FHA looks for IT help to fight fraud in mortgage business

Concerned with mortgage fraud, the Federal Housing Administration is looking for information technology tools to improve its ability to identify problems in housing loans, according to a request for proposals issued this month.

FHA, a Housing and Urban Development Department agency, provides housing loans for single and multifamily dwellings and health care facilities. When the mortgage market collapsed and lending institutions stopped originating loans, the agency experienced a jump in mortgage applications accompanied by an increase in mortgage insurance claims and delinquencies. FHA now accounts for 30 percent of the mortgage market. FHA wants to find technology solutions to streamline its databases and to decrease fraud, according to the RFP.

"Given FHA's central role in the market recovery, a renewed evaluation of risk and fraud controls is necessary," said HUD spokesman Lemar Wooley. "It is vital that FHA continues to strengthen its risk management and fraud prevention framework to ensure its programs and insurance funds are better protected from fraudulent and abusive lending practices and unmanageable credit risks."

FHA's IT strategy and improvement plan submitted to Congress in 2009 recommended the agency modernize its technology infrastructure, including adopting a risk and fraud mitigation initiative. The agency's fiscal 2010 budget included $20 million for combating fraud. In particular, the program seeks to correct holes in agency systems and processes that threaten the stability of the mutual mortgage insurance fund, according to the RFP.

"When you insure roughly 30 percent of single family purchases in the marketplace, you need a modern set of risk and fraud functionality from an IT perspective to protect the taxpayer," said a HUD official speaking on background because the procurement is open.

One solution includes a platform to aggregate data from sources such as credit check records, criminal background databases and the General Services Administration's Excluded Parties List system to help FHA evaluate the risks of loan contracts. The system will allow the agency to access real-time and archived data across the enterprise, according the RFP. FHA also is seeking help analyzing IT tools before investing in the technologies.

"This administration is taking steps to analytically understand challenges before they spend millions on IT functionality. In the past it's been difficult to find resources, and when you get them you have the responsibility to use them appropriately," the official said.

The GSA's Federal Systems Integration and Management Center is managing the acquisition for FHA.