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HUD   >   Program Offices   >   Housing   >   Comp   >   Premiums   >   HUD Reconciliation Discrepancy Types
Reconciliation Discrepancy Types

The following tables explain the discrepancy types that may appear on a mortgagee's Reconciliation Report together with instructions on what the mortgagee can do to correct the discrepancies. There are four (4) different types of Reconciliation discrepancies.

 -   Discrepancy Type: M01 Overpayment
 -   Discrepancy Type: M02 Underpayment
 -   Discrepancy Type: M20 Payment for Nonendorsed Case
 -   Discrepancy Type: M21 Payment for Non-billable Case
   
Discrepancy Type: M01 Overpayment

An overpayment is a payment that (a) exceeds the amount billed for a case, or (b) is remitted for a case that is no longer being billed. Any overage is designated as Unapplied.  

Reason Mortgagee Action
1. Payment remitted for an incorrect case number 
Note: The case number it should have been remitted to may have an underpayment or an error code of M02.
Determine the correct case number by reviewing the Mortgage Insurance Certificate and loan documentation and/or contacting the HUD HOC. 

Remit a payment for the correct case number. We will incur a late fee but, if we remit payment before the first day of next month, interest will not accrue.

Leave the money on the incorrect case number if we are the servicer of the loan, or request a refund or reallocation.

Update our records to allow for the correct remittance in following months.

2. Duplication of an FHA case number. Our records show two loans for the same FHA case number. We remitted two payments for the same FHA case number. Determine the correct case numbers by reviewing the Mortgage Insurance Certificates and loan documentation and/or contacting the HUD HOC.

Remit payment for the appropriate case number. We will incur a late fee but, if we remit payment before the first day of next month, interest will not accrue.

Apply the overage on the original case number to the next month's bill. We may request a refund or reallocation if the overage is greater than the premium due next month.

Update our records to allow for the correct remittance in following months.
 

3. Two Mortgagees Paying on Same Case. The FHA case number we are using for one of our loans is also being used by another mortgagee for one of their loans. Verify who the correct servicer/holder is by checking the portfolio and loan documentation. If we are the current servicer, continue paying current charges for the correct case number.

The other mortgagee will be requesting a refund or reallocation if the payment was made in error. If we remit payment before the tenth day of the next month, a late fee will not be assessed.

 
4. Two Mortgagees Paying on Same Case. We bought or sold the case. Both the buyer and seller are making payments on the case. Verify who the correct servicer/holder is by checking the portfolio and loan documentation. If the case number appears in our portfolio, we are the current servicer. If it does not appear in our portfolio, we are not the current servicer.

We Bought the Case:

If we are not the servicer of record, use the FHA Connection or EDI to record the servicer transfer or request the seller do so.

Continue paying current charges owed on the case.

We Sold the Case
If we are still the servicer of record, use the FHA Connection or EDI to record the servicer transfer or request the buyer do so.

Update our records, if necessary.

Send a request for a refund or reallocation of the payment made on the sold case.

Note: If we were billed for this case but our portfolio indicates that we are no longer the servicer, the servicing transfer information was not picked up before the current billing cycle.

5. Wrong payment amount remitted causing overage (i.e., clerical/typographical error) Determine if we are paying the amount being billed or using the correct formula for calculating premium.

Update our records, if necessary.

Apply the overage to next month's bill. We may request a refund or reallocation if the overage is greater than the premium due next month.
 

6. Discrepancy in the calculation of premium. Our premium calculation is greater than HUD's premium calculation. (A discrepancy in the loan's original principal, interest rate, or term could also be causing the difference in the premium calculations.) Compare our records (loan documentation) against the Portfolio and Reconciliation Reports. Also determine if we are using the correct formula for calculating premium.

Our records are incorrect:

Update our records to allow for the correct remittance in following months.

Apply the overage to next month's bill (or request a refund or reallocation if the overage is greater than the premium due next month). 

