As part of the downsizing, FHA’s Office of Single Family Housing is planning to reduce its staff from a 1994 level of 2,700 to 1,150 by the year 2000. Single Family Housing Initiatives to Reduce Staff by 57 Percent

FHA plans to use its existing information technology capabilities to facilitate some streamlining and staff reduction initiatives, while other initiatives will require new information technology applications. New information system support will be needed for FHA’s planned changes to loss mitigation and disposition operations. Loan Processing

To reduce its loan processing staff, FHA is (1) expanding the use of its electronic data transfer capabilities so that fewer staff are needed to enter data into systems from paper documents and (2) using its information systems to support the consolidation of operations from 81 offices to 5 offices. Additional efficiency and effectiveness improvements may be possible if FHA incorporates other information systems capabilities used by the organizations. For example, FHA officials stated they must deal with budget and procurement limits and the lack of skilled managers and technical staff that are necessary to quickly develop and implement the needed information systems. In this regard, as part of its efforts to improve operations, FHA officials told us that they are considering using the expertise of other organizations. FHA has also established a process for approving lenders’ use of other automated loan origination systems. In making future decisions on technology acquisitions, the agency can incorporate the technology investment framework established by the new Information Technology Management Reform Act of 1996 (ITMRA), which is based on industry best practices. Information technology figures prominently in the plans to support and enable the operational changes that are being contemplated. Objectives, Scope, and Methodology

As requested by the Chairs of the Subcommittee on Government Management, Information and Technology and Subcommittee on Human Resources and Intergovernmental Affairs of the House Committee on Government Reform and Oversight, our objectives were to determine (1) how FHA plans to use information technology to support the streamlining of single family housing operations and reduce staff, (2) whether FHA’s planned initiatives are similar to those undertaken by leading mortgage organizations to increase productivity, and (3) what FHA is doing to ensure that information technology initiatives will maintain or improve management controls over single family housing operations. As part of our work to determine what information is available that the planned information technology initiatives can help achieve the projected staff reductions and efficiencies, we analyzed information from FHA’s pilot test of consolidated loan processing operations, identified information technology applications and systems used by other mortgage industry organizations, and compared FHA’s reinvented processes and systems to those of the other mortgage organizations. While planned single family housing initiatives may help resolve management control weaknesses, insufficient information is available to assess them because detailed operating procedures and system designs have not yet been developed.
Why GAO Did This Study

Pursuant to a congressional request, GAO reviewed the Federal Housing Administration's (FHA) streamlining plans, focusing on: (1) FHA plans to use information technology to support the streamlining of single-family housing operations and reduce staff; (2) similarities between FHA initiatives and those undertaken by leading mortgage organizations to increase productivity; and (3) FHA efforts to ensure that technology initiatives will maintain or improve management controls over single-family housing operations.

What GAO Found

GAO found that: (1) FHA plans to use existing information technology capabilities to facilitate some streamlining and staff reduction initiatives, while other initiatives will require new information technology applications; (2) FHA plans to reduce single family housing staff from its 1994 level of about 2,700 to 1,150 in the year 2000 by: (a) expanding the use of existing electronic data transfer capabilities and using information systems to support the consolidation of loan processing operations from 81 offices to 5 offices; (b) implementing new loss mitigation processes that will be supported with a new information system; and (c) using information technology to support new processes associated with conducting real property maintenance and disposition operations or selling defaulted mortgage notes rather than foreclosing on properties; (3) FHA plans to incorporate information technology initiatives that are similar to, but not as extensive as, those used by other mortgage industry organizations to improve productivity; (4) further improvements may be achieved if FHA adopts other automated capabilities used by these organizations; (5) some of FHA's planned changes may help resolve management control weaknesses or maintain adequate controls for loan origination, loss mitigation, and property disposition; (6) however, GAO was unable to assess the impact of the planned changes because FHA has not yet made all of the decisions, developed the detailed operating procedures, or identified the information systems requirements that will be needed to implement the planned initiatives and management controls; (7) FHA officials recognize that additional information technology investments are needed to achieve the efficiency and effectiveness of other mortgage organizations; (8) however, they added that they must deal with budget and procurement limits and technical skills shortfalls to make needed improvements; (9) in this regard, FHA is considering using the expertise of other organizations; (10) in making future technology acquisitions, FHA can take advantage of the recently enacted Information Technology Management Reform Act of 1996, which establishes a framework for information technology decisionmaking and implementation based on best industry practices.