[Federal Register Volume 84, Number 69 (Wednesday, April 10, 2019)]
[Notices]
[Pages 14386-14389]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-07083]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Docket No. FR-6146-N-02]


Privacy Act of 1974; System of Records, Validation and 
Disposition Services (VDS-Best Ex)

AGENCY: Office of Single Family Asset Management, HUD.

ACTION: Notice of a new system of records.

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SUMMARY: In accordance with the Privacy Act of 1974, as amended, the 
Office of Single Family Asset Management, Department of Housing and 
Urban Development (HUD), proposes to create a new system of records 
(SOR) titled Validation and Disposition Services (VDS-Best Ex). The SOR 
VDS-Best Ex will allow HUD to mitigate financial risk to the Federal 
Housing Administration (FHA) Mutual Mortgage Insurance Fund (MMIF) by 
providing property valuation and disposition strategies for:
     FHA's Single Family Forward Mortgage Insurance portfolio 
of loans 90 days or more delinquent.
     FHA's Single Family Secretary-held Real Estate Owned (REO) 
portfolio.
    The SOR VDS-Best Ex will perform statistical analysis of individual 
property address, square footage, age of property, location, and 
associated property characteristics such as number and type of living 
units to identify similarly situated comparable properties. This 
analysis will provide a valuation to compare the value of neighboring 
properties with similar attributes and provide a point-in-time 
estimation of the current value of the FHA property.
     VDS-Best Ex will use a Best Execution Calculator and use 
Automated Valuation Models (AVMs) to provide FHA/HUD with the best of 
four strategies for disposing of mortgages that are over 90 days 
delinquent.
     VDS-Best Ex will establish a Fair Market List Price and a 
bid and counteroffer process for HUD's Single Family REO properties, to 
identify the ideal pricing point and discount rate percentages that FHA 
should consider when selling a property from its Secretary-held REO 
portfolio.

DATES: May 10, 2019.
    Comments Due Date: May 10, 2019.

ADDRESSES: You may submit comments, identified by docket number HUD-
2018-[XXXX] by one of the following methods:
    Federal e-Rulemaking Portal: http://www.regulations.gov. Follow the 
instructions provided on that site to submit comments electronically.
    Fax: 202-619-8365.
    Email: [email protected].
    Mail: Attention: Housing and Urban and Development, Privacy Office; 
John Bravacos, The Executive Secretariat; 451 Seventh Street SW, Room 
10139; Washington, DC 20410.
    Instructions: All submissions received must include the agency name 
and docket number for this rulemaking. All comments received will be 
posted without change to http://www.regulations.gov, including any 
personal information provided.
    Docket: For access to the docket to read background documents or 
comments received go to http://www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: John Bravacos, Senior Agency Official 
for Privacy; 451 Seventh Street SW, Room 10139; Washington, DC 20410; 
telephone number 202-708-3054 (this is not a toll-free number). 
Individuals who are hearing- or speech-impaired may access this 
telephone number via TTY by calling the Federal Relay Service at 800-
877-8339 (this is a toll-free number).

SUPPLEMENTARY INFORMATION: The Department moves to provide property 
valuation and disposition strategies for FHA's Single Family Forward 
Mortgage Insurance portfolio of loans over 90 days delinquent and for 
FHA's Single Family Secretary-held REO portfolio managed by the Office 
of Single Family Asset Management. The VDS-Best Ex will support the 
mission of the Department by mitigating losses and financial risk to 
the FHA Mutual Mortgage Insurance Fund. The Department, therefore, is 
creating a new system of records because the VDS-Best Ex will retrieve 
and access information, using FHA case numbers, to identify and provide 
the most cost-effective disposition strategy for mortgage cases that 
are over 90-days delinquent or a Secretary-held REO property.
    The FHA endorses mortgages made by qualified lenders to individuals

