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OIG Report: Fannie Overpaying Servicer Reimbursements

Nearly $90 million in 2012 overpayments

Sept. 19, 2013 (updated 12:00 p.m.)

By Mortgage Daily staff

Nearly $90 million in servicer reimbursements were overpaid last year by the Federal National Mortgage Association, according to a report that calls for the secondary lender to improve its reimbursement process.

Fannie Mae servicers make payments on behalf of delinquent borrowers for expenses like property maintenance, insurance, taxes and loan liquidation costs.

The Washington, D.C.-based company utilizes Accenture LLP to handle manual processing on requests for reimbursement from servicers on payments they've made on behalf of delinquent borrowers.

A report from the Federal Housing Finance Agency Office of Inspector General found that around $2.9 billion in reimbursements were approved by Accenture during 2012. The report was prompted by serious deficiencies in Fannie's controls and processors that its internal audit division began uncovering starting in 2010.

"Occasionally, however, Accenture analysts erroneously approve or deny servicer reimbursements," the OIG report said. "As a result of these errors, Fannie Mae overpays or underpays servicers. Thus, operational oversight is critical."

In 2012, the erroneous Accenture reimbursements cost Fannie $89 million, according to the OIG's estimates.

The report found that while Fannie collects valuable sample data on Accenture's performance, it doesn't effectively utilize the data to minimize processing errors.

The OIG criticized Fannie for failing to implement a red flag system for servicer reimbursements that would identify reimbursement trends and data anomalies that adversely impact Fannie's finances.

In addition to better utilizing sample data and implementing a red flag system, the OIG recommends that Fannie be required to quantify and aggregate its overpayments to servicers regularly; implement a plan that identifies the root causes of overpayments, creates reduction targets and holds managers accountable; and periodically report its finding to FHFA.

The OIG also wants the FHFA to publish Fannie's reduction targets and overpayment findings.


(after the publication of this story, an Accenture spokesman provided the following statement:

"The report's characterization is incorrect. We do not approve or deny reimbursements: our processors follow guidelines and business rules set by Fannie Mae to recommend how to disposition claims. And we do not have responsibility for payment or disbursement of funds."
)

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