4330.1 REV-5

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CHAPTER 4. FEES AND CHARGES AFTER ENDORSEMENT

4-1 ACCEPTABLE FEES AND CHARGES - GENERAL (24 CFR 203.552). HUD

regulations specify that the mortgagee may collect \"reasonable and

customary\" fees and charges from the mortgagor after the mortgage is

insured and as authorized by HUD.

A. Fee Basis. The basic rule governing all the amounts shown in

this chapter that may be charged for a service is that all fees

must be:

1\. \"reasonable and customary\" for that area of the country; and

2\. based on actual cost of the work performed (including actual

out-of-pocket expenses); and

3\. within the maximum amount allowed by HUD.

NOTE: Under no circumstances may a post-endorsement fee or

charge be based upon a percentage of either the face

amount or the unpaid principal balance of the mortgage.

B. Fee Regulators. Services for which a fee may be assessed and the

amounts that may be collected from mortgagors are either

established by HUD regulations, HUD Headquarters, HUD Regional

Offices and/or HUD Field Offices having jurisdiction over the

mortgage and in accordance with the Federal National Mortgage

Association (FEMA) fee schedules. (See Paragraph 4-8.)

NOTE: A mortgagee may be in violation of HUD regulations

should it be collecting a fee (regardless of when the

fee is actually collected) for:

1\. a service which in not specifically authorized in

Paragraph 4-1C; or

2.a service not authorized in advance by one of the

fee regulators above.

3.charging a fee that does not comply with the rule

stated in Paragraph 4-1A.

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4-19/94

4330.1 REV-5

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4.a service for which a fee is prohibited (Paragraph

4-12).

C.Services For Which Charges May Be Assessed. A \"reasonable and

customary\" fee (determined in accordance with Paragraph 4-1A) may

be assessed for the following services:

1.late charges as set forth in Paragraph 4-2; (Established by

the security instrument).

2.processing and reprocessing checks in accordance with

Paragraph 4-3 which have been returned as uncollectible;

(Established by HUD Regional Offices).

3.processing a change of ownership by assumption in accordance

with Paragraph 4-4; (Established by HUD Headquarters).

4.processing a change of ownership involving review of the

assumptor\'s credit, with or without release of the original

mortgagor from liability in accordance with Paragraph 4-4;

(Established by HUD Headquarters).

5.substitution of hazard insurance policies at a time other

than at the expiration of an existing policy in accordance

with Paragraph 4-5; (Established by HUD Regional Offices).

6.modification (recast) of the mortgage involving formal,

recorded documents in accordance with Paragraph 4-6;

(Established by the local HUD Field Offices).

7.processing partial releases of the security in accordance

with Paragraph 4-7; (Established by the local HUD Field

Offices).

8.attorney and trustee fees associated with mortgagor

reinstatement in accordance with Paragraph 4-8A;

(Established by the Federal National Mortgage Association

(FNMA) Schedule of Standard Attorney\'s and Trustee\'s Fees).

The Department considers the FNMA fee schedule to be

reasonable and customary.

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9/944-2

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NOTE:allowable attorney fees with respect to Claims for

Insurance Benefits are established by

Headquarters.

9.annual service charges in accordance with Paragraph 4-9;

(Established by HUD Headquarters).

10.trustee and recording fees associated with satisfaction

referred to in Paragraph 4-10; (Established by the local HUD

Field Offices).

11.property inspections and preservation expenses as referred

to in Paragraph 4-11; (Established by Regional HUD Offices).

12.FAXing of payoff statement, upon request, (Established by

HUD Headquarters. See Paragraph 4-12C2.)

\* D. Services For Which Charges May Be Assessed After Established

Number Of Times Has Been Exhausted. HUD has established the

number of times a service can be provided at no charge to the

mortgagor. After the established number of times has been

exhausted, each time a service is performed, the cost can be

charges to the mortgagor. The following services with

established fees are considered reasonable and customary for all

sections of the country.

1.Providing a copy of the mortgage or deed of trust: if the

copy is a duplicate of what had already been provided to the

mortgagor, a maximum fee of \$10 is allowable.

2.Providing a copy of the mortgage note: if the copy is a

duplicate of what has already been provided to the

mortgagor, a maximum fee of \$10 is allowable.

3.Providing a copy of the settlement statement, gift letters

and other documents: a maximum fee of \$10 is allowable.

4.Providing a new amortization schedule other than the

schedule provided at closing: a maximum fee of \$15 is

allowable.

5.Incorporating a borrower\'s name change into the servicer\'s

loan system: since this service is

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4-39/94

4330.1 REV-5

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considered a routine servicing function, no fee is approved.

