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» VISIT US ONLINE @ DSNEWS.COM THE LEADER IN DEFAULT SERVICING NEWS Help shape the next issue of DS News. Drop us a line at Editor@DSNews.com. FANNIE MAE OVERPAID SERVICERS $89 MILLION IN 2012 The Federal Housing Financing Agency Office of the Inspector General (FHFA-OIG) issued a report finding Fannie Mae overpaid mortgage servicers approximately $89 million in expenses related to default servicing in 2012. Fannie Mae outsources its reimbursement review process to the management consulting firm Accenture. FHFA's inspector general found that Accenture employees, who manually process the vast majority of claims, made errors because of "(1) inconsistent application of guidelines by different reviewers, (2) limited resources devoted to avoiding such inconsistencies, (3) complex subject matter, and (4) large volume of servicer claims." Examples of overpayment included duplicate claims that were reviewed by different processors and fraudulent claims. Because underpayments are almost always noticed and reported by the servicers, there are far fewer underpayments than overpayments. "Fannie Mae has no remedial measures to recover overpayments on 99 percent of claims because it only samples 1 percent of claims for accuracy," the report said. "Alternatively, when a servicer is underpaid, it often contacts Fannie Mae to discuss the underpayment and resubmits the claim at no additional cost. Because of this asymmetry, netting overpayments and underpayments does not accurately represent the financial loss that Fannie Mae incurs because of Accenture errors." To mitigate losses, FHFA-OIG suggested Fannie Mae put in place a system that would aggregate data about claims and raise certain "red flags" to bring potential errors to processors' attention. Examples of these red flags would include: duplicate payment— submission of more than one claim for the same service on the same loan; odd timing— submission outside expected service months or season (e.g., pool service in winter months in northern states); and unusual frequency— excessive claim submission or claim submission occurring more than expected (i.e., more than one submission for a service generally performed once per the life of the loan. The inspector general's report said Fannie Mae's oversight of Accenture focuses on measuring Accenture's contractual performance rather than minimizing overpayment to servicers. FHFA-OIG recommends Fannie Mae more effectively use its processing accuracy data and publish overpayment reduction targets and data annually. STAT INSIGHT Spillover Costs of Forelosures $23,150 Lost household wealth for families affected by nearby foreclosures, on average. $7,000,000,000,000 Lost home equity as a result of foreclosure crisis. Source: Center for Responsible Lending 39

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