listed awarded active contracts for

different time periods during the 2 fiscal years. The other three centers

provided fewer reports from HUD’s procurement system and/or estimates.

For example, staff at the Philadelphia center manually compiled lists of

 19Revitalization neighborhoods are neighborhoods that offer significant opportunities for

local economic growth and are, therefore, receiving targeted public- and private-sector

assistance.

20Interim Results – Officer/Teacher Next Door Program (2001-AT-0801, Feb. 14, 2001) and

Nationwide Audit Results on the Officer/Teacher Next Door Program (2001-AT-0001, June

29, 2001).
Page 19 GAO-02-44 Homeownership Center Information Systems

the contracts the center had awarded for the 2 fiscal years. The staff found

this information to be useful and told us they intended to keep the lists

current. Later, we were able to request and analyze data from HUD’s

procurement system to determine how much HUD headquarters and each

of the homeownership centers had obligated for single-family contract

support in fiscal years 1999 and 2000.

• HUD headquarters took approximately 3 months to provide us information

on the funds expended on different types of major single-family contracts

during fiscal years 1999 and 2000. When provided, the information did not

seem to match the obligation data that we had received and analyzed.

HUD initially sought to get the expenditure information from the centers

before finally retrieving the data from its financial system. The information

HUD provided from this system, however, appears incomplete. Our

analysis of data from HUD’s procurement system showed that HUD

obligated about $465 million for one major single-family contract type,

management and marketing services, in fiscal years 1999 and 2000. Yet, the

data HUD provided from its financial system showed that expenditures for

all major single-family contract types during the 2 fiscal years totaled only

about $44 million.

The centers’ ability to provide service to their external and internal

customers has been hindered by inadequate telephone systems and the

limited reporting capabilities of some information systems. While the

centers’ telephone systems generate a number of reports, they do not

provide all the information needed to manage the centers’ customer

service workload. For example, according to the branch chief at

Philadelphia’s customer service call center, the center’s telephone system

does not produce any information showing the peak usage times—the

times of day that generate the highest volume of phone calls. The Atlanta

center director also expressed concern about his ability to track the total

number of calls coming into the center. The center’s customer service

telephone system tracks the number of calls the center receives on its tollfree number, but the calls made directly to program staff, which represent

an estimated 25 percent of the center’s call volume, cannot be easily

tracked. In addition, the centers’ telephone systems do not allow

telephone calls to be transferred between centers. Finally, because of

telephone network inadequacies, more than 14,000 single-family calls were

blocked in fiscal year 2000.

In October 2000, the Office of Single Family Housing hired a contractor to

assess the single-family toll-free number information systems and

operations and identify a more efficient and cost-effective means of

Inadequate Telephone

Systems and the Limited

Reporting Capabilities of

Some Information Systems

Reduce the Centers’ Ability

to Provide Customer

Service
Page 20 GAO-02-44 Homeownership Center Information Systems

providing customer service. In its March 2001 report, the contractor

concluded that some of the single-family telephone systems were strained

to the limit and that the systems in place would not provide the services

that would be needed in the future. It recommended just one single-family

toll-free number for the centers and a tracking system that would provide

information on each interaction with the public and include responses to

frequently asked questions. According to the Associate Deputy Assistant

Secretary for Single Family Housing, the contractor’s recommendations

are still under consideration.

The centers’ information systems also do not effectively support their

customer service activities, for they do not allow center staff to generate

easily some of the reports their internal customers—center and

headquarters managers—need to manage center operations. According to

an August 2000 assessment of HUD’s loan origination systems needs, the

extensive number of reports produced by the current information systems

that support the loan origination process do not accurately serve the new

FHA business model. Also, an overly rigid reporting process hinders staff’s

ability to meet their responsibilities. For example, reports are delivered in

hard copy on predetermined reporting schedules, and staff must enlist

programming help if they want to specify reporting parameters. During our

visits to the four centers, we found the following examples of center staff

going to great efforts to produce needed reports:

• Staff at two of the four centers must generate reports manually because,

while CHUMS has been modified to produce some standard reports by

center, it continues to generate other reports by field office only. For a

CHUMS user in Philadelphia to prepare a monthly report that shows

whether the center is meeting its performance goals, the user must print

out a standard report that provides information by field office and enter

data for each of the 24 field offices within the center’s jurisdiction into a

spreadsheet. It takes up to 1 full day each month to prepare this report.

