The Department of Housing and Urban Development (HUD) has issued a notice in the Federal Register announcing modifications to several systems of records under the Privacy Act of 1974. Published on January 16, 2026, this action adds a new routine use to enable data sharing with the Department of Treasury for fraud prevention purposes. The changes respond directly to Executive Order 14249, issued by President Trump on March 25, 2025, which directs federal agencies to enhance protections against fraud, waste, and abuse in government payments. By integrating with Treasury's Do Not Pay system, HUD aims to identify and prevent improper payments in its housing programs. This development underscores ongoing efforts to safeguard federal funds while navigating privacy considerations in data management.
Background on the Privacy Act and HUD's Systems of Records
The Privacy Act of 1974 governs how federal agencies collect, maintain, use, and disclose personal information in their systems of records. Agencies must publish System of Records Notices (SORNs) in the Federal Register to inform the public about these systems, including the purposes of data collection and any routine uses that allow sharing without individual consent. HUD maintains multiple such systems to support its mission of providing affordable housing and community development.
The modifications stem from Executive Order 14249, titled "Protecting America's Bank Account Against Fraud, Waste, and Abuse," issued by President Trump. This order instructs agency heads to review and update SORNs to include routine uses permitting disclosure to Treasury for detecting and recovering improper payments. Complementing this is Office of Management and Budget (OMB) Memorandum M-25-32, "Preventing Improper Payments and Protecting Privacy Through Do Not Pay," released on August 20, 2025. These directives build on prior laws like the Payment Integrity Information Act of 2019, which emphasizes reducing errors in federal disbursements.
HUD's notice lists nine specific systems affected, including those handling mortgage insurance, rental assistance, and financial management. For instance, the Enterprise Income Verification system (HUD/PIH-05) verifies income for public housing eligibility, while the Single Family Insurance System (HUD/HOU-04) manages FHA mortgage data. The notice also removes an outdated Do Not Pay routine use from the Single Family Mortgage Insurance Origination System, streamlining it with the new, broader provision.
Key Changes and Routine Use Addition
The core modification is the addition of a new routine use at the end of each affected SORN's routine uses section. This allows disclosure "to the U.S. Department of the Treasury when disclosure of the information is relevant to review payment and award eligibility through the Do Not Pay Working System for the purposes of identifying, preventing, or recouping improper payments to an applicant for, or recipient of, Federal funds, including funds disbursed by a state... in a state-administered, federally funded program."
This routine use facilitates integration with Treasury's Do Not Pay system, a centralized tool that cross-checks payment data against databases like death records, excluded parties lists, and tax delinquency records. As Shalanda Capehart, HUD's Acting Chief Privacy Officer, is listed as the contact, the notice emphasizes compliance with legal standards. Comments on the proposal are invited until February 17, 2026, after which the changes become effective unless significant objections arise.
The affected systems include the Line of Credit Control System (LOCCS, A67), used for grant disbursements, and the Tenant Rental Assistance Certification System (TRACS, HUD/HOU-11), which processes Section 8 voucher data. Each system's prior Federal Register citations are provided, such as 89 FR 5923 for LOCCS, ensuring transparency in historical updates.
Legal and Political Context
This action aligns with broader federal initiatives to combat improper payments, estimated by OMB to exceed $200 billion annually across government programs. Precedents include the Improper Payments Elimination and Recovery Act of 2010, which mandated agencies to implement recovery audits. In the housing sector, HUD has faced scrutiny over fraud in programs like FHA mortgages, where improper payments have led to losses in the billions, as reported in Government Accountability Office audits.
Key players include President Trump, whose executive order drives the policy, and OMB, which provides implementation guidance. Treasury administers the Do Not Pay system, established under the 2012 Bipartisan Budget Act. Politically, this reflects a focus on fiscal responsibility, echoing themes from Trump's administration. However, it occurs amid debates over data privacy, with groups like the Electronic Privacy Information Center advocating for stronger safeguards against overreach.
Perspectives vary. Supporters argue it strengthens program integrity, potentially saving taxpayer dollars by preventing payments to ineligible recipients, such as deceased individuals or sanctioned entities. Critics, including privacy advocates, express concerns about expanded data sharing eroding individual protections under the Privacy Act, potentially leading to errors or misuse without adequate oversight.
Implications for HUD Programs and Stakeholders
In the short term, these modifications could enhance HUD's ability to verify eligibility in real-time, reducing fraud in high-volume programs like public housing and mortgage insurance. For example, integrating EIV with Do Not Pay might flag discrepancies in income reporting, directly impacting rental assistance calculations.
Long-term implications include improved efficiency in federal spending but also challenges in balancing privacy with security. Stakeholders such as housing authorities, lenders, and beneficiaries may see procedural changes, with potential for increased scrutiny on applications. Legal precedents like the Supreme Court's ruling in Department of Agriculture v. Moreno (1973), which addressed eligibility restrictions, highlight the need for fair implementation to avoid discriminatory effects.
Different viewpoints emerge from policymakers: fiscal conservatives praise the anti-fraud measures, while progressive groups emphasize protecting vulnerable populations from undue data surveillance. HUD's notice does not alter the underlying data categories or security classifications, which remain as previously published.
The HUD notice represents a targeted response to executive directives, fortifying fraud prevention in housing programs through enhanced data sharing. Potential next steps include reviewing public comments by February 17, 2026, and possible adjustments before final implementation. Ongoing debates may center on the effectiveness of Do Not Pay in reducing improper payments versus risks to privacy rights. Future challenges could involve technological integration, ensuring compliance with evolving laws, and addressing any legal challenges from affected parties. This development highlights the tension between fiscal accountability and individual data protections in federal administration.