[[Page 14387]]

purchasing or refinancing a primary residence. The FHA's Single Family 
Mortgage Insurance Program provides mortgage insurance to protect 
lenders against the risk of default on mortgages to qualified buyers. 
The FHA expands homeownership opportunities for first-time homebuyers 
and other borrowers who would not otherwise qualify for conventional 
mortgages on affordable terms, as well as for those who live in 
underserved areas where mortgages may be harder to get. These 
obligations are protected by FHA's Mutual Mortgage Insurance Fund, 
which is sustained entirely by borrower premiums.
    This program is authorized under section 203, National Housing Act 
(12 U.S.C. 1709(b),(i)). Program regulations are in 24 CFR part 203. If 
the borrower/co-borrower fails to make any payment under the insured 
mortgage, and such failure continues for a period of 30 days, the 
endorsed mortgage loan (FHA case) is considered to be in default. HUD 
provides training to mortgage lenders and Housing Counseling Agencies, 
who are then better able to aid homeowners in order to avoid 
foreclosure. Mortgage lenders (mortgagees) report delinquent servicing 
activities for all FHA cases that are 30, 60, and 90 days or more 
delinquent as of the last day of the month. Mortgagees must reevaluate 
each delinquent mortgage monthly for loss mitigation eligibility until 
reinstatement. If the delinquency cannot be cured, the mortgagee must 
take action to acquire the property. The mortgagee must acquire clear, 
marketable title and transfer the property to the Secretary of HUD. The 
property then becomes part of FHA's Single Family REO portfolio. VDS-
Best Ex will analyze common characteristics of the over-90-day 
delinquent mortgage portfolio and provide the most cost-effective 
property disposition strategy. For REO properties, VDS-Best Ex will 
establish a Fair Market List Price, together with a bid and 
counteroffer process, to identify FHA's ideal pricing point and 
discount rate percentages. Implementation of the VDS-Best Ex strategies 
will allow HUD to minimize losses and to mitigate financial risk to the 
Mutual Mortgage Insurance Fund.
    Phase I will focus on the best strategy for disposition of FHA 
Single Family Forward Mortgage Insurance loans over 90 days. A Best 
Execution Calculator will be developed to provide FHA/HUD with the best 
of four strategies for disposing of the delinquent mortgages. AVMs will 
be a key component in this solution. The solution requires data input 
regarding the property location and characteristics to perform a 
statistical analysis using similarly situated comparable properties 
(aka comparables/comps) to provide a valuation. Data regarding the 
property address, square footage, age, etc., will be required to 
compare the value of neighboring properties with similar attributes and 
provide a point-in-time estimation of the current value of the FHA 
property. This estimated value will then be compared across several 
options used in disposing delinquent FHA properties, to provide a 
disposition strategy that results in the best return to HUD. The data 
that will support this function are the historic mortgage costs 
associated with the similarly situated properties that utilized the 
targeted disposition procedures. The output of this process will be a 
series of valuations that identify the current value of the property.
    Phase II involves REO foreclosed properties owned by the Secretary 
of HUD (i.e., Secretary-held). A process to establish a Fair Market 
List Price for REO properties will be created. The bid and counteroffer 
process for the REO properties will be managed as part of the VDS-Best 
Ex solution. The output for this service will include a value 
identifying what is the ideal pricing point and discount rate 
percentages that FHA should consider when selling an REO property. 
Information required to achieve this valuation will be information 
regarding the property address, square footage, age, etc., that will be 
required to compare the value of neighboring properties with similar 
attributes and provide a point-in-time estimation of the current value 
of the FHA property. The resulting valuation will then be compared 
against purchasing offers made for each REO property to ascertain 
whether to accept a bid, reject a bid, and/or counteroffer based on 
assessment of the proposed amount only.
    VDS-Best Ex will routinely produce property valuations and 
determine property disposition strategies for the FHA Single Family 
Forward Mortgage Insurance delinquent portfolio. The property valuation 
part of the contract will be completed using the AVM suite. The AVM 
will create a point-in-time ``value'' for the property (either 
retroactive, current, or future). The AVM suite will be used to 
finalize and train a customized model that will generate a set of 
``reserve prices'' for each disposition option, with the goal of 
minimizing the loss to HUD/FHA due to a delinquent property claim.
SYSTEM NAME AND NUMBER:
    Valuation and Disposition Services (VDS-Best Ex).

SECURITY CLASSIFICATION:
    Unclassified, non-sensitive, for official use only.