Similarly, the CHUMS user in Santa Ana responsible for generating

monthly management reports spends 1 day each month manually

summarizing data on the 16 field offices in the center’s jurisdiction.

According to single-family officials, HUD plans to automate part of this

process in fiscal year 2002.

• Center staff must print out SAMS reports for each management and

marketing contract area in the center’s jurisdiction in order to supply

monthly data to headquarters on the HUD-owned properties for which the

center is responsible. Since 6 of the 16 contract areas fall within Santa

Ana’s jurisdiction, the center must print out reports for each of the 6 areas

each month.
Page 21 GAO-02-44 Homeownership Center Information Systems

• SAMS’ ad hoc reporting feature is so difficult to use that center staff

responsible for overseeing property disposition often must request ad hoc

reports from headquarters if the system’s standard reports do not meet

their needs. For example, when the Atlanta center temporarily assumed

responsibility for the management and sale of certain properties after

terminating a management and marketing contractor, center staff had to

request an ad hoc report from headquarters every week. Rather than

request an ad hoc report from headquarters, some SAMS users told us that

they pull needed information from multiple reports intended for other

purposes, which can be time-consuming. In addition, one SAMS user said

that she sometimes makes do without the information.

The Single Family Data Warehouse has helped center staff obtain needed

information from multiple single-family legacy systems. However, the data

in the warehouse are updated only once a month. According to Office of

Single Family Housing officials, the warehouse is helpful to those who

want to use historical data to develop trend analyses but is of limited use

for day-to-day operational needs. Center staff who need up-to-date data

would probably have to go directly to the individual data systems,

according to these officials. Another limitation of the warehouse is that it

is difficult for most staff to use. Because it requires extensive knowledge

of database software, only a few staff at each homeownership center are

proficient in using the warehouse. To make the warehouse more useful to

the average user, HUD has developed a front-end query tool that enables

staff to request basic information without having knowledge of database

software. However, advanced queries still require program and database

knowledge.

To better ensure that FHA’s single-family information systems support the

homeownership centers’ operations, HUD’s Office of the Chief

Information Officer is developing an enterprise architecture, and its Office

of Single Family Housing is planning improvements to specific information

systems. An enterprise architecture defines an organization’s current

(baseline) and desired (target) systems operating environments and

provides a road map for moving between the two. It is an essential tool for

effectively and efficiently reengineering business processes and for

implementing and evolving their supporting systems. A well-defined

enterprise architecture can assist in optimizing an organization’s business

operations and the underlying information technology supporting these

operations.

HUD’s Plans to

Improve Its SingleFamily Information

Systems Are in the

Early Stages
Page 22 GAO-02-44 Homeownership Center Information Systems

As required by the Clinger-Cohen Act, HUD’s Office of the Chief

Information Officer is developing an enterprise architecture for the

Department. As planned, its enterprise architecture will define:

• the work HUD performs in achieving the Department’s mission,

• the information necessary to deliver programs and operate the

Department,

• the automated systems that create or manipulate data to support HUD’s

business, and

• the technology, such as hardware and software, necessary to support the

Department’s activities.

As part of its efforts to develop an enterprise architecture for the

Department as a whole, the Office of the Chief Information Officer plans

to complete its definition of FHA’s baseline architecture by the fall of 2001.