HUD's records are incorrect:
Send the Settlement Statement and the Mortgage Note to the Homeownership Center (HOC) in our area and request that they correct their records.
7. Payment on a terminated case 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Review our loan documentation, advice of Mortgage Record Change letter, and our Portfolio Report to determine the termination date (or if the loan was terminated).

Our records are incorrect:

Update our records.

Send a request for a refund or reallocation.

HUD's records are incorrect:
Termination date is incorrect: Contact our HUD Data Quality Lender Representative.

Case was terminated in error: Contact our HUD Data Quality Lender Representative. Continue making monthly payments.

8. Historical Payment Made to Periodic Apply the overage to the next month's bill (or request a refund or reallocation if the overage is greater than the premium due the next month). The process for sending payments for outstanding debt incurred prior to the implementation of the Single Family Premium Collection Subsystem-Periodic (September 1999) has been changed. Contact our Periodic Lender Representative for instructions. We will incur penalties.
9. Payment is remitted for an invalid case number. If necessary, determine the correct case number by reviewing the Mortgage Insurance Certificate and/or notifying the HUD HOC.

Remit payment for the correct case number. We will incur a late fee but, if we remit payment before the first day of next month, interest will not accrue.

Send a request for a refund or reallocation of the payment on the invalid case number.

10. Payment is remitted for an invalid case number using an invalid mortgagee ID; remittance mortgagee ID is corrected If necessary, determine the correct case number by reviewing the Mortgage Insurance Certificate and/or contacting the HUD HOC.

Remit payment for the correct case number. We will incur a late fee but, if we remit payment before the first day of next month, interest will not accrue.

Send a request for a refund or reallocation of the payment on the invalid case number.

Update our records to allow for the correct remittance in following months.  

Discrepancy Type: M02 Underpayment

An underpayment is a payment that is due (billed) and either (a) full payment has not been made or (b) payment has not been received.

Reason Mortgagee Action
1. Payment remitted for an incorrect case number. 
Note: The case number that was remitted in error may have an overpayment or an error code of M01.
If necessary, determine the correct case number by reviewing the Mortgage Insurance Certificate and/or contacting the HUD HOC.

Reallocate the payment to the correct case number.

Update our records to allow for the correct remittance in following months.

Verify that the case is removed from our portfolio the following month or process a servicer/holder transfer using the FHA Connection or EDI, if necessary.

2. The loan has two FHA case numbers (e.g., it was refinanced and the previous loan was not terminated). Check the case number using Portfolio. 

(a) If it indicates a termination status,

the information was not received by HUD's billing system, the Single Family Premium Collection Subsystem-Periodic, before the current billing cycle. (It will be picked up in next month's billing cycle.)

or

the termination transaction resulted in a BI error. If I am an FHA Connection User, review the results of the termination transaction in the Mortgage Servicing Data Quality Database. For BI errors, contact our Data Quality Lender Representative.

(b) If it indicates an active status, the termination has not been processed. For refinances, contact our Upfront Premium Lender Representative.

Update our records.

3. Duplication of an FHA case number. Our records show two loans for the same FHA case number. Determine the correct case numbers by reviewing the Mortgage Insurance Certificates and/or contacting the HUD HOC.

Remit payment for the appropriate case number. We will incur a late fee but, if we remit payment before the first day of next month, interest will not accrue.

Update our records to allow for the correct remittance in following months.
 

4. Case was terminated.
 
 
 
 
Check the case number using Portfolio. 
(a) If it indicates a termination status, the information was not received by HUD's billing system, the Single Family Premium Collection Subsystem-Periodic.
(b) If it indicates an active status, the termination has not been processed. Use EDI or the FHA Connection to submit the Notice of Termination. If necessary, contact our HUD Data Quality Lender Representative.

Note: When HUD processes the termination, the charges on the case are removed.

