Outside of their Uniform Covenants, the other covenants in the FHA security instruments need to closely match the language found in the 1990-version of the FNMA/FHLMC Uniform Security Instruments, though the sections following Section 18 may be amended to conform to “state law or practice” (see FHA Single Family Handbook 4155.2 ch. 6.B.2 and FHA ML 2009-13 & 2002-03). The 1990-version of the Louisiana mortgage (FNMA Form 3019) contains the following clause:
“Late Charge. Borrower shall pay to Lender a late charge of X percent of any monthly installment of principal and interest as provided in the Note not received by Lender within X days after such installment is due.”
This clause effectively allows the lender to collect from the borrower a late charge calculated based on the principal and interest of the late installment. This clause comprises Section 24 of our standard Louisiana FHA mortgage (Cx380).
According to 24 CFR § 203.25 and FHA Single Family Handbook 4330.1 REV-5 ch. 4-2, lenders are allowed to collect up to four percent of a late installment, calculated based on the full monthly late payment (principal, interest, taxes, and insurance), rather than just based on the principal and interest.
Due to this, as well as the fact that Louisiana-laws restrictions on late charges allow for the charge to be calculated based on the full late payment (see La. Rev. Stat. Ann. §§ 6:1097[A] & 9:3527[A]), we will be revising the clause in Cx380 to conform more with the provisions of our standard FHA promissory notes, which allow for the calculation to be based on the full late payment. Section 24 will be as follows:
“Late Charge. Borrower shall pay to Lender a late charge of X percent of any monthly installment as provided in the Note not received by Lender within X days after such installment is due.”
This change will take effect on May 14, 2014. If you have any questions or concerns about this change, please contact Client Support at 1.800.497.3584.
May 7, 2014