By January 2002, it expects to define some aspects of the Department’s

target architecture. According to the Associate Deputy Chief Information

Officer for Information Technology Reform, HUD will use this partial

target architecture to guide its decisions on the next round of information

technology projects to be submitted in March 2002. Once its target

architecture is complete, HUD will develop an implementation plan for

transitioning over time from the baseline to target architecture.

Although HUD has made progress in developing an enterprise

architecture, it has not yet put in place certain management controls for

developing, implementing, and maintaining an enterprise architecture

recommended by the Chief Information Officers Council. The Council’s

guidance on best practices for successfully managing an enterprise

architecture states that an agency should, among other things, have a

written policy that governs the development, maintenance, and use of

enterprise architecture and a committee or group that is responsible for

directing, overseeing, and/or approving the enterprise architecture.21

According to its response to our survey of federal departments’ enterprise

architecture efforts,22 HUD has drafted an architecture policy, but it has

not been approved. Obtaining a clear mandate for the architecture in the

form of an enterprise policy statement is a critical success factor and will

 21A Practical Guide to Federal Enterprise Architecture, Version 1.0.

22This survey was conducted as part of our ongoing review of federal departments’ and

agencies’ enterprise architecture efforts to gauge progress towards meeting Clinger-Cohen

Act and OMB requirements.
Page 23 GAO-02-44 Homeownership Center Information Systems

be instrumental in gaining the buy-in and commitment of all organizational

components of the enterprise, whose participation is vital to successfully

developing and implementing the enterprise’s architecture. Also according

to HUD, it plans to form a committee to oversee its enterprise

architecture, although it has not yet done so. Such a committee should be

an executive body whose members represent all stakeholder organizations

and have the authority to commit resources and to make and enforce

decisions for their respective organizations.

Concurrent with the development of an enterprise architecture, HUD’s

Office of Single Family Housing has developed plans to replace CHUMS,

SFIS, and two other systems that support the origination of FHA-insured

loans with one system that has greater capabilities. As designed, the new

system would support a paperless insurance process, complete with

virtual case binders and digitally signed mortgage documents. The Internet

would be used as the mode of communication among FHA, its business

partners, and service providers. According to a contractor’s cost/benefit

analysis, HUD could save $70 million by replacing the four old systems

with a new system that would operate for 10 years. HUD included funding

to begin development of this new system in its proposed fiscal year 2002

budget.

Although plans for a new loan origination system have progressed, HUD

has not yet completed its enterprise architecture or assessed the business

processes that the new system should support. HUD’s Office of Single

Family Housing has developed plans for a new system and contracted for a

cost/benefit analysis, yet the Office of the Chief Information Officer does

not plan to have even a partially completed target architecture until

January 2002. Furthermore, the Office of Single Family Housing did not

assess the current loan origination processes in place at the centers before

laying the groundwork for a new loan origination system. As recently as

early August 2001, it was planning to contract out preparation of a

functional requirements document for the new system. It decided later

that month, however, to delay acquisition of the new system until after it

had assessed the current loan origination process. As part of this review,

the Office of Single Family Housing plans to assess what information is

needed to support the process as well as research the best way to maintain

case binders and generate mortgage insurance certificates.

Since HUD has not yet completed its enterprise architecture or examined

single-family business processes, it is premature to assess whether these

efforts will fully address the centers’ information systems needs. However,

ensuring that single-family business processes are reviewed and HUD’s
Page 24 GAO-02-44 Homeownership Center Information Systems

enterprise architecture is completed before attempting to acquire a new

system would be in accordance with OMB guidance, which requires an

agency’s information systems investments to be consistent with its

architecture. Our experience with federal agencies has shown that

attempting to define and build major information technology systems

without first completing an enterprise architecture often results in systems

that are duplicative, are not well integrated, are unnecessarily costly to

maintain and interface, and do not effectively optimize mission

performance.