5. Case was sold/bought. Neither the buyer nor the seller are making payments on the case. Review the Portfolio Report to determine the current servicer on record for the loan. If the case number appears in our portfolio, we are the current servicer. If it does not appear in our portfolio, we are not the current servicer.

We Sold the Case

If we are still the servicer on record, use the FHA Connection or EDI to record the servicer transfer or request the buyer do so.

Update our records, if necessary.

Note: If we were billed for this case but our portfolio indicates that we are no longer the servicer, the servicing transfer information was not received by HUD's billing system, the Single Family Premium Collection Subsystem-Periodic, before the current billing cycle.

We Bought the Case:
If we are not the servicer on record, use the FHA Connection or EDI to record the servicer transfer or request the seller do so.

Remit payment immediately. We are responsible for the late fee incurred. If we remit payment before the first day of next month, interest will not accrue.

Update our records to allow for the correct remittance in following months.

6. Wrong payment amount remitted causing shortage (i.e., clerical/typographical error).  Remit another payment to cover the difference. We will incur a late fee but, if we remit payment before the first day of next month, interest will not accrue.
7. Missed payment. 
 
 
 
 

 

Remit payment immediately. We will incur a late fee but, if we remit payment before the first day of next month, interest will not accrue.

Update our records to allow for the correct remittance in following months.

Note: We can request a penalty adjustment if the reason for the missed payment meets HUD's criteria for an adjustment.
8. Discrepancy in the calculation of premium. Our premium calculation is less than HUD's premium calculation. (A discrepancy in the loan's original principal, interest rate, or term could also be causing the difference in the premium calculations.) Compare our records (loan documentation) against the Portfolio and Reconciliation Reports. Also determine if we are using the correct formula for calculating premium.

Our records are incorrect:

Remit the difference immediately. We will incur a late fee but, if we remit payment before the first day of next month, interest will not accrue.

Update our records to allow for the correct remittance in following months.

 HUD's records are incorrect:
Send copies of form HUD-1 Settlement Statement and the Mortgage Note to the Homeownership Center (HOC) in our area and request that they correct their records.

Send a request for a penalty adjustment to the Interest and Late Charge Review Committee.

If we pay the penalties, we can leave the overage on the case and, after the penalty adjustment is made, apply it to the next month's bill (or request a refund or reallocation if the amount is greater than the premium due next month).

9. Discrepancy in the first payment due date. Our first payment due date (Begin Amort Date) is later than the date HUD has recorded. Compare our records (loan documentation) against the Portfolio and Reconciliation Reports. 

Our records are incorrect:

Remit payment immediately. We will incur a late fee but, if we remit payment before the first day of next month, interest will not accrue.

Update our records to allow for the correct remittance in following months.

HUD's records are incorrect:
Send a copy of the Mortgage Note to the Homeownership Center (HOC) in our area and request that they correct their records. When the correction is made, the charges on the case are removed.
10. Discrepancy in the type of loan (Section of the Act). Our records show this loan is not Risk-based or Section 530. HUD's records show this loan is Risk-based or Section 530. Compare our records (loan documentation) against the Portfolio and Reconciliation Reports

Our records are incorrect:

Remit payment immediately. We will incur a late fee but, if we remit payment before the first day of next month, interest will not accrue.

Update our records to allow for the correct remittance in following months.

HUD's records are incorrect:
Send HUD a copy of the Mortgage Note to the Homeownership Center (HOC) in our area and request that they correct their records. When the correction is made, the charges on the case are removed.
11. Discrepancy in the exempt status. Our records show that this loan is exempt. HUD's records show that it is non-exempt. 
 
 
 
 
 
 
 
 
 
 

 

Compare our records (loan documentation) against the Portfolio and Reconciliation Reports.

Our records are incorrect:

Remit payment immediately. We will incur a late fee but, if we remit payment before the first day of next month, interest will not accrue.

Update our records to allow for the correct remittance in following months.

