To accomplish its mission, HUD administers community and housing programs that benefit millions of households each year. Among other things, the department provides affordable rental housing opportunities and helps homeless families and chronically homeless individuals and veterans. The department also administers mortgage insurance programs for single-family housing, multifamily housing, and health care. HUD relies on five main organizational components to carry out its mission. Of these, two components have lead responsibility for improving access to housing and are the business owners for related IT modernization efforts: Housing/Federal Housing Administration (FHA): Programs within this office are responsible for contributing to building healthy communities, maintaining and expanding housing opportunities, and stabilizing credit markets in times of economic disruption. This office also regulates certain aspects of the housing industry. For example, the department currently reports that it provides insurance on loans made by its approved lenders for 4.8 million single-family mortgages and 13,000 multifamily projects, including manufactured homes and hospitals. The FHA Transformation modernization effort is managed within this office. Public and Indian Housing: Programs within this office are responsible for creating opportunities for residents’ self-sufficiency and economic independence. Toward this end, this office currently oversees a housing choice voucher program to subsidize housing for approximately 2.1 million low-income, elderly, and disabled families; a public housing program that subsidizes about 1.3 million housing units for vulnerable low-income families; and block grants and guarantee programs for Native American groups. The NGMS modernization effort is managed within this office. In addition, to support these organizational components, the department relies on various administrative offices to provide guidance and tools. These include the department’s Office of the Chief Information Officer (OCIO) and the Office of the Chief Procurement Officer (OCPO). Through coordination with the organizational components, OCIO manages IT resources and provides support for the department’s infrastructure, security, and ongoing projects. This office also provides project management guidance and technical expertise to modernization efforts. For its part, OCPO is responsible for obtaining contracted goods and services required by the department to meet its strategic objectives. This office is involved with initiating acquisition actions upon request by the organizational components. Further, HUD’s Deputy Secretary is responsible for managing the department’s daily operations, annual operating budget, and approximately 8,900 employees. As part of this role, the Deputy Secretary conducts biweekly meetings with stakeholders to discuss the Secretary’s priorities. During these meetings, the scope, milestones, risks, and status of action items related to priority issues are discussed. The FHA Transformation and NGMS modernization efforts are designated as priority and each has its own biweekly meeting. A simplified view of the department’s housing organization structure and the offices responsible for FHA Transformation and NGMS is provided in figure 1. According to the fiscal year 2014 President’s Budget request for HUD, $285.1 million is expected to be spent on IT investments. HUD’s IT environment consists of multiple systems that, among other things, are intended to help the department coordinate with lending institutions to insure mortgages, collect and manage state and local housing data, process applications for community development, and issue vouchers that provide access to subsidized housing. In particular, the department’s housing programs rely on systems for processing and managing these business operations. For example, systems within the Office of Housing are expected to process mortgage insurance applications, bill and collect premiums, pay claims, manage receivables and other assets, track delinquencies and defaults, and support staff in providing counseling to first-time home buyers and existing homeowners. Additionally, Public and Indian Housing programs that use systems are intended to process vouchers for different rental assistance programs, as well as to support the processing of applications for, and the management of, more than 50 grant programs administered by the department. However, HUD’s current IT environment has not effectively supported its business operations because its systems are overlapping and duplicative, not integrated, necessitate manual workloads, and employ antiquated technologies that are costly to maintain. For example, the department reported from 2008 to 2012 that its IT environment consisted of: Over 200 information systems, many of which perform the same function and, thus, are overlapping and duplicative. Specifically, different systems perform the same task to separately support grants management, loan processing, and subsidies management. Stovepiped, nonintegrated systems that result in identical data existing in multiple systems. For example, two organizational components store about 80 percent of similar data in separate databases that provide information on rental assistance participants. Manual processing for business functions due to a lack of systems to support these processes. For example, specific NGMS projects are intended to replace existing ad hoc analyses performed in spreadsheets and databases with systems that automate and standardize those functions. Antiquated technology (15- to 30- years old) and complex systems that are costly to maintain. For example, the department relies on different programming languages and operating systems, which requires specialized