The following scenarios include typical situations that result in unreconciled cases that will appear on the Reconciliation file, available to all lenders between the 15th and 17th day of each month. Accessing and comparing the Portfolio file against your records will help resolve many of these errors. The scenarios are shown with the data provided in a sample report layout. Your exception reporting process may differ from the sample shown here. However, the problems and action required for resolution will be the same.
Reconciliation File/Sample Report Field Descriptions
- Amount Due: Amount billed for the current month.
- Current Charges: Monthly premium, late, and interest assessed for that month.
- Paid/Applied: All payments, refunds, adjustments, and debit vouchers that occurred between the two billing cycles (15th and 15th).
- Past Billed: Amount billed the previous month.
- Unapplied Before Current Bill: Overpayment amount on the case prior to billing.
M01 Overpayments
A case with an M01 error code in the Reconciliation report file indicates an overpayment. Below are some reasons the overpayment may have occurred and the action to be taken.
Reason 1: Payment Remitted for an Incorrect Case Number
Situation: We made a $38.00 payment for case 111-1111111 on June 7, but $20.00 of that payment should have been remitted for case 222-2222222. We are the servicer for both cases. The Reconciliation file for June 16 shows an M01 overpayment error for case 111-1111111 and an M02 underpayment error for case 222-2222222 as follows:
| Error | Case Number | Billing and Payment(s) | Premium | Late | Interest | Total |
|---|---|---|---|---|---|---|
| M01 | 111-1111111 | Past Billed (due 6/1) | 18.00 | 0.00 | 0.00 | 18.00 |
| Current Charges | 18.00 | 0.00 | 0.00 | 18.00 | ||
| Paid/Applied | 36.00 | 0.00 | 0.00 | 36.00 | ||
| Amount Due (7/1) | 0.00 | 0.00 | 0.00 | 0.00 | ||
| Unapplied Before Current Bill | 20.00 |
| Error | Case Number | Billing and Payment(s) | Premium | Late | Interest | Total |
|---|---|---|---|---|---|---|
| M02 | 222-2222222 | Past Billed(due 6/1) | 20.00 | 0.00 | 0.00 | 20.00 |
| Current Charges | 20.00 | 0.80 | 0.00 | 20.80 | ||
| Paid/Applied | 0.00 | 0.00 | 0.00 | 0.00 | ||
| Amount Due (7/1) | 40.00 | 0.80 | 0.00 | 40.80 | ||
| Unapplied Before Current Bill | 0.00 |
Lender Action:
- Determine the correct case number by reviewing the Mortgage Insurance Certificate and/or contacting the HUD HOC.
- Remit the shortage amount for case 222-2222222.
- We are responsible for the late fee assessed on case 222-2222222.
- Leave the $2.00 overage (unapplied amount after billing) on case 111-1111111 as credit to be applied to the bill due August 1; a refund or reallocation may be requested.
- Update our records to allow for the correct remittance in following months.
Notes:
- If we remit $20.00 for case 222-2222222 before July 1, interest will not accrue.
- If we remit $40.80 for case 222-2222222 before July 15, the case will not appear in the Reconciliation file for July 16 since there is no outstanding balance. However, interest will accrue on $20.00 and be billed on July's bill.
