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c. Late Charges (10/01/2025)
i. Definition
Late Charges are charges assessed if a Mortgage Payment is received more than 15 Days after the due date.
ii. Standard
The Mortgagee may consider a Borrower’s Mortgage Payment late if the payment is received by the Mortgagee more than 15 Days after the due date, except for payments received from Borrowers in accordance with a Trial Payment Plan Agreement. The Mortgagee may assess a late charge on the 17th Day.
For Mortgages assigned a case number on or after March 14, 2016, the Mortgagee may assess a Late Charge, not to exceed 4 percent of the overdue payment of Principal and Interest (P&I) and in accordance with applicable state and federal laws.
For Mortgages assigned a case number before March 14, 2016, the Mortgagee may assess a Late Charge calculated based on overdue PITI if permitted under the terms of the mortgage Note and under applicable state and federal laws.
(A) Notifying the Borrower of the Late Charge
Before collecting the Late Charge or returning a Mortgage Payment to the Borrower for failing to pay the Late Charge, the Mortgagee must provide the Borrower with an advance written notice of the charge.
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III. SERVICING AND LOSS MITIGATION A. Title II Insured Housing Programs Forward Mortgages
2. Default Servicing
The Mortgagee must include in the advance notice the following information:
• the due date of the monthly Mortgage Payment;
• the amount of the regular monthly Mortgage Payment;
• the date on which the Late Charge will be imposed; and
• the amount of the Late Charge (or the full amount now due which consists of the regular monthly Mortgage Payment plus the Late Charge amount).
(B) Application of Subsequent Payment to Unpaid Late Charges
After advance notice has been sent to the Borrower, the Mortgagee may:
• treat any subsequent payment that does not include the Late Charge in accordance with HUD’s Partial Payments for Mortgages in Default section; and
• deduct amounts due for Late Charges owed for a previous installment.
(C) Default/Foreclosure Due to Unpaid Late Charges
A Mortgage may be technically in Default by its terms if a Late Charge is not paid within 30 Days after it becomes due. However, the Mortgagee may not initiate foreclosure action when the only delinquency is due to:
• unpaid Late Charges that are due on the account; and/or
• unpaid monthly payments that remain unpaid because the Mortgagee did not comply with HUD’s Partial Payments for Mortgages in Default section.
iii. Required Documentation
The Mortgagee must ensure that the Servicing File reflects any Late Charges assessed and includes any advance written notice of such charges sent to the Borrower.