source:
  type: guide
  id: hud-4000-1-iii-e-payment-administration
  authority: FHA Single Family Housing Policy Handbook 4000.1, Part III — e. Payment
    Administration (10/01/2025)
  description: FHA Single Family Housing Policy Handbook 4000.1, Part III — e. Payment
    Administration (10/01/2025).
  coverage_tier: operative
obligations:
- id: hud-4000-1-iii-e-payment-administration-full
  canonical_id: hud-4000-1-iii-e-payment-administration-full
  section: FHA Single Family Housing Policy Handbook 4000.1, Part III — e. Payment
    Administration (10/01/2025)
  type: do
  tags:
  - regulator-direct
  - fha
  - hud-handbook
  - corpus-expansion
  - tier-operative
  primary_source:
    tier: 1
    authority: FHA Single Family Housing Policy Handbook 4000.1, Part III — e. Payment
      Administration (10/01/2025)
    source_class: hud-handbook
    source_url: https://www.hud.gov/hud-partners/single-family-handbook-4000-1
    snapshot_id: 8c03836f77f317e1
    fetched_at: '2026-05-23T00:28:40Z'
    content_hash: sha256:411430f29b13f9b54a2ebb0e6f6e7087ecd2b90d0da22eb0c8c792eaa2d7d0df
    paragraph_quote: 'e. Payment Administration (10/01/2025) i. Receipt of Payments
      (A) Definition [Text was deleted in this section.] A Trust Clearing Account
      refers to a fiduciary account containing Borrower funds that will be transferred
      by the Mortgagee to another account before the end of an accounting period.
      (B) Standard The Mortgagee must either use a Trust Clearing Account or special
      custodial account to hold all payments on the insured Mortgage. III. SERVICING
      AND LOSS MITIGATION A. Title II Insured Housing Programs Forward Mortgages 1.
      Servicing of FHA-Insured Mortgages Handbook 4000.1 1159 Last Revised: 11/26/2025
      The Mortgagee’s Trust Clearing Account may be used for collections received
      on all types of Mortgages. If a Trust Clearing Account is not used, the Mortgagee
      must immediately transfer payments into a special custodial account. ii. Application
      of Payments Mortgagees using special custodial accounts must withdraw an amount
      equal to the principal, interest, and service charges within 30 Days after deposit
      and post to the Borrower’s records accordingly. The Mortgagee must apply Borrower
      payments in the following order: • to MIPs due, if any; • to charges for Ground
      Rents, taxes, special assessments, including any assessments related to a Property
      Assessed Clean Energy (PACE) obligation, flood insurance premiums, if required,
      and fire and other hazard insurance premiums; • to interest on the Mortgage;
      • to amortization of the principal of the Mortgage; and • to Late Charges, provided,
      however, that any amounts owed for Late Charges must be handled consistent with
      applicable laws. The Mortgagee may only apply funds for payments of optional
      insurance coverage premiums after the application of funds to the Principal,
      Interest, Taxes, and Insurance (PITI) of the monthly Mortgage Payment. iii.
      Return of Partial Payments for Less than the Amount Due (A) Definition A Partial
      Payment is a payment of any amount less than the full amount due under the Mortgage
      at the time the payment is tendered, including Late Charges and amounts advanced
      by the Mortgagee on behalf of the Borrower. (B) Standard For performing Mortgages,
      the Mortgagee may return any Partial Payment to the Borrower with a letter of
      explanation. (C) Required Documentation The Mortgagee must note in its Servicing
      File any Partial Payments received and, if applicable, documentation on the
      date the payment was returned with a letter of explanation. III. SERVICING AND
      LOSS MITIGATION A. Title II Insured Housing Programs Forward Mortgages 1. Servicing
      of FHA-Insured Mortgages Handbook 4000.1 1160 Last Revised: 11/26/2025 iv. Application
      of Partial Prepayments (A) Definition A Partial Prepayment is a payment of part
      of the principal amount before the date on which the principal is due. An Advance
      Full Monthly Payment is the payment of an amount larger than the full monthly
      payment, equaling an additional full monthly payment. (B) Standard The Mortgagee
      must apply Partial Prepayments as requested by the Borrower as either: • advance
      full monthly payments; or • additional payments toward reducing principal and
      future monthly payments. In the event that the Borrower does not specify how
      the Partial Prepayment should be applied, the Mortgagee must communicate with
      the Borrower to determine the method of application or apply the payment in
      a manner previously communicated to the Borrower. If the Borrower elects to
      have Partial Prepayments equal to a full monthly payment applied as an advance
      full monthly payment, the Mortgagee must allow the Borrower to skip an equal
      number of installments in the future without creating a mortgage Default or
      incurring a Late Charge. v. Prepayment (A) Definitions A Partial Prepayment
      is a payment of part of the principal amount before the date on which the principal
      is due. A Prepayment in Full, or Payoff, is the payment in whole of the principal
      amount of the mortgage Note in advance of expiration of the term of the mortgage
      Note. The Installment Due Date is the first Day of the month, as provided for
      in the security instrument. (B) Standard The Mortgagee must accept a prepayment
      of a Mortgage in whole or in part on any Installment Due Date without penalty
      to the Borrower. III. SERVICING AND LOSS MITIGATION A. Title II Insured Housing