The Office of Single Family Housing also plans to enhance the Single

Family Data Warehouse. For example, it plans to add information on

nonprofit agencies that participate in FHA’s programs and on FHA-insured

reverse mortgages.23 In addition, it intends to expand the front-end query

tool that enables users to query the warehouse without having to use

database software. However, it has no plans to update the data in the

warehouse more often than once a month; therefore, the warehouse still

will not be able to provide data essential to meeting day-to-day operational

needs.

Given the multibillion-dollar insurance risk that FHA assumes annually, it

is critical that the agency’s single-family information and telephone

systems help it carry out its responsibilities efficiently and effectively.

However, the information and telephone systems in use at FHA’s four

homeownership centers do not support FHA’s current business processes

or efficiently supply FHA staff with necessary information. Center staff

have demonstrated dedication and a willingness to overcome problems

with these systems. Still, nonintegrated systems and cumbersome

reporting mechanisms make it difficult for them to obtain the information

needed to oversee lenders and contractors and provide timely and

consistent customer service. Also, because FHA’s information systems do

not share information, time and effort must be spent pulling together data

needed for routine oversight or customer service purposes, and this

lengthens response times and increases costs. Staff spend time learning,

using, and working around information system problems—time that could

be spent in more productive ways. Furthermore, while it seems that the

Single Family Data Warehouse should alleviate some of these problems, it

 23Under its Home Equity Conversion Mortgage Program, FHA insures reverse mortgages—

mortgages that convert equity into income—made to older homeowners.

Conclusions
Page 25 GAO-02-44 Homeownership Center Information Systems

is updated only monthly and requires special technical expertise to extract

all but basic reports.

These problems indicate that new single-family information and telephone

systems are necessary to support homeownership center operations and

reduce insurance risk. However, HUD’s Offices of the Chief Information

Officer and Single Family Housing have to work together to acquire new

systems for the centers. Currently, as required by the Clinger-Cohen Act,

the Office of the Chief Information Officer is developing an enterprise

architecture to better ensure that HUD’s information systems support its

business processes. However, HUD has not yet put into place certain

architecture management controls recommended by the Chief Information

Officers Council. Only if developed and implemented effectively will

HUD’s enterprise architecture help ensure that the centers have the

information and telephone systems necessary to support their efforts to

oversee lenders and contractors and provide customer service.

Meanwhile, the Office of Single Family Housing has designed a new loan

origination system and made plans to assess the loan origination process

at the centers before acquiring the new system. While we agree that

assessing single-family business processes before acquiring new systems is

prudent, any plans to reengineer single-family business processes or

improve single-family information systems should fall within the

framework of HUD’s enterprise architecture. If this does not occur, HUD

risks acquiring systems that are not well integrated and do not effectively

support the centers’ efforts to oversee lenders and contractors and provide

customer service.

To address the information system challenges facing HUD’s

homeownership centers, we recommend that the Secretary of Housing and

Urban Development direct the Chief Information Officer and Assistant

Secretary for Housing-Federal Housing Commissioner to:

• Implement the best practices for enterprise architecture management

recommended by the Chief Information Officers Council, including

forming an enterprise architecture steering committee and formulating an

enterprise architecture policy;

• Continue delaying any sizable single-family systems acquisition or

development until the Department’s enterprise architecture is complete;

and

• Ensure the development of an enterprise architecture that reflects the

Office of Single Family Housing’s analysis of business processes and data

Recommendations for

Executive Action
Page 26 GAO-02-44 Homeownership Center Information Systems

needs at the homeownership centers and provides a framework for the

future acquisition of single-family information systems.

Finally, we recommend that the Secretary of Housing and Urban

Development direct the Assistant Secretary for Housing-Federal Housing

Commissioner to implement telephone systems that track the data, such

as peak usage periods, that the centers need to manage their customer

service workload.

We provided copies of a draft of this report to HUD for its review and

comment. In a letter from the Assistant Secretary for Housing-Federal

Housing Commissioner (see app. II), HUD did not take issue with any of

our findings or factual statements. It agreed with three of our

recommendations and expressed concerns about one recommendation.

