25th September 2013

Fannie Mae Overpaid Servicers by $89 Million

posted in Appraiser News |

Fannie Mae Overpaid Servicers by $89 Million
Reposted from Appraiser News Online

Fannie Mae overpaid servicers by about $89 million in 2012 due to errors made by a third-party vendor incorrectly processing servicer reimbursement claims, National Mortgage News reported Sept. 18.

The Office of the Inspector General for the Federal Housing Finance Agency reported the problem, noting that Fannie not only overpaid servicers but also incorrectly denied $27 million in reimbursements last year.

However, the FHFA conducted its own review of the issue and claimed that the errors were “substantially less” than what the IG’s report suggested, although the agency failed to report the amount they said was overpaid, National Mortgage News reported.

The FHFA contracted with third-party vendor, Accenture, to review the reimbursement claims by servicers and then decide whether or not to pay, curtail or deny those claims. The IG’s report indicated that Accenture reviewed about 1.3 million claims last year and approved $2.9 billion worth of reimbursements.

Before 2011, Fannie conducted its own reimbursement reviews; now 80 percent undergo manual review by Accenture.

The IG’s report indicated that errors largely were due to inconsistent application of guidelines, incomplete reviews or large volumes of claims.

“Although these overpayments may not equate directly to financial harm against Fannie Mae, they represent a fundamental problem that undermines the reliability and integrity of Fannie Mae’s servicer reimbursement operations,” the IG report concluded, National Mortgage News reported.

The report suggested that Fannie minimize processing errors by creating a red flag system, and it also advised the firm to quantify and aggregate overpayments and to determine the root cause of those overpayments. The IG also said the firm should then publish the results.

The FHFA said it would implement most of the IG’s recommendations but noted that it would not publish the results of a review of overpayments.

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