March 1, 2023

Jon Mabry
Vice President of Disaster Recovery
Innovative Emergency Management, Inc.
2801 Slater Road, Suite 110
Morrisville, NC 27560
Jon.Mabry@iem.com

Dear Mr. Mabry,

This letter serves as official notice from the Pennsylvania Housing Finance Agency (the “Agency”
or “PHFA”) to Innovative Emergency Management Incorporated (“IEM”) regarding the
administration of the Pennsylvania Homeowners Assistance Fund (“PAHAF” or “Program”) and
the contractual relationship with the Agency and IEM regarding the Program’s operations. PHFA
must terminate the contract with IEM for administration of the Program for cause.

This notice is in reference to Contract Number 2021-ADM-032, entered on October 7, 2021.

Pursuant to Article VII Termination of the Contract, PHFA is exercising the right to terminate
the contract via written notice to the Contractor.

This notice supplants the communication between PHFA and IEM dated as of January 3, 2023,
and the updated notice dated February 3, 2023. As was communicated in the contract notices and
in the follow-on transition discussions, the Agency sought an orderly transition from the
administration and operation of the Program from IEM to the Agency. As such, PHFA was willing
to consider a termination for convenience. The termination for convenience would be the Agency’s
approach as we worked with IEM on the transition under those parameters if the factual situation
concerning the program and transition to the Agency warranted the termination for convenience.
It was also communicated that at all times, the Agency reserved and maintained the right and
obligation to terminate for cause if the facts warranted such termination for cause.

Based upon facts gathered during the transition since January as well as the performance of IEM
during the transition between their operation and Agency staff taking over, it unfortunately has
become evident that the Agency must terminate for cause.

While not an exhaustive list, the following facts and actions demonstrate why the Agency must
terminate for cause.

• As of the report dated February 23,2023, IEM has only processed 6,036 applications of the
10,281 assigned upon receiving notice in January and still has 4,245 applications that need
to be processed. Many of the applications that were processed were already in a nearly
closed status at the time of notice. Given the termination date of March 31, 2023, and the
vital need to get the needed assistance to the applicants the Agency can no longer risk the
unlikely outcome that the applications will be successfully completed in that time.

211 N. Front St. • PO Box 8029 • Harrisburg, PA 17105-8029 www.phfa.org

717.780.3800 • TTY: 711
 • As the newly migrated cases are being reviewed, issues with the data maintained by IEM
and discrepancies with the servicers interface have been identified. These issues create
concerns with IEM’s ability to continue to process the remaining applications. Many of
the assigned IEM applications are still in the Imminent Adverse Action status and PHFA
believes it is in the best interest of these applicants and the Program to bring their
applications in-house.

• Based upon data analysis during the migration, there are various types of data
discrepancies. The data deficiencies have created issues with those records being part of
the data load into the software needed to process the applications. These issues include
duplicate applicants and missing assistance type data. Because of data deficiencies, there
are approximately 2,000 applications that will need to be manually verified and keyed.

• Since providing the initial notice of termination in January, the Agency has received an
increase in appeals and complaints related to IEM’s processing of applications. This
increase was in addition to an already significant level of complaints regarding IEM and
the Program. Several of these appeals include challenges to “zero awards for servicer non-
response”. These “zero awards” have increased dramatically since IEM received notice and
appear to be the company’s effort to “close” applications prematurely.

• During the transition, the Agency has received information from mortgage servicers that
IEM has received information in a timely manner when IEM failed to acknowledge that
information and follow through with processing and proper award of funds.

• Preliminary analysis of data demonstrates that processing delays by IEM have created
additional costs to the Program by increasing the amounts of needed assistance to cover
additional assistance costs accruing during the delay.

• PHFA has obtained a modification to the software that provides operational enhancements
that allows the Agency to process partially disbursed applications and accurately provide
the required Treasury reporting and is therefore currently in a position to be able to take
over administration of the remaining applications previously assigned to IEM.

The final major deficiency that mandates IEM’s termination for cause is the performance gaps and
lack of readiness from the program start in the software IEM utilizes and personnel knowledge
from IEM staff. The software and personnel did not meet the levels presented in the RFP response
and proposal demonstrations. The deficiencies and inadequacies of the software and service
delivery provided have created substantial issues for the program. These deficiencies have also
resulted in increased caps, higher payments to applicants, and increases in adverse actions due to
the delays in processing.

While the above are significant justification for termination for cause, they do not cover the full
extent of IEM’s deficiencies.

In addition, as the Agency audits the program in conjunction with the termination and close out,
additional issues may be identified that will require discussions between IEM and the Agency.

2
Updated Effective Date and Transition Requirements

Due to the need to terminate for cause, the new termination date is March 8, 2023. This allows for
the disbursement of those files that are in a payment ready state as defined below.

• IEM should only process files where the “A” record has been sent; and the ACH and/or
Check has been finalized and is ready to be sent. These required payments must be
submitted, and the “B” record finalized no later than March 8, 2023.
• For any assistance types not related to mortgage, IEM should only complete those that are
in an ACH /Check file ready to be paid as of the notice date (March 1, 2023).
• No payments on forward mortgage assistance can be disbursed.
• As per existing reporting requirements, IEM must provide a detailed report to include the
file number, when the A was transmitted; the amount, and the specific ACH or check
information.
• IEM must provide a list of files where a grant agreement/letter (zero awards excluded) was
sent during the transition period of January 1st-March 8th, 2023, but payment does not meet
the ACH/Check Criteria noted above and therefore was not paid out. That file should
include applicant ID, date the grant agreement/letter was sent, assistance type and amount
to be paid. The report must be provided by March 10th, 2023.
• As already mandated, IEM must provide a full disbursement report of all program
disbursements made upon closeout. This information must be provided no later than March
10th, 2023.
• IEM must provide the application data for the remaining applications not processed to
include the Imminent Adverse Action Status no later than March 10, 2023.
• IEM must coordinate the transition of the IEM SFTP CDF folder with PHFA to ensure a
smooth transition for servicers of CDF records.
• IEM must return all funds provided in excess of what was disbursed.
• IEM must provide all data required for the Q1 Treasury report and harmonization of data
for the program dashboard.
• IEM is responsible for the proper retention of all program data per Treasury requirements.
• IEM will coordinate with PHFA to process final payments due up through February 28,
2023, to Housing Counseling Agencies (HCA’s) and marketing partners.

Once the required tasks are performed and the final audit of the program is completed, the Agency
will reach a final payment to be made to IEM based upon the amounts properly disbursed by IEM
and the necessary offsets that will need to be made by the Agency in accordance with the
contractual terms between the parties.

3
Please respond with your acknowledgement of receipt of this email notification. Per the notice
requirements of the contract, this letter will also be provided via US mail.

Sincerely,

Kim Burky
Contract Issuing Officer
717-780-3802
kburky@phfa.org

cc: contracts@iem.com
Tim.Lagudi@iem.com
kwilson@phfa.org