SYSTEM LOCATION:
    The system is externally hosted and controlled at the contractor's 
primary and backup facilities. The VDS primary host server is in Plano, 
Texas (2300 West Plano Parkway, Plano, TX 75075); the data and 
statistical modeling is hosted in Roseville, California (2270 Douglas 
Boulevard, Suite 120, Roseville, CA 95661); Washington, DC (601 New 
Jersey Avenue NW, Suite 400, Washington, DC 20001); and Herndon, VA 
(950 Herndon Parkway, Suite 410, Herndon, VA 20170). The backup/
disaster recovery facilities for the main data centers are in Quincy, 
Washington (525 D Street NW, Quincy, WA 98848).
    The VDS-Best Ex outputs will be accessible at workstations located 
at the following locations: 451 Seventh Street SW, Washington, DC 20410 
and at HUD National Servicing Center 301 Northwest 6th Street, Suite 
200, Oklahoma City, OK 73102.
    Records of system outputs will be maintained at the Department of 
Housing and Urban Development Headquarters, at 451 Seventh Street SW, 
Room 4156, Washington, DC 20410.

SYSTEM MANAGER:
    Ivery Himes, VDS-Best Ex system owner and Director of the Office of 
Single Family Asset Management, Department of Housing and Urban 
Development, Room 9178, 451 Seventh Street SW, Washington, DC 20410.

AUTHORITY FOR MAINTENANCE OF THE SYSTEM:
    Section 203, National Housing Act as amended (12 U.S.C. 1709, 
subchapter II, Sec. Sec.  1707 et seq., 1710, 1715u, 1715z-16) enables 
HUD/FHA to process applications for HUD single family mortgage 
insurance. Social Security numbers are not collected or maintained in 
VDS-Best Ex.

PURPOSES OF THE SYSTEM:
    VDS-Best Ex will routinely produce property valuations and 
determine property disposition strategies for the FHA Single Family 
Forward Mortgage insurance loans over 90 days delinquent and for 
Secretary-held REO properties.
    In operation, the VDS-Best Ex system will be used to:
     Create a point-in-time ``value'' for the property using an 
Automated Valuation Model (AVM) suite to finalize and train a 
customized model that will generate a set of ``reserve prices'' for 
each disposition option, with the goal of minimizing the loss to HUD/
FHA due to a delinquent property claim.

[[Page 14388]]

     Provide a data-based analysis to determine the essential 
decision factors affecting the projected return of delinquent assets, 
based on historic FHA data on originations, claims, and servicing 
actions and costs.
     Compare purchasing offers made for each REO property to 
ascertain whether to accept a bid, reject a bid, and/or counteroffer 
based on assessment of the proposed amount, using a valuation that 
identifies what is the ideal pricing point and discount rate 
percentages that FHA should consider when selling a property.

CATEGORIES OF INDIVIDUALS COVERED BY THE SYSTEM:
     Defaulted Loan Portfolio: Individuals covered by this 
system are mortgagors with loans insured by HUD/FHA's single family 
mortgage insurance programs whose associated loans are over 90 days 
delinquent.
     Secretary-Held Real Estate Owned (REO) Portfolio: 
Defaulted single family mortgage loans where titles have been deeded to 
the Secretary of HUD and do not have mortgagor-specific information.

CATEGORIES OF RECORDS IN THE SYSTEM:
    Information provided to the VDS-Best Ex system contains the 
following categories of records in the system:
    Default Loan Portfolio (FHA Mortgagor) Property Characteristic/
Attribute Records: FHA Case Number; Property Address, City, State, Zip 
Code; Endorsement Code; Mortgage Origination, Endorsement, and Default 
Dates; Federal Information Processing Standard (FIPS) County Code, FIPS 
State Code, First-Time Home Buyer Status; Mortgage Loan Amount, 
Interest Rate, Loan Type (Fixed/ARM); Insurance Status/Rate; Last 
Payment/Default Date/Unpaid Balance; Due Date of Last Payment + 60 
Days; Amortization Begin Date (Calendar Year); Amortization Begin Date 
(Calendar Quarter); Property Type (Condo/Single Family); Credit Subsidy 
Cohort; Property Interior/Exterior Features; Default Prosperity 
Occupancy Status; Loss Mitigation Code Types.
    REO Property (HUD-Held/-Owned Properties) Characteristic/Attribute 
Records: FHA Case Number; Endorsement Code; Property Address, City, 
State, Zip Code; Mortgage Rate/Loan Type; Mortgage Origination, 
Endorsement, and Default Dates; Amortization Begin Date (Calendar 
Year); Amortization Begin Date (Calendar Quarter); FIPS State Code; 
Property/Claim Type; Property Disposition/Acquisition Date; Loan-to-
Value Category (New/Old); Interest Rate; Contract Sales Price; Mortgage 
Term; Insurance Termination Date; Property Appraisal Estimate; Default 
Event Codes; Evaluation Codes; Interior Features/External type; 
Property List Dates; Transactional Records; Conveyed Damaged 
Indicators.

