The servicer must credit the borrower’s account for any net overcharge by reallocating the borrower’s actual monthly payments between P&I, or by reducing the UPB of the mortgage loan when the overcharge is related to an incorrect interest rate only.
When the overcharge is related to an incorrect monthly payment, credits may be used instead of cash refunds when
the servicer has advanced funds to cure an escrow overdraft,
the mortgage loan is delinquent,
the adjustment error is an interest rate change error only, or
the adjustment error is a payment change error only.
The servicer must establish its own procedures to ensure compliance with all of Fannie Mae’s policies regarding the correction of adjustment errors for all mortgage loans it services for Fannie Mae, regardless of whether they were originated under standard or negotiated ARM plans.
The servicer must follow the applicable procedures in either Refunding or Crediting Overcharges Resulting from an Incorrect Monthly Payment and an Incorrect Interest Rate, or Refunding or Crediting Overcharges Resulting from an Incorrect Monthly Payment in F-1-01, Servicing ARM Loans.
Additional Information: https://www.fanniemae.com/content/guide/servicing/c/2.2/03.html