Reason 2: Duplication of an FHA Case Number - Two Loans with Same FHA Case Number
Situation: Our records show two loans for the same FHA case number, 333-3333333. As a result, we remitted two payments, $20.00 and $25.00, for this case number on June 7. Upon further investigation, we discovered that one of the loans is actually case number 444-4444444. The Reconciliation file for June 16 shows an M01 overpayment error for case 333-3333333 and an M02 underpayment error for case 444-4444444 as follows:
| Error | Case Number | Billing and Payment(s) | Premium | Late | Interest | Total |
|---|---|---|---|---|---|---|
| M01 | 333-3333333 | Past Billed (due 6/1) | 20.00 | 0.00 | 0.00 | 20.00 |
| Current Charges | 20.00 | 0.00 | 0.00 | 20.00 | ||
| Paid/Applied | 40.00 | 0.00 | 0.00 | 40.00 | ||
| Amount Due (7/1) | 0.00 | 0.00 | 0.00 | 0.00 | ||
| Unapplied Before Current Bill | 25.00 |
| Error | Case Number | Billing and Payment(s) | Premium | Late | Interest | Total |
|---|---|---|---|---|---|---|
| M02 | 444-4444444 | Past Billed due 6/1/) | 25.00 | 0.00 | 0.00 | 25.00 |
| Current Charges | 25.00 | 1.00 | 0.00 | 26.00 | ||
| Paid/Applied | 0.00 | 0.00 | 0.00 | 0.00 | ||
| Amount Due (7/1) | 50.00 | 1.00 | 0.00 | 51.00 | ||
| Unapplied Before Current Bill | 0.00 |
Lender Action:
- Determine the correct case number by reviewing the Mortgage Insurance Certificate and/or contacting the HUD HOC.
- Remit the amount due for case 444-4444444.
- We are responsible for the late fee assessed on case 444-4444444.
- Leave the $5.00 overage (unapplied amount after billing) on case 333-3333333 to be applied to the next bill; a refund or reallocation may be requested.
- Update our records to allow for the correct remittance in following months.
Notes:
- If we remit $25.00 for case 444-4444444 before July 1, interest will not accrue.
- If we remit $51.00 for case 444-4444444 before July 15, the case will not appear in the Reconciliation file for July 16 since there is no outstanding balance. However, interest will accrue on $25.00 and be billed on July's bill.
Reason 3: Duplication of an FHA Case Number - Case Number Also Being Used by Another Lender
Situation: The FHA case number we are using for one of our loans is also used by lender ID 91111 for one of their loans. We are both using case number 555-5555555. Both of us remitted a premium payment (we remitted $20.00, and the other lender remitted $27.00) before June 10. The Reconciliation file for June 16 shows the following:
| Error | Case Number | Billing and Payment(s) | Premium | Late | Interest | Total |
|---|---|---|---|---|---|---|
| M01 | 555-5555555 | Past Billed (due 6/1) | 20.00 | 0.00 | 0.00 | 20.00 |
| Current Charges | 20.00 | 0.00 | 0.00 | 20.00 | ||
| Paid/Applied | 40.00 | 0.00 | 0.00 | 40.00 | ||
| Amount Due (7/1) | 0.00 | 0.00 | 0.00 | 0.00 | ||
| Unapplied Before Current Bill | 27.00 |
Lender Action:
- Verify we are recorded as the current servicer of the case by checking our portfolio. If the case number appears in our portfolio, we are the current servicer.
- Continue paying current charges owed on the case (whether billed or not).
- The other lender should request a refund or reallocation of their payment.
Notes:
- Both lenders that remitted a payment receive Lender Notifications.
- If we remit $20.00 before July 10, a late fee will not be assessed.
- If we make another payment and lender ID 91111 is not issued a refund by July 15, this case will appear with an M01 discrepancy type in the Reconciliation file for July 16. The excess money will eventually be refunded or reallocated; continue paying current charges owed on the case.
- NOTE: If lender 91111 continues to pay on their case, such a payment would transfer the case to 91111's portfolio. We should periodically check our portfolio to see if we need to report a servicer transfer.