RECORD SOURCE CATEGORIES:
    Records are transmitted to VDS-Best Ex from the HUD-owned source 
systems, which obtain records from FHA-approved mortgagees and third-
party providers, mortgagors, taxing authorities, insurance companies, 
and housing counselors as a case flows through the case life cycle from 
underwriting and counseling, endorsement, loan servicing, loss 
mitigation, loan termination, and property disposition.
     FHA single family insured mortgage loans over 90-days 
delinquent is linked to HUD's Single Family Default Monitoring System 
(SFDMS) data collection requirements.
     Secretary-held Single Family REO properties is linked to 
HUD's Single Family Asset Management System (SAMS) data collection 
requirements.

ROUTINE USES OF RECORDS MAINTAINED IN THE SYSTEM, INCLUDING CATEGORIES 
OF USERS AND PURPOSES OF SUCH USES:
    In addition to those disclosures generally permitted under 5 U.S.C. 
Section 552a(b) of the Privacy Act, all or a portion of the records or 
information in this system may be disclosed to authorized entities, as 
determined to be relevant and necessary, outside the Department of 
Housing and Urban Development (HUD) as a routine use pursuant to 5 
U.S.C. 552a(b)(3):
    a. To appropriate agencies, entities, and persons for disclosures 
compatible with the purpose for which the records in this system were 
collected, as set forth by Appendix I--HUD's Routine Use Inventory 
Notice published in the Federal Register (80 FR 81837-81840):
    b. To the National Archives and Records Administration (NARA) and 
the General Services Administration (GSA) for records having sufficient 
historical or other value to warrant continued preservation by the 
United States Government, or for inspection under authority of Title 
44, Chapter 29, of the United States Code.
    c. To a congressional office from the record of an individual, in 
response to an inquiry from the congressional office made at the 
request of that individual.
    d. To contractors, grantees, experts, consultants and their agents, 
or others performing or working under a contract, service, grant, or 
cooperative agreement with HUD, when necessary to accomplish an agency 
function related to a system of records. Disclosure requirements are 
limited to only those data elements considered relevant to 
accomplishing an agency function. Individuals provided information 
under these routine use conditions are subject to Privacy Act 
requirements and disclosure limitations imposed on the Department.
    e. To appropriate agencies, entities, and persons when:
    i. HUD suspects or has confirmed that the security or 
confidentiality of information in a system of records has been 
compromised;
    ii. HUD has determined that as a result of the suspected or 
confirmed compromise there is a risk of harm to economic or property 
interests, identity thief, or fraud, or hard to the security or 
integrity of systems or programs (whether maintained by HUD or another 
agency or entity) that rely upon the compromised information; and
    iii. The disclosure made to such agencies, entities, and persons is 
reasonably necessary to assist in connection with HUD's efforts to 
respond to the suspected or confirmed compromise and prevent, minimize, 
or remedy such harm for purposes of facilitating responses and 
remediation efforts in the event of a data breach.
    f. To the Department of Justice (DOJ) when seeking legal advice for 
a HUD initiative or in response to DOJ's request for the information, 
after either HUD or DOJ determine that such information is relevant to 
DOJ's representatives of the United States or any other components in 
legal proceedings before a court or adjudicative body, provided that, 
in each case, the agency also determines prior to disclosure that 
disclosure of the records to DOJ is a use of the information contained 
in the records that is compatible with the purpose for which HUD 
collected the records. HUD on its own may disclose records in this 
system of records in legal proceedings before a court or administrative 
body after determining that the disclosure of the records to the court 
or administrative body is a use of the information contained in the 
records that is compatible with the purpose for which HUD collected the 
records.