6.Providing payoff statements: no charge may be made for the

first two such statements provided per calendar year; the

mortgagee may charge \$10 for providing each additional

statement requested.

7.Faxing any payoff statement (upon request of mortgagor): a

maximum fee of \$5 is allowable.

8.Providing replacement coupon books: a maximum fee of \$5 is

allowable.

9.Re-analyzing escrow accounts and providing new coupon books:

since these are normal servicing functions no fee is

allowable.

10.Providing a payment history to the mortgagor (other than the

current year and one prior year): a maximum fee of \$5 is

allowable.

11.Verifying the mortgage to prospective creditor: this covers

requests from other lenders to verify the status of an

existing loan (typically in connection with a refinance

application). A \$20 fee is allowed as long as the mortgagor

has given the new lender a written authorization for the

release of the information to the new lender and for the

fee.

12.Providing duplicate year-end statements: a maximum fee of

\$5 is allowable.

13.Processing and/or reprocessing of checks returned as

uncollectible: if a State has a set fee, a mortgagee may

charge up to the maximum amount; otherwise, the maximum

allowable fee is established by HUD Regional Offices. \*

4-2LATE CHARGES (24 CFR 203.25). Assessment of a late charge is intended

only to reimburse the mortgagee for the added expense of collection

activities and to serve as motivation to the mortgagor to make timely

payments (also, see Paragraph 7-7F).

A.Date Late Charge May Be Assessed. HUD regulations 24 CFR 203.25

and the security instrument provide the mortgagee with the option

of collecting a late charge if a payment is received by the

mortgagor more than 15

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9/944-4

4330.1 REV-5

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days after the due date, the first day of the month, (i.e., the

payment is received by the mortgagee after the 16th of the mouth

in which it is due).

EXAMPLE: Installment Due Date = March 1

Mortgage Is Delinquent = March 2

15th Day After Installment

Due Date; = March 16

Earliest Date Late Charge

May Be Assessed = March 17

NOTE:A late charge may not be assessed against a Payment

UNTIL the 17th of the month which is the 16th day after

the installment due date.

B.Mortgagee\'s Option To Assess Late Charges. HUD does not require

that a mortgagee enforce the late charge provision of the

security instrument. However, if the mortgagee chooses to assess

a late fee on a delinquent payment, HUD expects it to prudently

exercise this option and the late fee assessment must conform to

the requirements set forth under Paragraph 4-2.

C.Percentage That May Be Assessed (24 CFR 203.25).

1.Amount. The actual percentage of the monthly payment that

the mortgagee may collect is governed by the regulations,

security instrument, and state law.

a.Mortgages Insured Before January 1, 1977. Security

instruments of mortgages insured before January 1,

1977, provide for a late charge of up to two percent of

each payment in arrears.

b.HUD regulations (24 CFR 203.25) provide for a maximum

charge of four percent of each payment that is in

arrears. Older mortgages using post-1976 HUD forms

generally provide for a four percent charge in the

security instrument. More recent forms prepared by

private sources to conform to current HUD requirements

provide for the late charge in the note; HUD does not

suggest any amount other than one that conforms to the

regulations. In all cases, the late charge stated in

the note or security instrument

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4-59/94

4330.1 REV-5

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shall prevail unless it exceeds four percent.

NOTE:If a mortgage is insured under Section 235, the late

charge may be assessed against the mortgagor\'s portion

of the monthly payment only.

D. Computing Late Charges. Late charges are computed on

\* the full monthly payment (Principal, interest, taxes

and insurance) due from the mortgagor in the month of \*

computation. Previously uncollected late charges may not be

added to the monthly payment due when computing the present late

charge. Multiple delinquent payments are considered separately,

with a late charge computed on each individual monthly payment.

NOTE:When the mortgage is insured under Section 235, OR the

mortgage is subject to a buy-down, only the mortgagor\'s

portion of the monthly payment is used when computing a

late charge.

E.Advance Demand Notice (24 CFR 203.554). Before a mortgagee may

enforce the obligation to pay a late charge or before the

mortgagee may return a mortgage payment to the mortgagor for

failing to include the late charge amount, the mortgagor must

have been provided an advance notice (see Paragraph 4-2F). This

advance notice may be in the form of:

1.a monthly payment coupon issued to accompany the mortgagor\'s

monthly payment; or

2.an individual monthly billing statement which was issued to

accompany the mortgagor\'s monthly payment.

3.a written demand to the mortgagor to pay the late charge.