Reason 4: Duplication of an FHA Case Number - Case Was Bought/Sold
Situation: We bought case 666-6666666 from lender ID 91111 in mid-April. However, we have both been remitting payments of $20.00 for this case before the 10th of the month. The Reconciliation file for June 16 shows the following:
| Error | Case Number | Billing and Payment(s) | Premium | Late | Interest | Total |
|---|---|---|---|---|---|---|
| M01 | 666-6666666 | Past Billed (due 6/1) | 0.00 | 0.00 | 0.00 | 0.00 |
| Current Charges | 20.00 | 0.00 | 0.00 | 20.00 | ||
| Paid/Applied | 20.00 | 0.00 | 0.00 | 20.00 | ||
| Amount Due (7/1) | 0.00 | 0.00 | 0.00 | 0.00 | ||
| Unapplied Before Current Bill | 40.00 |
Lender Action:
- Check our portfolio to determine the current servicer on record for the loan. If the case number appears in our portfolio, we are the current servicer on record. If it does not appear in our portfolio, we are not the current servicer; use EDI or the FHA Connection to record the servicer transfer or request the seller do so.
- Continue paying current charges owed on the case (whether billed or not).
- The other lender should request a refund or reallocation of their payment.
Notes:
- Both lenders that remitted a payment receive Lender Notifications.
- If we remit $20.00 before July 10, a late fee will not be assessed.
- If we make another payment and lender ID 91111 is not issued a refund or reallocation by July 15, this case will appear with an M01 discrepancy type in the Reconciliation file for July 16. The excess money will eventually be refunded; continue paying current charges owed on the case.
Reason 4: Duplication of an FHA Case Number - Case was Bought/Sold (Continued)
Situation: We sold case 777-7777777 to lender ID 91919 in mid-April. However, we have both been remitting payments of $20.00 for this case before the 10th of the month. The Reconciliation file for June 16 shows the following:
| Error | Case Number | Billing and Payment(s) | Premium | Late | Interest | Total |
|---|---|---|---|---|---|---|
| M01 | 777-7777777 | Past Billed (due 6/1) | 0.00 | 0.00 | 0.00 | 0.00 |
| Current Charges | 20.00 | 0.00 | 0.00 | 20.00 | ||
| Paid/Applied | 20.00 | 0.00 | 0.00 | 20.00 | ||
| Amount Due (7/1) | 0.00 | 0.00 | 0.00 | 0.00 | ||
| Unapplied Before Current Bill | 40.00 |
Lender Action:
- Check our portfolio to determine the current servicer on record for the loan. If the case number appears in our portfolio, we are the current servicer on record. If it does not appear in our portfolio, we are not the current servicer; use EDI or the FHA Connection to record the servicer transfer or request the buyer to do so.
- Update our records, if necessary.
- Request a refund or reallocation of the payments made on the case.
Notes:
- Both lenders that remitted a payment receive Lender Notifications.
- It is important for lender ID 91919 to continue paying the current charges owed.
Reason 5: Wrong Payment Amount Remitted
Situation: Due to clerical or typographical error, we remitted $200.00 instead of $20.00 for case 888-8888888 on June 9. The Reconciliation file for June 16 shows the following:
| Error | Case Number | Billing and Payment(s) | Premium | Late | Interest | Total |
|---|---|---|---|---|---|---|
| M01 | 888-8888888 | Past Billed (due 6/1) | 20.00 | 0.00 | 0.00 | 20.00 |
| Current Charges | 20.00 | 0.00 | 0.00 | 20.00 | ||
| Paid/Applied | 40.00 | 0.00 | 0.00 | 40.00 | ||
| Amount Due (7/1) | 0.00 | 0.00 | 0.00 | 0.00 | ||
| Unapplied Before Current Bill | 180.00 |
Lender Action:
- Verify that we are calculating the premium correctly.
- Update our records to allow for the correct remittance in the following months.
- Apply $20.00 to next month's bill and leave remaining unapplied on case to apply to future bills, or request a refund or reallocation of $160.00 (unapplied amount after billing).
Notes:
- If we make an overpayment, we should leave it on the case and apply it to the next bill. If the overpayment is substantial, we can ask for a refund or reallocation of the unapplied amount after billing.
- If we request a refund or reallocation of $160.00, we must continue remitting the normal premium amount. Otherwise, when the refund or reallocation is processed, we will incur late (and interest) charges.