HUD's records are incorrect:
Submit a correction to the Homeownership Center (HOC) in our area with the following documentation:
For streamline refinances exempt from the risk-based premium program: 

(a) Verify the original loan closing prior to July 1, 1991 by submitting the case number and one of the following from the original loan: HUD-1 Settlement Statement, Mortgage Note, Mortgage Insurance Certificate, Deed of Trust, or Schedule B from the Title Insurance policy of the new loan which reflects the date of the original loan.

(b) Verify that the refinanced loan closed on or after April 24, 1992 with no cash back to the borrower (except for minor adjustments at closing not to exceed $250) by submitting the HUD-1 Settlement Statement for the new refinanced loan.

For 15-year loans (a) exempt from risk-based premium program, (b) closed on or after December 26, 1992, and (c) having a LTV ratio < 90%, submit the following: Mortgage Insurance Certificate or the first page of the Mortgage Note, and HUD-1 Settlement Statement.

When the correction is made, the charges on the case are removed.

Discrepancy Type: M20 Payment for Nonendorsed Case

When a payment is received for a nonendorsed case (i.e., non-billed), it is classified an M20 discrepancy type. This is typically not an error but rather confirmation that the nonendorsed case payment was received. The payment is designated as Unapplied and is applied against charges assessed when the case is endorsed.

Reason Mortgagee Action
1. Case has not been endorsed yet, but has a first premium payment due date (Begin Amort Date).  Start making monthly premium payments when amortization begins, and continue making payments through endorsement.

If the case is canceled before endorsement, request a refund or reallocation.

Note: Until the case is endorsed, the case will appear on the monthly Reconciliation Report. When the case is endorsed, HUD generates bills for the effective periods and applies the payments to the newly generated bills. If payments are not made from the beginning of amortization, penalties are assessed on the case.
2. Discrepancy in the first premium payment due date (Begin Amort Date). Our first payment due date is earlier than the date HUD has recorded. Compare our records (loan documentation) against the Portfolio and Reconciliation Reports.

Our records are incorrect:

Update our records with the correct first payment due date (Begin Amort Date).

Leave overage on case and let it be applied when the first payment is due, or request a refund or reallocation.

HUD's records are incorrect:
Send copies of the Mortgage Insurance Certificate, HUD-1 Settlement Statement, and the Mortgage Note to the Homeownership Center (HOC) in our area and request that their records be corrected.
Note: When the correction is made, bills are generated for the effective periods and payments (overage) are applied to the newly generated bills.

Discrepancy Type: M21 Payment for Non-billable Case

If a payment is received for a case that HUD has never billed, it is classified an M21 discrepancy type. This includes "non-Periodic" and exempt cases. The payment is designated as Unapplied.

Reason Mortgagee Action
1. Discrepancy in the type of loan (Section of the Act). Our records show this loan as Risk-based or Section 530. HUD's records do not. Compare our records (loan documentation) against the Portfolio and Reconciliation Reports.

Our records are incorrect:

Update our records with the correct type of loan.

Request a refund or reallocation of the payment.

HUD's records are incorrect:
Send a copy of the Mortgage Note to the Homeownership Center (HOC) in our area and request that they correct their records.

Note: When the correction is made, bills are generated for the effective periods and payments (overage) are applied to the newly generated bills.

2. Discrepancy in the exempt status. Our records show that this loan is non-exempt. HUD's records show that it is exempt.
 
 
 
 
 
 
 
 
 
 
 
 
Compare our records (loan documentation) against the Portfolio and Reconciliation Reports.

Our records are incorrect:

Update our records with the correct exempt status.

Request a refund or reallocation of the payment.

HUD's records are incorrect:
Send copies of the Mortgage Note, Mortgage Insurance Certificate and HUD-1 Settlement Statement to the Homeownership Center (HOC) in our area and request that they correct their records.
Note: When the correction is made, bills are generated for the effective periods and payments (overage) are applied to the newly generated bills.