F.Content Of Advance Notice. In order to comply with HUD\'s

requirement, the advance notice sent to the mortgagor must

provide the following information:

1.the due date of the payment;

2.the amount of the regular monthly payment;

3.the date on which the late charge will be imposed; and

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9/944-6

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4.the amount of the late charge (or the full amount now due

which consists of the regular monthly payment plus the late

charge amount).

G.Application Of The Late Payment (24 CFR 203.554). If a monthly

payment is received on or after the 17th of the month in which it

is due and does not include the late charge, the late charge may

not be deducted from that monthly payment. That payment must be

applied in the order set forth in 24 CFR 203.24 as follows:

1.to MIP, if any;

2.to other escrow items;

3.to interest;

4.to principal; and

5.to late charges.

H.Application Of Subsequent Payments To Unpaid Late Chargers) (24

CFR 203.554(b)). Once the demand notice has been sent to the

mortgagor, if the late charge is not included in the subsequent

payment, the mortgagee may treat that payment, or any subsequent

payment, in accordance with HUD\'s partial payment rules. (See

Paragraph 7-9.)

I.Waiver Of Late Charges. Mortgagees are expected to exercise good

judgment when levying late charges. When the reason for the late

payment is due to the mortgagee\'s failure to perform or due to

circumstances obviously beyond the mortgagor\'s control,

mortgagees are expected to waive the late charges.

J.Default/Foreclosure Due To Unpaid Late Charge (24 CFR

203.554(a)). A mortgage is technically in default if a late

charge is not paid within 30 days after it becomes due. However,

foreclosure action may not be initiated on a HUD-insured mortgage

when the only delinquency is:

1.unpaid late charges that are due on the account; and/or

2.unpaid monthly payments that remain unpaid because the

mortgagee did not comply with the partial payment rule and

refused to accept a subsequent

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4-79/94

4330.1 REV-5

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payment which was insufficient to pay the full amount due

including late charges from the previous month or months.

K.Surplus Escrow Application To Delinquency (24 CFR 203.550(b)).

Should a delinquency exist (due to unpaid late charges and/or

monthly payments) and an escrow surplus is discovered when

performing the annual escrow account analysis, this escrow

surplus may be applied to offset all or a portion of the

delinquency. Application of surplus escrow funds in this manner

shall be considered as a cash refund to the mortgagor in

accordance with Paragraph 2-8A. However, this is a method of

last resort; a mortgagee should first use the mechanism provided

in the regulations for enforcement of late charges as discussed

in H. above.

A letter shall be sent to the mortgagor explaining the

application of the surplus escrow funds if all the surplus is

used toward the delinquency. If only a portion of the escrow

surplus is needed to cure the delinquency, the letter shall give

the mortgagor the opportunity to select the method for adjusting

the remaining portion of the escrow surplus as shown under

Paragraph 2-4D.

4-3UNCOLLECTIBLE CHECKS. Where a mortgagor\'s bank policy permits a
check

must be presented for payment and returned unpaid twice before it can

be deemed \"uncollectible\". When the check is returned to the

mortgagee unpaid the second time, a fee may be assessed on the

returned check.

4-4 ASSUMPTIONS.

A.Maximum Allowable Fees. Fees for processing assumptions must be

based on the mortgagee\'s actual costs and cannot exceed the

maximum amount authorized in this Handbook. (See Chapter 6 for

requirements concerning assumptions.) The maximum amounts

allowed by HUD for processing various types of assumption are as

follows:

1.\"Simple\" Assumptions. Where no credit checks are required,

the maximum fee that may be charged is \$125.00.

2.Assumption With A Release of Liability. Where a credit

check is required, the maximum fee that may be charged in

\$500.00.

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9/944-8

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3.Section 235 Assumptions.

a.Assumption Without A Release of Liability and Where

Assistance Is Requested But Disapproved. Where no

credit checks are required and the mortgagor applies

for assistance but is not considered eligible for

Section 235 subsidy the maximum fee that may be charged

is \$140.00.

b.Assumption Without A Release of Liability and Where

Assistance Is Requested and Approved. Where a credit

check is not required and the Section 235 subsidy will

be terminated, the maximum fee that may be charged is

\$185.00.

c.Assumption With A Release of Liability and Where

Assistance Is Not Requested or Approved. Where a

credit check is required and the Section 235 subsidy

will be terminated, the maximum fee that may be charged

is \$500.00.

d.Assumption With A Release of Liability and Assistance

Is To Continue. Where a credit check is required and

the Section 235 subsidy will continue on behalf of the

assumptor, the maximum fee that may be charged is

\$500.00.