skills to operate and maintain. Additionally, HUD engaged contractors to conduct an assessment of the department’s environment. This assessment, issued in January 2011, concluded that unclear reporting relationships hindered the enforcement of IT policies; contractor performance information was not used to inform management decisions; technical standards were lacking or not enforced; and data management practices did not support business needs. Through the Transformation Initiative’s IT component, HUD has begun addressing challenges to its environment and modernizing its systems. In this regard, the department initiated seven IT modernization efforts, of which FHA Transformation and NGMS are the two largest. For fiscal years 2010 and 2011, the department reported that the Transformation Initiative funding made available for FHA Transformation and NGMS was $58.5 and $41.1 million, respectively. (See later discussion in this report regarding costs associated with the 14 projects in our study.) FHA Transformation was initiated to improve the department’s management of insurance programs through the development and implementation of a modern financial services IT environment that is expected to improve loan endorsement processes, collateral risk capabilities, and fraud prevention. In August 2009, HUD published the FHA Office of Housing Information Technology Strategy and Improvement Plan, which identified and prioritized 25 IT areas with performance gaps for its single-family housing, multifamily housing development and rental assistance, health care facilities programs, and enterprise applications. In May 2010, FHA Transformation began planning and executing modernization efforts aimed at addressing the gaps identified in the plan. Specifically, the modernization initiative is intended to implement technology within the following four functional areas aimed at addressing changes in FHA’s business model, operating environment, and components of the loan life cycle: Infrastructure and legacy migration: Provide a scalable infrastructure to support rules engines, analytics, and reporting systems, as well as a mechanism for transferring legacy applications to the new platform. Specifically, the Federal Financial Services Platform project is intended to provide hardware and standard software to support case management and migration of legacy applications (e.g., the Computerized Homes Underwriting Reporting System) for all lines of business. Borrower/collateral risk management and fraud monitoring: Provide tools for analyzing, monitoring, and managing emerging issues and trends in the housing market, including borrower and collateral risk, appraisals, and fraud, as it relates to the FHA portfolio. For example, the Legacy Application Transformation project is expected to implement a software service tool that aggregates data to identify emerging issues and trends in borrower risk and fraud by analyzing the accuracy and validity of verified assets, income, and employment on individual loans. Other projects within this functional area include business process reengineering and a pilot designed to automate and streamline the multifamily housing underwriting process. Using the new infrastructure, an automated underwriting tool is expected to be deployed to expand the capabilities for processing loan applications for insurance programs and replace current systems (e.g., the Development Application Processing System). Counterparty management: Provide applications for improved performance and compliance of lenders and appraisers through more proactively identifying risk trends and improving loan file review techniques. Specific projects include the Lender Electronic Assessment Portal, a web-based automated delivery of electronic applications and storage of lender application data that assists with reviewing new lender applications and requests for annual recertification to participate in FHA programs. Future plans call for replacing seven legacy applications. Portfolio analysis: Provide tools intended to augment risk monitoring and management; enhance predictive analytics; provide timely and flexible reporting; and deliver more accurate, detailed information to decision makers. For example, the Portfolio Risk Reporting & Analytics project is intended to provide a web-based software service tool for modeling FHA program risks. While initial use of the software is to include receiving hard-copy reports from the third-party vendor, HUD also expects to deploy the tool within the department’s infrastructure in order for FHA employees to have access to reports and the analytics dashboard data electronically. Overall leadership for FHA is provided by the Assistant Secretary for Housing/Federal Housing Commissioner, who chairs the modernization effort steering committee; the General Deputy Assistant Secretary for Housing; and the Director for the Office of Program Systems Management, who is the executive sponsor. The modernization effort also has a project management office that is responsible for executing and managing the associated projects. As of April 2013, FHA Transformation consisted of 10 projects, 9 of which were included in our study. Table 1 summarizes the 9 FHA Transformation projects that we assessed as part of our study. The NGMS modernization effort is intended to provide an integrated system with a seamless view of financial and program data currently warehoused in disparate data sources and a new set of monitoring, oversight, and software tools directed at ensuring that funds are used to assist affordable housing participants and reduce improper payment errors. In November 2011, the department used contractors to develop four prototype software tools aimed at demonstrating anticipated NGMS functionality for voucher programs.