HUD’s homeownership centers support the single-family activities of FHA. 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 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, 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.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 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. 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. 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 efforts to be a more efficient and effective housing credit provider. 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. The Clinger-Cohen Act requires agency chief information officers to develop, maintain, and facilitate the implementation of sound and integrated information technology architectures. 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, 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. 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. Information on the seven systems is shown in table 1. 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 FHA policies and regulations. 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 case- level 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. 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 technical review ratings of new direct endorsement lenders. 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.