4.Section 143 of the Internal Revenue Code of 1986. HUD does

not permit additional fees for ensuring that mortgage

revenue bond mortgages, when assumed, comply with

requirements of the subject Code.

B.Allowable Charges Separate From Processing Fee. Additional fees

that may be assessed for items in connection with an assumption

which are not included in the processing fee referred to in

Paragraph 4-4A are as follows:

1.Credit Reports and Verification of Employment. Fees or

charges for such things as credit reports and verification

of employment that must be collected by the mortgagee and

passed through, may be assessed in addition to the amounts

stated in Paragraph 4-4A for assumption processing fees.

These fees are non-refundable.

2.Execution of Release Form. Should a co-mortgagor or former

mortgagor request that he/she be provided an executed

release of liability form (i.e., Form HUD-92210.1, Approval

of Purchaser and Release of

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4-99/94

4330.1 REV-5

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Seller) (Appendix 7) separate and apart from the actual

processing of the creditworthiness review (with or without

Section 235 subsidy involvement), the maximum fee that may

be charged for the preparation and execution of this

additional document is \$45.00.

NOTE:A Form HUD-92210.1, prepared at the same time a

creditworthiness review is performed, is included

in the maximum \$500 fee. An additional fee of

\$45.00 may only be assessed should a co-mortgagor

(or a previous assumptor) come in at a later date

and ask for an executed Form HUD-92210.1 as

evidence that he/she also had been released during

a previous creditworthiness review.

C.Circumstances Governing Refund Of Processing Fees. In the event

a mortgage is not assumed, processing fee refunds are to be made

in accordance with the following:

1.if the assumptor\'s credit is rejected and HUD\'s consent to

release from liability is denied, the entire processing fee

may be retained by the mortgagee;

2.if the assumptor\'s credit is approved but the closing of the

sale does not occur for reasons beyond the control of the

assumptor, the mortgagee is to refund one-half of the

collected fee.

4-5SUBSTITUTION OF HAZARD INSURANCE POLICIES. When the mortgagor

arranges for a change of insurance coverage at a time other than the

normal time for renewing the hazard insurance policy, the mortgagee

may charge a reasonable and customary fee (set by the Regional Office

having jurisdiction over the mortgage) for handling the replacement

policy.

NOTE:This does not apply to an assumption where the new mortgagor

prefers to use a company and/or agent other than the one

used by the former mortgagor, even if it does not fall

within the normal time for renewing the policy on that

particular mortgaged property.

4-6MODIFICATION (RECAST) OF MORTGAGES. Where a mortgagee grants relief

to a defaulting mortgagor by modifying (or recasting) the mortgage, a

fee, considered by the local HUD Field Office to be \"reasonable and

customary\" for that area

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9/944-10

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of the country, may be assessed for processing and recording the

modification.

4-7PARTIAL RELEASE OF SECURITY. Costs involved in processing partial

releases of the security (whether as a result of condemnation or of

voluntary action by the mortgagor) are the mortgagor\'s responsibility

and may be passed on to the mortgagor. However, any costs passed on

to the mortgagor must be in an amount that is considered by the local

HUD Field Office to be \"reasonable and customary\" for that service in

that area of the country.

4-8 ATTORNEY\'S AND TRUSTEE\'S FEES - MORTGAGOR REINSTATEMENT

\* (24 CFR 203.552 (a)(9)). When a mortgage is referred to

foreclosure and is later reinstated, and where bankruptcy

related services occur, mortgagees can collect fees from

the mortgagor in accordance with the Federal National

Mortgage Association (FNMA) Schedule of Standard Attorney\'s

and Trustee\'s Fees in effect on the date the legal action

is instituted. The Department considers the FNMA fee

schedules to be reasonable and customary. \*

A.Legal fees may be collected from the mortgagor only when the

mortgagee has made its \"decision to foreclose\" and has instructed

the attorney to initiate legal action.

NOTE:It is HUD\'s position that, if the attorney is required

to ask the mortgagee\'s permission to proceed further at

any stage of the foreclosure once the case is referred

to the attorney, the \"decision to foreclose\" has not

been made by the mortgagee.

Where the \"decision to foreclose\" has not been made, no

legal fee may be passed on to the mortgagor for any

work that was performed prior to the mortgagee making

its \"decision to foreclose\".

B.The amount passed on to the mortgagor must be the \"actual amount

incurred\" by the mortgagee and must be in accordance with the

FNMA fee schedules. In order to pass on this cost, neither the

attorney nor the trustee performing the service can be a salaried

member of the mortgagee\'s and/or servicer\'s staff.

C.Mortgagees shall not charge mortgagors an administrative and/or

reinstatement fee in connection with the reinstatement of their

mortgage.