HUD commented as follows on each recommendation:

• HUD stated that it plans to recharter its Technology Investment Board

Executive Committee to include oversight of its enterprise architecture.

This committee will then be asked to adopt the existing draft enterprise

architecture policy after it has completed departmental clearance.

• While HUD agreed that its single-family information systems must be

replaced or substantially overhauled in order to meet FHA’s business

needs, it disagreed that any major efforts to improve these information

systems should be suspended until HUD’s enterprise architecture is

completed. It stated that its Offices of the Chief Information Officer and

Housing will immediately review all systems development work planned

for single-family systems in fiscal year 2002 and assess whether the

development of any significant new capabilities for these systems should

be deferred until the target enterprise architecture for Office of Housing

systems is under development. In addition, it noted that the Office of the

Chief Information Officer will ensure that the information technology

project selection process for fiscal years 2003 and 2004 explicitly uses the

target enterprise architecture as a major determining factor for selecting

an information technology investment for funding. While these are positive

steps, we still believe that HUD should delay any sizable single-family

systems acquisition or development until the Department’s enterprise

architecture is complete. Our experience with federal agencies has shown

that attempting to define and build major information technology systems

without first completing an enterprise architecture often results in systems

that are duplicative, are not well integrated, are unnecessarily costly to

maintain and interface, and do not effectively optimize mission

performance. Therefore, we made no changes to our recommendation.

Agency Comments

and Our Evaluation
Page 27 GAO-02-44 Homeownership Center Information Systems

• HUD noted that the Offices of the Chief Information Officer and Housing

will work together to ensure that the information needs of the

homeownership centers are integrated into the design and architecture for

the single-family business process and subsequent information technology.

• HUD stated that it plans to establish a single toll-free telephone number

for FHA’s clients and to acquire new telephone equipment and tracking

systems to capture information about the caller, the nature of calls, and

the number of calls.

We conducted our work at HUD headquarters and at all four of the

Department’s homeownership centers in Atlanta, Denver, Philadelphia,

and Santa Ana. We reviewed documents describing FHA’s single-family

information systems and telephone systems. We interviewed officials from

HUD’s Office of Single Family Housing, Office of the Chief Information

Officer, and the four centers. Finally, we reviewed documents outlining

HUD’s enterprise architecture and its plans for specific single-family

information systems. We performed our work from July 2000 through

September 2001, in accordance with generally accepted government

auditing standards.

We are sending copies of this report to the Chairman, Subcommittee on

Housing and Transportation, Senate Committee on Banking, Housing, and

Urban Affairs; the Chairman and Ranking Minority Member, Senate

Committee on Banking, Housing, and Urban Affairs; the Chairwoman and

Ranking Minority Member, Subcommittee on Housing and Community

Opportunity, House Committee on Financial Services; and the Chairman

and Ranking Minority Member, House Committee on Financial Services.

We will also send copies to the Secretary of Housing and Urban

Development; the Assistant Secretary for Housing-Federal Housing

Commissioner; and the Director of the Office of Management and Budget.

We will make copies available to others upon request.

Scope and

Methodology
Page 28 GAO-02-44 Homeownership Center Information Systems

Please call me at (202) 512-2834 if you or your staff have any questions

about this report. Key contributors to this report are listed in appendix III.

Sincerely yours,

Stanley J. Czerwinski

Director, Physical Infrastructure Issues
Appendix I: Objectives, Scope, and

Methodology

Page 29 GAO-02-44 Homeownership Center Information Systems

Our objectives were to (1) describe the information systems used by the

homeownership centers, (2) analyze the effectiveness of these systems in

supporting the centers’ current operations, and (3) assess the Department

of Housing and Urban Development’s (HUD) plans for the information

systems used by the centers.