- If we reallocate or receive a refund of $160.00 before July 15, this case will no longer have an overage and will not appear in the Reconciliation file for July 16. Otherwise, the case will appear with an M01 discrepancy type in the Reconciliation file for July 16.
The Reconciliation file for July 16 shows the results of billing on July 15; $20.00 from Unapplied Before Current Bill is applied to Current Charges.
| Error | Case Number | Billing and Payment(s) | Premium | Late | Interest | Total |
|---|---|---|---|---|---|---|
| M01 | 888-8888888 | Past Billed (due 7/1) | 0.00 | 0.00 | 0.00 | 0.00 |
| Current Charges | 20.00 | 0.00 | 0.00 | 20.00 | ||
| Paid/Applied | 20.00 | 0.00 | 0.00 | 20.00 | ||
| Amount Due (8/1) | 0.00 | 0.00 | 0.00 | 0.00 | ||
| Unapplied Before Current Bill | 160.00 |
Reason 6: Discrepancy in the Calculation of Premium
Situation A: We compared our records against the Portfolio and Reconciliation files and discovered that we have an incorrect loan to value ratio which caused an error in our premium calculation for case 999-9999999. Our premium calculation is $25.00, and HUD's premium calculation is $20.00. We have been remitting payments based on our calculation for several months now before the 10th of the month. The Reconciliation file for June 16 shows the following:
| Error | Case Number | Billing and Payment(s) | Premium | Late | Interest | Total |
|---|---|---|---|---|---|---|
| M01 | 999-9999999 | Past Billed (due 6/1) | 0.00 | 0.00 | 0.00 | 0.00 |
| Current Charges | 20.00 | 0.00 | 0.00 | 20.00 | ||
| Paid/Applied | 20.00 | 0.00 | 0.00 | 20.00 | ||
| Amount Due (7/1) | 0.00 | 0.00 | 0.00 | 0.00 | ||
| Unapplied Before Current Bill | 25.00 |
Lender Action:
- Update our records with the correct information.
- Leave the $5.00 overage (unapplied amount after billing) on the case to be applied to the next bill along with a $15.00 payment, and thereafter make monthly payments of $20.00.
Situation B: We compared our records against the Portfolio and Reconciliation files and discovered that HUD has an incorrect original mortgage amount which caused an error in their premium calculation on case 909-9999999. Our premium calculation is $24.00, and HUD's premium calculation is $19.00. We have been remitting payments based on our calculation for several months now before the 10th of the month. The Reconciliation file for June 16 shows the following:
| Error | Case Number | Billing and Payment(s) | Premium | Late | Interest | Total |
|---|---|---|---|---|---|---|
| M01 | 909-9999999 | Past Billed (due 6/1/02) | 0.00 | 0.00 | 0.00 | 0.00 |
| Current Charges | 19.00 | 0.00 | 0.00 | 19.00 | ||
| Paid/Applied | 19.00 | 0.00 | 0.00 | 19.00 | ||
| Amount Due (7/1/02) | 0.00 | 0.00 | 0.00 | 0.00 | ||
| Unapplied Before Current Bill | 25.00 |
Lender Action:
- Review the loan documentation (HUD-1 Settlement Statement, Mortgage Note, etc.).
- Send copies of HUD-1 Settlement Statement and the Mortgage Note to the Homeownership Center (HOC) in our area and request that HUD's records be corrected.
- Leave the $6.00 overage (unapplied amount after billing) to be applied to the MIP adjustment when HUD corrects their records. Continue making monthly payments of $24.00.
