Wednesday, September 25, 2013

More Mortgage-Related Payment Mistakes?

Last May, we told you about significant errors that occurred with the mortgage settlement checks that went out to the millions of homeowners who were eligible for funds.  Now it looks like more financial mishaps are plaguing the mortgage industry.  This time, it looks like Fannie Mae is to blame.  According to an article in, Fannie Mae overpaid mortgages servicers by about $89 million in “expenses related to default servicing” last year.
The Office of the Inspector General of the Federal Housing Financing Agency (FHFA) explained in its report that Fannie Mae outsources certain tasks to management consulting firms, and it relied on Accenture for its reimbursement review process.  In short, Fannie Mae grossly overpaid its services “because a manual review by a third-party vendor resulted in account errors,” according to a news release from the Credit Union National Association.  This comes on the heels of a recent news report in National Mortgage News that while Fannie Mae overpaid $89 million last year, it also “incorrectly denied $27 million in reimbursements last year.”
Details of the FHFA Report—What Did Accenture Do Wrong?
According to, the FHFA’s report explained that Accenture employees’ accounting errors, which were mostly manual one (and thus not made by an electronic processing system), occurred for several different reasons.  First, it looks like different reviewers inconsistently applied guidelines for the reimbursement review process.  Next, Accenture devoted a limited amount of resources to avoiding these inconsistencies, adding insult to injury.  In addition, the subject matter itself was relatively complicated, naturally leading to some margin for error.  And finally, Accenture employees were dealing with such a large volume of servicer claims that they likely weren’t as careful as they should have been.
What are some of the examples of the claim overpayments?  For instance, some of the overpayments were connected to duplicate claims—in other words, claims were submitted and paid more than once, and Accenture didn’t notice the error.  In most of these cases, there is no reliable mechanisms to catch duplicate claim errors.  According to the FHFA report, “Fannie Mae has no remedial measures to recover overpayments on 99 percent of claims because it only samples 1 percent of claims for accuracy.”  Only 1 percent of claims are sampled for accuracy?  This seems strikingly low.
Unlike the erroneous overpayments, Fannie Mae tends to find out when a servicer is underpaid.  The FHFA report explained that when a servicer receives a payment that’s less than the correct amount, “it often contacts Fannie Mae to discuss the underpayments and resubmits the claim at no additional cost.”
How Will Fannie Mae Mitigate its Losses?
The Inspector General for the FHFA encouraged Fannie Mae to “put in place a system that would aggregate data about claims and raise certain ‘red flags’ that would bring potential errors to the processors’ attention.”  For example, so-called ‘red flags’ would arise anytime a duplicate payment was issued, or if Fannie Mae were to receive more than one claim for the same loan service.  As of right no, there’s no such system in place.  As well, such a system would also catch generally odd submissions for reimbursement, such as those arriving outside the typical months for expected servicing or those submitted with an excessive frequency.
The Inspector General also wants Fannie Mae to “more effectively use its processing accuracy data and publish overpayment reduction targets and data annually,” according to
Do you have questions or concerns about mortgages and the mortgage-servicing industry?  Experienced real estate attorneys can answer your questions today.  Don’t hesitate to contact the experienced attorneys at the Emerson Law Firm today.
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