To determine what information systems the homeownership centers use,

we reviewed a list of HUD’s information systems and identified those

information systems that support single-family operations. We then

interviewed HUD officials to determine which information systems are the

major single-family information systems. For the seven major single-family

information systems, we obtained and reviewed documentation that

described the purpose of and the information contained in each system. At

each of the four homeownership centers, we interviewed the director,

division heads, and system users to determine which information systems

are used to support the center’s operations. Our interviews also focused

on (1) the databases, including spreadsheets, the centers have developed

to support their operations, and (2) the telephone systems the centers use.

We obtained and reviewed documentation on these databases and

telephone systems.

To determine how effectively these systems support the centers’ current

operations, we interviewed information system users at each of the four

homeownership centers. We asked them about how they use FHA’s singlefamily information systems to accomplish their missions, the training they

received on the information systems they use, the quality of the data in the

information systems, and information systems’ limitations. Our interviews

focused on the Computerized Homes Underwriting Management System,

the Single Family Acquired Asset Management System, the

Approval/Recertification/Review Tracking System, and the Single Family

Data Warehouse. We reviewed the procedures followed by the centers to

target high-risk lenders for review and identify potential loan fraud cases

in order to determine the extent to which the centers can rely on their

information systems for data. Similarly, we obtained and analyzed contract

obligation data from the HUD Procurement System and contract

expenditure data from HUD’s Central Accounting and Program System to

determine the systems’ ability to readily provide complete and accurate

contract cost information. We also reviewed a March 2001 HUD-sponsored

assessment of the centers’ toll-free telephone information systems and

operations for information on the strengths and weaknesses of the

systems and their ability to provide efficient and cost-effective customer

service. Finally, we reviewed reports on our prior work at the centers and

reports issued by HUD’s Inspector General for information regarding

Appendix I: Objectives, Scope, and

Methodology
Appendix I: Objectives, Scope, and

Methodology

Page 30 GAO-02-44 Homeownership Center Information Systems

HUD’s oversight of lenders and its management and marketing

contractors.

To assess HUD’s plans for the information systems used by the centers, we

interviewed HUD officials and reviewed documents outlining HUD’s

enterprise architecture and its plans for specific single-family information

systems. Specifically, we interviewed officials from the Office of the Chief

Information Officer and reviewed documents to determine the status of

HUD’s efforts to develop an enterprise architecture. These documents

included the Chief Information Officers Council’s A Practical Guide to

Federal Enterprise Architecture Version 1.0 and HUD’s response to our

survey of federal departments’ enterprise architecture efforts. We also

interviewed officials from the Office of Single Family Housing regarding

HUD’s plans for individual single-family information systems. Finally, we

reviewed documents outlining plans to replace the Computerized Homes

Underwriting Management System and three other information systems

with one integrated system.

We performed our work from July 2000 through September 2001 in

accordance with generally accepted government auditing standards.
Appendix II: Comments From the Department

of Housing and Urban Development

Page 31 GAO-02-44 Homeownership Center Information Systems

Appendix II: Comments From the

Department of Housing and Urban

Development
Appendix II: Comments From the Department

of Housing and Urban Development

Page 32 GAO-02-44 Homeownership Center Information Systems
Appendix II: Comments From the Department

of Housing and Urban Development

Page 33 GAO-02-44 Homeownership Center Information Systems
Appendix III: GAO Contacts and

Staff Acknowledgments

Page 34 GAO-02-44 Homeownership Center Information Systems

Stanley Czerwinski, (202) 512-2834

Paul Schmidt, (312) 220-7681

In addition to those named above, Bess Eisenstadt, Daniel Gage, Cathy

Hurley, Barbara Johnson, John McGrail, Stanley Ritchick, Stewart Seman,

Paige Smith, and Alwynne Wilbur made key contributions to this report.

Appendix III: GAO Contacts and Staff

Acknowledgments

GAO Contacts

Acknowledgments

(541005)
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