This is what I found on the net:

umbilical granuloma

An umbilical granuloma is a small piece of bright red, moist flesh that remains in the umbilicus after cord separation when normal healing should have occurred. It is a small piece of scar tissue, usually on a stalk, that did not become normally covered with skin cells. It contains no nerves and has no feeling. Depending upon when they are more flat or berry-like, these things are either cauterised with silver nitrate, tied off with a suture and allowed to wither and drop off, or just plucked off with a clamp and cauterised.