Reason 7: Payment on a Terminated Case
Situation A: We reviewed our loan documentation for case number 100-0000000, the Advice of Mortgage Record Change, and our current Portfolio file. HUD has a termination date of April 25 for this loan, but we failed to enter that information in our computer system. As a result, we remitted our usual monthly payment on June 9. This caused case number 100-0000000 to appear in the Reconciliation file for June 16 with an M01 discrepancy type.
| Error | Case Number | Billing and Payment(s) | Premium | Late | Interest | Total |
|---|---|---|---|---|---|---|
| M01 | 100-0000000 | Past Billed (due 6/1/) | 0.00 | 0.00 | 0.00 | 0.00 |
| Current Charges | 0.00 | 0.00 | 0.00 | 0.00 | ||
| Paid/Applied | 0.00 | 0.00 | 0.00 | 0.00 | ||
| Amount Due (7/1) | 0.00 | 0.00 | 0.00 | 0.00 | ||
| Unapplied Before Current Bill | 20.00 |
Lender Action:
- Update our records with the correct information.
- Request a refund or reallocation of $20.00.
Situation B: We reviewed our loan documentation for case number 200-0000000, the Advice of Mortgage Record Change, and our current Portfolio file. HUD has an incorrect termination of April 25. The insurance on the case was not terminated until May 5, making us responsible for the May premium that was due June 1, which we remitted on June 9. This caused case number 200-0000000 to appear in the Reconciliation file for June 16 with an M01 discrepancy type.
| Error | Case Number | Billing and Payment(s) | Premium | Late | Interest | Total |
|---|---|---|---|---|---|---|
| M01 | 200-0000000 | Past Billed (due 6/1) | 0.00 | 0.00 | 0.00 | 0.00 |
| Current Charges | 0.00 | 0.00 | 0.00 | 0.00 | ||
| Paid/Applied | 0.00 | 0.00 | 0.00 | 0.00 | ||
| Amount Due (7/1) | 0.00 | 0.00 | 0.00 | 0.00 | ||
| Unapplied Before Current Bill | 25.00 |
Lender Action:
- Contact our HUD Data Quality Lender Representative.
- Leave the $25.00 overage (unapplied amount) to be applied to the May premium when HUD corrects their records.
Situation C: We reviewed our loan documentation for case number 300-0000000 and our current Portfolio file (we do not have an Advice of Mortgage Record Change). We found out that HUD erroneously terminated the case on April 25. However, we remitted our usual monthly payment on June 9. This caused case number 300-0000000 to appear in the Reconciliation file for June 16 with an M01 discrepancy type.
| Error | Case Number | Billing and Payment(s) | Premium | Late | Interest | Total |
|---|---|---|---|---|---|---|
| M01 | 200-0000000 | Past Billed (due 6/1) | 0.00 | 0.00 | 0.00 | 0.00 |
| Current Charges | 0.00 | 0.00 | 0.00 | 0.00 | ||
| Paid/Applied | 0.00 | 0.00 | 0.00 | 0.00 | ||
| Amount Due (7/1) | 0.00 | 0.00 | 0.00 | 0.00 | ||
| Unapplied Before Current Bill | 18.00 |
Lender Action:
- Contact HUD Data Quality Lender Representative.
- Continue making monthly payments.
Reason 8: Payment Submitted for an Invalid Case Number
Situation: Case number 212-4545454 is showing up in our Reconciliation file with an M01 discrepancy type from a $20.00 payment we remitted on June 9. In addition, corresponding case number 212-4000000 appears with an M02 discrepancy type (underpayment). We realize that we remitted the payment with invalid case number 212-4545454 by mistake. The Reconciliation file for June 16 shows the following:
| Error | Case Number | Billing and Payment(s) | Premium | Late | Interest | Total |
|---|---|---|---|---|---|---|
| M01 | 212-4545454 | Past Billed (due 6/1) | 0.00 | 0.00 | 0.00 | 0.00 |
| Current Charges | 0.00 | 0.00 | 0.00 | 0.00 | ||
| Paid/Applied | 0.00 | 0.00 | 0.00 | 0.00 | ||
| Amount Due (7/1) | 0.00 | 0.00 | 0.00 | 0.00 | ||
| Unapplied Before Current Bill | 20.00 |
| Error | Case Number | Billing and Payment(s) | Premium | Late | Interest | Total |
|---|---|---|---|---|---|---|
| M02 | 212-4000000 | Past Billed (due 6/1) | 20.00 | 0.00 | 0.00 | 20.00 |
| Current Charges | 20.00 | 0.80 | 0.00 | 20.80 | ||
| Paid/Applied | 0.00 | 0.00 | 0.00 | 0.00 | ||
| Amount Due (7/1) | 40.00 | 0.80 | 0.00 | 40.80 | ||
| Unapplied Before Current Bill | 0.00 |
Lender Action:
- Determine the correct case number by reviewing the Mortgage Insurance Certificate and/or notifying the HUD HOC.
