So now i've added multiotpmschap to sites-enabled/default and i get User doesn't exists so i must have set something wrong in the files.
(2) } # authorize = ok
(2) Found Auth-Type = multiotpmschap
(2) # Executing group from file /etc/raddb/…
Thank you very much for your answer. I changed the content of file under policy.d but i still get the same response when using mschap.
I am using CentOS Linux release 7.4.1708 (Core), multiOTP 22.214.171.124 (2017-06-06) [CLI] and FreeRADIUS Version 3.0.13