POLICIES AND PRACTICES FOR STORAGE OF RECORDS:
    a. Storage: Records for this system will be stored electronically 
in secure facilities and on secure servers. Electronic files are 
replicated at an off-site disaster recovery location in case of loss of 
computing capability or other emergency at the primary facility.

[[Page 14389]]

Paper-based records are not maintained by VDS-Best Ex.
    b. Retrievability: Electronic records are retrieved by FHA case 
number and/or property address as the primary data identifier.
    c. Safeguards: Records are maintained in a secured computer network 
and in the contractors' secured facilities. Access is limited to 
authorized personnel. VDS-Best Ex data and outputs are transmitted via 
approved Secure File Transfer Protocol methodology.
    d. Retention and Disposal: In accordance with General Records 
Schedule 1.1, Financial Management and Reporting Records, Items 010 and 
011, the records are maintained for 6 years or when business use 
ceases. Paper records are not in use. Backup and Recovery digital media 
will be destroyed or otherwise rendered irrecoverable per NIST SP 800-
88, Rev. 1, ``Guidelines for Media Sanitization'' (December 2014).

ADMINISTRATIVE, TECHNICAL, AND PHYSICAL SAFEGUARDS:
    FHA ensures the protection of program participants' PII and 
mortgagee business sensitive information by ensuring VDS-Best Ex's 
compliance with HUD and Federal Information Security Management Act 
(FISMA) security and privacy controls.

RECORD ACCESS PROCEDURES:
    For Information, assistance, or inquiries about records, contact 
John Bravacos, Senior Agency Official for Privacy, 451 Seventh Street 
SW, Room 10139, Washington, DC 20410, telephone number 202-402-6836. 
When seeking records about yourself from this system of records or any 
other HUD system of records, your request must conform with the Privacy 
Act regulations in 24 CFR part 16. You must first verify your identity, 
by providing your full name, address, and date and place of birth. You 
must sign your request, and your signature must either be notarized or 
submitted under 28 U.S.C. 1746, a law that permits statements to be 
made under penalty of perjury as a substitute for notarization. In 
addition, your request should:
    a. Explain why you believe HUD would have information on you.
    b. Identify which HUD office you believe has the records about you.
    c. Specify when you believe the records would have been created.
    d. Provide any other information that will help Freedom of 
Information Act (FOIA) staff determine which HUD office may have 
responsive records.
    If your request is seeking records pertaining to another living 
individual, you must include a statement obtained from that individual 
certifying their agreement for you to access their records. Without the 
above information, the HUD FOIA office may not conduct an effective 
search, and your request may be denied due to lack of specificity or 
lack of compliance with regulations.

CONTESTING RECORD PROCEDURES:
    The Department's rules for contesting contents of records and 
appealing initial denials appear in 24 CFR part 16, Procedures for 
Inquiries. Additional assistance may be obtained by contacting John 
Bravacos, Senior Agency Official for Privacy, 451 Seventh Street SW, 
Room 10139, Washington, DC 20410, or the HUD Departmental Privacy 
Appeals Officers, Office of General Counsel, Department of Housing and 
Urban Development, 451 Seventh Street SW, Room 10110, Washington, DC 
20410.

NOTIFICATION PROCEDURES:
    Individuals seeking notification of and access to any record 
contained in this system of records, or seeking to contest its content, 
may submit a request in writing to the Privacy Office at the address 
provided above or to the component's FOIA Officer, whose contact 
information can be found at http://www.hud.gov/foia under ``contact''. 
If an individual believes more than one component maintains Privacy Act 
records concerning him or her the individual may submit the request to 
the Senior Agency Official for Privacy, HUD, 451 7th Street SW, Room 
10139, Washington, DC 20410.

EXEMPTIONS PROMULGATED FOR THE SYSTEM:
    None.

HISTORY:
    Not Applicable.

John Bravacos,
Senior Agency Official for Privacy.
[FR Doc. 2019-07083 Filed 4-9-19; 8:45 am]
BILLING CODE 4210-67-P