- Remit the missed payment on case 212-4000000 immediately.
- We are responsible for the late fee assessed on case 212-4000000.
- Request a refund or reallocation of the payment made for invalid case number 212-4545454.
Notes:
If we remit $20.00 for case 212-4000000 before July 1, interest will not be assessed on that amount. If we remit $40.80 for case 212-4000000 before July 15, the case will not appear in the Reconciliation file for July 16 since there is no outstanding balance. However, interest will accrue on $20.00 and be billed on July's bill.
Reason 9: Payment Submitted for an Invalid Case Number Using an Invalid Remittance Lender ID
Situation: We received a call from our HUD Lender Representative informing us that our payment was remitted under an invalid lender ID. We also received a Lender Notification indicating that our cases were not paid under our lender ID. The invalid remittance lender ID was corrected to our lender ID. Now invalid case number 212-5555555 is showing up in our Reconciliation file with an M01 discrepancy type since we remitted a $20.00 payment on June 9. In addition, corresponding case number 212-4444444 appears with an M02 discrepancy type (underpayment). The Reconciliation file for June 16 shows the following:
| Error | Case Number | Billing and Payment(s) | Premium | Late | Interest | Total |
|---|---|---|---|---|---|---|
| M01 | 212-5555555 | Past Billed (due 6/1) | 0.00 | 0.00 | 0.00 | 0.00 |
| Current Charges | 0.00 | 0.00 | 0.00 | 0.00 | ||
| Paid/Applied | 0.00 | 0.00 | 0.00 | 0.00 | ||
| Amount Due (7/1) | 40.00 | 0.00 | 0.00 | 0.00 | ||
| Unapplied Before Current Bill | 20.00 |
| Error | Case Number | Billing and Payment(s) | Premium | Late | Interest | Total |
|---|---|---|---|---|---|---|
| M02 | 212-4444444 | Past Billed (due 6/1) | 20.00 | 0.00 | 0.00 | 20.00 |
| Current Charges | 20.00 | 0.80 | 0.00 | 20.80 | ||
| Paid/Applied | 0.00 | 0.00 | 0.00 | 0.00 | ||
| Amount Due (7/1) | 40.00 | 0.80 | 0.00 | 40.80 | ||
| Unapplied Before Current Bill | 0.00 |
Lender Action:
- Determine the correct case number by reviewing the Mortgage Insurance Certificate and/or notifying the HUD HOC.
- Remit the missed payment on case 212-4444444 immediately.
- We are responsible for the late fee assessed on case 212-4444444.
- Update our records to ensure correct remittance lender ID and case number in the following months.
- Request a refund or reallocation of the payment made for invalid case number 212-5555555.
Notes:
- If we reallocate or receive a refund of $20.00 before July 15, case 212-5555555 will no longer appear on the Reconciliation file.
- If we remit $20.00 for case 212-4444444 before July 1, interest will not be assessed on that amount. If we remit $40.80 for case 212-4444444 before July 15, the case will not appear in the Reconciliation file for July 16 since there is no outstanding balance. However, interest will accrue on $20.00 and be billed on July's bill.
See also Reconciliation Discrepancy Types, Discrepancy Type: M01 Overpayment.