Premiums/Late Fees/Interest Charges

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Questions and Answers

What are monthly (periodic) premiums?

Monthly premiums, also referred to as periodic premiums, are mortgage insurance premiums that are paid to HUD on a monthly basis by the servicer or holder of the mortgage loan. The Single Family Premium Collection Subsystem-Periodic is HUD's system for the collection of all monthly premiums which are required for the following types of mortgage loans:

	Risk-based loans: Risk-based loans became effective July 1, 1991, and require both upfront and monthly premium payments. The payment of monthly premiums at the beginning of loan amortization became effective August 19, 1996 for Risk-based loans insured under the Mutual Mortgage Insurance (MMI) fund (regardless of what time frame exists between endorsement and the beginning of amortization).
	Section 530 loans: Section 530 loans include FHA-insured loans endorsed prior to September 30, 1983, and loans insured under the Special Risk Insurance (SRI) and General Insurance (GI) funds after September 1983. Note: SFPCS Periodic does not collect monthly premiums for Home Equity Conversion Mortgages (HECMs) which are insured under the GI fund.

For further information, please see Mortgagee Letters 98-22, 99-25, and 05-38.

How is a monthly premium calculated?

See the Monthly (Periodic) Mortgage Insurance Premium Calculation.

When are late fees and interest charges billed?

Late fees and interest charges are included in the bill generated on the 15th of the month. The bill lists the amount of late fees and interest charges owed on each case, along with the premium owed.

How are late fees calculated?

A four percent (4%) late charge is assessed on:

Any amount of current premium owed that is unpaid by the 11th day of the current month. Current premium owed is premium that was billed in the prior month and is due by the first day of the current month (with a grace period through the 10th day of the month). Note: If the 10th day of the month occurs on a weekend or holiday, a late charge is assessed on a payment not received before 8:00 p.m. ET on the last business day prior to the 10th day of the month. For example, if the 10th day of the month is on a Sunday, the payment must be received before 8:00 p.m. ET on Friday, the 8th day of the month, to avoid a late charge.

Any premium outstanding at the time of billing as a result of a transaction removing money from the case (e.g., refund, reallocation, or debit voucher).

(See the Late Charge Calculation.)

How is payment of the late fee remitted?

You no longer remit a separate late fee payment. Include the late fee with your premium remittance. After a late fee has been assessed, the amount owed in late fees is automatically applied from a payment that is received. (Payments are applied first to any late fees, second to any interest charges, third to premium, and last to unapplied.) 

What will happen if late fees are not paid with the next month's remittance?

Payments are applied first to any late charges, second to any interest charges, third to premium, and last to unapplied. If you do not include the amount owed in late fees in your remittance, it will be subtracted from the amount that is applied to your premium. You may face additional penalties based on the unpaid premium.

For example, you were billed $25.00 in premium and $1.00 in late fees on June 15. On July 9, you remit $25.00. Out of the $25.00, $1.00 will be applied to late, and $24.00 will be applied to premium. You will be subject to penalties on the $1.00 shortage in premium.

See monthly premiums Late Charge and Late and Interest Charge examples (.pdf).

When is interest assessed?

Interest is assessed after the last day of the month in which the premium is due. Assessed interest will appear in the next bill. 

How are interest charges calculated?

Interest charges are calculated monthly and assessed on unpaid premiums after the last day of the month in which the premium is due. Interest charges are calculated using the Treasury Current Value of Funds Rate. (See the Interest Charge Calculation.) 

See monthly premiums late and interest charge examples. (pdf)

Is interest assessed on a daily basis?

No. Interest is assessed on each full month that premium is unpaid. If all outstanding premium is paid on any day of the month, interest will not be assessed for that month (i.e., there will be no interest charge in the next month's bill).

How is payment of interest remitted?

You no longer remit a separate interest payment. Include the interest amount in your premium remittance. After interest has been assessed, the amount owed in interest is automatically applied from a payment received after any owed late fees have been applied. (Payments are applied first to any late charges, second to any interest charges, third to premium, and last to unapplied.)

What will happen if interest charges are not paid with the next month's remittance?

Payments are applied first to any late charges, second to any interest charges, third to premium, and last to unapplied. If you do not include the amount owed in interest charges in your remittance, it will be subtracted from the amount that is applied to your premium. You may face additional penalties based on the unpaid premium.

For example, you were billed $25.00 in premium and $0.08 in interest fees on June 15. On July 9, you remit $25.00. Out of the $25.00, $0.08 will be applied to interest, and $24.92 will be applied to premium. You will be subject to penalties on the $0.08 shortage in premium.

How do I get late/interest charges (penalties) removed from a payment?

You must submit a request via e-mail to the Interest and Late Charge Review Committee at HUD's Single Family Insurance Operations Branch. See late and interest adjustments for further details.

Does SFPCS-P allow a tolerance for monthly premiums?

No.  You must pay the full amount of premium billed in order to avoid late and interest charges.

When is the first monthly mortgage insurance premium due on the loan?

You must begin making monthly mortgage insurance premium payments in the month following the amortization date. For further information, see Mortgagee Letter 96-47. 

How do I know what to pay?

Check your Billing file. The bill shows how much premium, late, and interest is due for each of your cases. (Also see payments for nonendorsed cases.)

How do I know when to stop making monthly mortgage insurance premium payments?

You will receive an Advance Notice with the case showing an annual premium of $0.00. 

Can I specify how I want my payments to be applied?

No. Payments will be applied first to any late charges, second to any interest charges, third to premium, and last to unapplied. 

Can I ask for a payment to be reallocated to another case?

Yes. You may request money from a case be reallocated to one to three other cases. See Reallocation.

Do I send in monthly premiums on nonendorsed cases?

Yes. Monthly premium payments should start when amortization begins and continue through endorsement, when billing begins.

How do I report an error in the calculation of premium?

Send the Settlement Statement and Mortgage Note to the HUD Homeownership Center (HOC) in your area, and request that HUD correct its records.

I am being billed for an incorrect amount of premium and incurring late and interest charges. How do I get reimbursed for the late and interest?

You must submit a request to the Interest and Late Charge Review Committee at HUD's Single Family Insurance Operations Branch for a late/interest adjustment.  If you would like the excess late and interest to be refunded, specify this on your request to the Committee.  If you do not request a refund, any overage will be left on the case and applied to next month's bill. 

I am being billed for an incorrect amount of premium and overpaying. Will HUD automatically refund the excess premium to me?

No. You may request a refund or reallocation of the excess premium. If you choose to leave the premium on the case, it will be applied to the following month's bill(s). 

What causes a mortgage insurance premium change?

A correction to certain loan information in HUD's Computerized Homes Underwriting Management System (CHUMS) or Single Family Insurance System (SFIS) (e.g., the loan's original mortgage amount, interest rate, term, loan-to-value ratio, and Section of the Act) may cause an increase or decrease in the monthly premium in SFIS, which is reported to SFPCS-P at the beginning of the next month as a mortgage insurance premium adjustment (or correction).

What happens when there is a mortgage insurance premium change?

When data is corrected in CHUMS or SFIS which changes the mortgage insurance premium amount, the case balances in SFPCS-P are recalculated all the way back to the first record of the case in SFPCS-P. The result is either a shortage or overage of money on the case in the current period. If there is a shortage, late and interest charges are assessed at the next billing. However, HUD may adjust the late/interest charges if the error was not caused by the mortgagee.