HUD's $21.7M single-family master subservice contract awarded to Countrywide Financial Corporation

Contract Overview

Contract Amount: $21,699,764 ($21.7M)

Contractor: Countrywide Financial Corporation

Awarding Agency: Department of Housing and Urban Development

Start Date: 2003-03-13

End Date: 2009-08-31

Contract Duration: 2,363 days

Daily Burn Rate: $9.2K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Other

Official Description: SINGLE FAMILY MASTER SUBSERVICER

Place of Performance

Location: PLANO, COLLIN County, TEXAS, 75024

State: Texas Government Spending

Plain-Language Summary

Department of Housing and Urban Development obligated $21.7 million to COUNTRYWIDE FINANCIAL CORPORATION for work described as: SINGLE FAMILY MASTER SUBSERVICER Key points: 1. Contract value appears reasonable given the duration and scope of master subservicing. 2. Full and open competition suggests a competitive bidding process. 3. Fixed-price contract type mitigates cost overrun risks for the government. 4. Contract duration of nearly 20 years is substantial, indicating long-term reliance. 5. The award to a single entity suggests a focus on specialized capabilities. 6. Performance context is critical to assess value beyond the initial award amount.

Value Assessment

Rating: fair

The contract's total value of $21.7 million over approximately 20 years averages to about $1.1 million per year. This figure needs to be benchmarked against the volume of single-family mortgages serviced. Without knowing the number of loans or the complexity of the servicing portfolio, it's difficult to definitively assess value for money. However, the fixed-price nature provides cost certainty. Comparisons to similar master subserving contracts would be beneficial to gauge if the pricing is competitive.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, indicating that all responsible sources were permitted to submit a bid. This suggests a robust bidding process where multiple firms likely vied for the contract. The presence of competition is generally a positive sign for price discovery and ensuring the government receives competitive pricing.

Taxpayer Impact: Full and open competition helps ensure that taxpayer dollars are used efficiently by driving down costs through market forces.

Public Impact

Homeowners with single-family mortgages serviced under this contract benefit from consistent and standardized servicing operations. The contract supports the Department of Housing and Urban Development's mission to ensure the stability and affordability of the housing market. Geographic impact is nationwide, covering single-family mortgages across the United States. The contract supports jobs within the financial services and mortgage servicing industry, particularly at Countrywide Financial Corporation.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Countrywide Financial Corporation faced significant scrutiny and eventual acquisition due to its role in the 2008 financial crisis, raising concerns about its long-term stability and risk management practices at the time of award.
The extended duration of the contract (nearly 20 years) could represent a significant long-term commitment that might be inflexible if market conditions or contractor performance change drastically.

Positive Signals

The contract was awarded through full and open competition, suggesting a thorough vetting process and competitive pricing.
The firm fixed-price contract type provides budget certainty and transfers risk of cost overruns to the contractor.
The contract specifies a clear deliverable: master subservice for single-family mortgages, indicating a well-defined scope of work.

Sector Analysis

This contract falls within the Financial Transactions Processing, Reserve, and Clearinghouse Activities sector, specifically related to mortgage servicing. The mortgage servicing market is substantial, with billions of dollars in loans managed annually. Master subservicers play a critical role in managing large portfolios of mortgages on behalf of primary servicers or government-sponsored entities, handling tasks like payment collection, escrow management, and default servicing. This contract represents a significant portion of HUD's outsourced mortgage servicing operations.

Small Business Impact

There is no indication that this contract included specific small business set-asides. Given the nature of master subservicing, which requires significant infrastructure and expertise, it is likely that larger financial institutions were the primary bidders. Subcontracting opportunities for small businesses may exist within the operational support functions, but are not explicitly detailed in the provided data.

Oversight & Accountability

Oversight for this contract would primarily reside with the Department of Housing and Urban Development (HUD), specifically the office responsible for mortgage insurance and servicing. Accountability measures would be tied to the performance standards outlined in the contract, with potential for penalties or termination for non-compliance. Transparency is generally facilitated through contract award databases, though detailed performance reports may not always be publicly accessible.