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4-119/94

4330.1 REV-5

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NOTE:Attorney and trustee fees associated with filing a claim for

insurance benefits when a mortgage is not reinstated are

discussed in Paragraph 9-5C.

4-9ANNUAL SERVICE CHARGES (24 CFR 203.23(c)). For mortgages insured as

the result of an application submitted before July 17, 1961, with an

original principal amount of no more than \$9,000, the mortgagee may

collect a monthly service charge of no more than one-half of one

percent per annum of the average unpaid principal balance if provided

for in the security instrument.

4-10TRUSTEE\'S AND RECORDING FEES FOR SATISFACTIONS (24 CFR 203.552).

A.Trustee\'s Fee (24 CFR 203.552(a)(11)). If the security

instrument specifically provides for the payment of a trustee\'s

fee for the execution of a satisfaction, release or trustee\'s

deed when the debt is paid in full, the mortgagee may charge a

fee for that service. However, the fee must be an amount that is

considered by the local HUD Field Office to be \"reasonable and

customary\" for that service in that area of the country.

B.Recording Fee (24 CFR 203.552(a)(12)(iv)). In those states where

a mortgagee is not required by law to record the satisfaction,

the mortgagee may charge a fee. However, the fee must be one

that is considered by the local HUD Field Office to be

\"reasonable and customary\" for that service in that area of the

country. (See Paragraph 4-12C for satisfactions required by

State law.)

4-11PROPERTY INSPECTIONS/PRESERVATION (24 CFR 203.377). Mortgagees are

charged with the responsibility of taking reasonable action to protect

and preserve vacant and abandoned properties until foreclosure can be

completed and title conveyed to HUD in accordance with HUD

regulations. In the event of reinstatement, the mortgagee may pass on

the costs of such action.

A.If A Mortgage Is Reinstated. Costs of property inspections

and/or preservation may be recovered from the mortgagor provided

all of the following conditions are met:

1.the mortgage is reinstated;

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9/944-12

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2.the fee is not inconsistent with HUD\'s requirements;

3.the fee is not inconsistent with state law;

4.the fee is not inconsistent with the security instruments;

and

5.the costs are considered by the Regional Office to be

reasonable and customary\" for such services.

B.If A Claim Is Filed With HUD. The mortgagee shall be reimbursed

in accordance with HUD claims policies for costs of property

inspections and/or preservation. See Chapter 9, Paragraph 9-9A2.

4-12PROHIBITED FEES AND CHARGES (24 CFR 203.552(a)(12)). There are some

services a mortgagee may not charge the mortgagor. These services are

listed below:

Fees and Charges Specifically Prohibited by HUD Regulations (24 CFR

203.552(a)(12)). Fees and charges listed below are prohibited:

A.Charges For Servicing Activities. Mortgagees may not charge

mortgagors for the cost of telephone calls, telegrams, personal

visits with the mortgagor, or other activities that are normally

considered a part of a prudent mortgagee\'s servicing activity.

B.Fees For Tax Services. The mortgagee\'s use of an independent

contractor such as a tax service to furnish tax data and

information necessary to pay property taxes and in some

circumstances to make the payments on behalf of the mortgagee.

C.\"Satisfaction\", \"Reconveyance\", Or \"Termination\" Fees. Except as

provided for in Paragraph 4-10, no fee may be collected for:

1.preparing and providing evidence of satisfaction,

reconveyance or termination of the mortgage;

2.providing information essential to the satisfaction, such as

preparing a payoff statement; Although mortgagees may not

charge for the payoff statement, if FAXing of the statement

\"is requested,\" a fee of \$5 is permitted. (See Paragraph

4-1C12)

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4-139/94

4330.1 REV-5

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3.recording the satisfaction of the mortgage in states where

recordation is the responsibility of the mortgagee.

D.Attorney\'s Fees. No charge may be made for any legal service

provided by an attorney who is a salaried member of the

mortgagee\'s and/or servicer\'s staff.

E.Trustee\'s Fees. No charge may be made for any service performed

by a trustee who is a salaried member of the mortgagee\'s and/or

servicer\'s staff.

F.Fees Based On Fee Amount Or Unpaid Balance (24 CFR 203.552(b)).

No fee or charge shall be based on a percentage of either the

face amount of the mortgage or the unpaid principal balance due

on the mortgage.

4-13OTHER FEES AND CHARGES (24 CFR 203.552(12)). The local HUD Office or

Headquarters may be asked to rule on any fee or charge or unusual

service not specifically mentioned in this Handbook. The

determination will be based on what is reasonable and customary in the

area.

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