      Programs Forward Mortgages 1. Servicing of FHA-Insured Mortgages Handbook 4000.1
      1161 Last Revised: 11/26/2025 (C) Prepayment Procedures (1) Mortgages Closed
      on or after January 21, 2015 The Mortgagee must accept a prepayment on a Mortgage
      closed on or after January 21, 2015, at any time and in any amount. The Mortgagee
      must calculate the interest as of the date the prepayment is received, not as
      of the next Installment Due Date. (2) Mortgages Closed before January 21, 2015
      (a) Mortgages Insured on or after August 2, 1985 The Mortgagee must accept a
      prepayment on a Mortgage insured on or after August 2, 1985 and closed before
      January 21, 2015, if the Borrower prepays the Mortgage in full on the first
      Day of any month in the term of the Mortgage. If prepayment is offered on a
      Day other than the Installment Due Date, the Mortgagee may: • refuse to accept
      the prepayment until the first Day of the next month; or • accept the prepayment
      and require the payment of interest to the first Day of the next month. For
      Prepayment in Full, this option may only be used if the Mortgagee has provided
      the Payoff Procedure Disclosure to the Borrower. (b) Mortgages Insured Prior
      to August 2, 1985 (i) Definitions Notice of Intent to Prepay refers to the advance
      notice that Borrowers on Mortgages insured before August 2, 1985, must provide
      in order to prepay their FHA-insured Mortgages in full without penalty. The
      30-Day Advance Prepayment Notice Period refers to the time requirement for the
      Borrower to provide advance notice to the Mortgagee for prepayment of an FHA-insured
      Mortgage insured prior to August 2, 1985. (ii) Standard The Mortgagee must accept
      prepayment on a Mortgage insured prior to August 2, 1985, if the Borrower: •
      submits to the Mortgagee a Notice of Intent to Prepay at least 30 Days prior
      to the prepayment; and III. SERVICING AND LOSS MITIGATION A. Title II Insured
      Housing Programs Forward Mortgages 1. Servicing of FHA-Insured Mortgages Handbook
      4000.1 1162 Last Revised: 11/26/2025 • prepays the Mortgage in full on the first
      Day of any month in the term of the Mortgage. If a prepayment is offered on
      a day other than the Installment Due Date, the Mortgagee may: • refuse to accept
      the prepayment until the first Day of the month following the expiration of
      the 30-Day Advance Prepayment Notice Period; or • accept prepayment and require
      the payment of interest to the first Day of the month following the expiration
      of the 30-Day Advance Prepayment Notice Period. For Prepayment in Full, this
      option may only be used if the Mortgagee has provided the Payoff Disclosure
      to the Borrower. (iii)Borrower’s Notice of Intent to Prepay For Mortgages insured
      prior to August 2, 1985, the Borrower must send, and the Mortgagee must receive,
      the Borrower’s Notice of Intent to Prepay at least 30 Days prior to prepayment.
      If the Borrower submits a prepayment without previously sending a Borrower’s
      Notice of Intent to Prepay, the Mortgagee may consider receipt of the prepayment
      as the Borrower’s Notice of Intent to Prepay. The Mortgagee may choose to: •
      provide a Payoff Disclosure, enabling the Mortgagee to: o defer acceptance of
      prepayment until the first Day of the month following the date prepayment is
      tendered; or o accept the prepayment and require the payment of interest to
      the first Day of the month following the date prepayment is tendered; or • accept
      the prepayment on the date tendered, which limits the Mortgagee’s collection
      of interest to that prepayment date. (iv) Effective Dates for Notice of Intent
      to Prepay The effective date of the Notice of Intent to Prepay is the date that
      the Notice was received by the Mortgagee, unless the Borrower can produce documentation
      showing that the Notice was received earlier. The 30-Day Advance Prepayment
      Notice Period required for Mortgages insured prior to August 2, 1985, begins
      on this date of receipt. (c) Installment Due Date Falls on a Non-business Day
      When the Installment Due Date falls on a non-business day, the Mortgagee must
      consider a Borrower’s Notice of Intent to Prepay or the receipt of the III.
      SERVICING AND LOSS MITIGATION A. Title II Insured Housing Programs Forward Mortgages
      1. Servicing of FHA-Insured Mortgages Handbook 4000.1 1163 Last Revised: 11/26/2025
      prepayment amount for a Mortgage closed before January 21, 2015 timely if received
      on the next business day. (3) Payoff Disclosure Requirements When notified of
      the Borrower’s intent to prepay, the Mortgagee must send the Payoff Procedure
      Disclosure and copy of the payoff statement directly to the Borrower, even if
      the Mortgagee is dealing with an Authorized Third Party. The Mortgagee will
      forfeit any interest collected after the date of prepayment if these disclosure
      requirements are not met. (D) Trustee’s Fee for Satisfactions If specifically
      provided for in the security instrument, the Mortgagee may charge the Borrower
      the amount of the trustee’s fee, plus any reasonable and customary fee for payment,
      or for the execution of a satisfaction, release or trustee’s deed when the debt
      is paid in full. (E) Recording Fees for Satisfactions The Mortgagee may charge
      the Borrower a reasonable and customary fee for recording satisfactions in states
      where recordation is not the responsibility of the Mortgagee.'
  judgment: false