Related Government Programs

Government National Mortgage Association (Ginnie Mae) Mortgage-Backed Securities Program
Federal Housing Administration (FHA) Loan Programs
Department of Veterans Affairs (VA) Loan Guaranty Program
Office of Federal Housing Enterprise Oversight (OFHEO) oversight activities

Risk Flags

Contractor financial stability risk (historical)
Long-term contract duration inflexibility
Potential for performance degradation over extended periods

Frequently Asked Questions

What is this federal contract paying for?

Department of Housing and Urban Development awarded $21.7 million to COUNTRYWIDE FINANCIAL CORPORATION. SINGLE FAMILY MASTER SUBSERVICER

Who is the contractor on this award?

The obligated recipient is COUNTRYWIDE FINANCIAL CORPORATION.

Which agency awarded this contract?

Awarding agency: Department of Housing and Urban Development (Department of Housing and Urban Development).

What is the total obligated amount?

The obligated amount is $21.7 million.

What is the period of performance?

Start: 2003-03-13. End: 2009-08-31.

What was the specific volume of single-family mortgages serviced under this contract, and how did it compare to the initial projections?

The provided data does not specify the exact volume of single-family mortgages serviced under this contract. The total award amount of $21.7 million over approximately 20 years suggests an average annual servicing value. To assess the contract's performance and value, it would be crucial to know the number of loans managed and the total principal balance of those loans. Comparing actual serviced volumes against any initial projections or benchmarks would reveal whether the contract met its intended scale and if the pricing was appropriate for the workload undertaken. Without this information, a detailed value-for-money assessment remains incomplete.

How did Countrywide Financial Corporation's financial health and risk profile at the time of award influence the decision-making process?

Countrywide Financial Corporation was a major player in the mortgage market leading up to 2008. While the contract award date is March 2003, the company's practices and financial stability were under increasing scrutiny as the subprime mortgage crisis unfolded. The government's decision-making process would have ideally involved a thorough risk assessment of Countrywide's financial health, operational capacity, and compliance record. Given the company's eventual collapse and government bailout, a retrospective analysis might question the adequacy of the initial risk assessment. However, at the time of award in 2003, Countrywide was perceived by many as a stable, albeit large, entity.

What were the key performance indicators (KPIs) for this master subservice contract, and how was contractor performance measured?

Key performance indicators for a master subservice contract typically include metrics related to timely payment processing, accurate escrow management, effective delinquency and default management, customer service responsiveness, and compliance with all relevant federal regulations and investor guidelines. Performance would likely be measured through regular reporting by the contractor, audits, and potentially customer satisfaction surveys. HUD would have established specific service level agreements (SLAs) and quality assurance procedures to monitor Countrywide's adherence to these KPIs. Failure to meet these standards could result in corrective actions or financial penalties.

What was the total spending on single-family mortgage servicing by HUD during the contract period (2003-2009), and how does this contract compare?

The provided data focuses solely on this specific contract awarded to Countrywide Financial Corporation. To understand the total spending on single-family mortgage servicing by HUD during the 2003-2009 period, one would need to examine HUD's comprehensive budget and expenditure reports for those fiscal years. This would include spending on all contracts related to mortgage servicing, whether for primary servicing, master subserving, loss mitigation, or other related functions. This contract's value of $21.7 million represents a portion of HUD's overall investment in managing its mortgage portfolio during that time. A broader analysis would be needed to contextualize this specific award within HUD's total servicing expenditures.

Were there any significant contract modifications or change orders issued to Countrywide Financial Corporation during the contract's lifespan?

The provided data summary does not detail any contract modifications or change orders. However, for a contract spanning nearly 20 years (March 2003 to August 2009, totaling 77 months, not 2363 days as indicated by 'dur'), it is highly probable that modifications were issued. These could have been for adjustments in scope, changes in pricing due to unforeseen circumstances (though less likely with fixed-price), extensions of contract duration, or updates to regulatory compliance requirements. A comprehensive contract file review or access to contract modification databases would be necessary to determine if any significant changes occurred.

Industry Classification

NAICS: Finance and Insurance › Activities Related to Credit Intermediation › Financial Transactions Processing, Reserve, and Clearinghouse Activities

Product/Service Code: SUPPORT SVCS (PROF, ADMIN, MGMT) › MANAGEMENT SUPPORT SERVICES

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Contractor Details

Business Categories: Category Business, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $21,699,764

Exercised Options: $21,699,764

Current Obligation: $21,699,764

Timeline