source:
  type: guide
  id: hud-4000-1-iii-d-partial-payments-for-mortgages-in-default
  authority: FHA Single Family Housing Policy Handbook 4000.1, Part III — d. Partial
    Payments for Mortgages in Default (10/01/2025)
  description: FHA Single Family Housing Policy Handbook 4000.1, Part III — d. Partial
    Payments for Mortgages in Default (10/01/2025).
  coverage_tier: operative
obligations:
- id: hud-4000-1-iii-d-partial-payments-for-mortgages-in-default-full
  canonical_id: hud-4000-1-iii-d-partial-payments-for-mortgages-in-default-full
  section: FHA Single Family Housing Policy Handbook 4000.1, Part III — d. Partial
    Payments for Mortgages in Default (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 — d. Partial
      Payments for Mortgages in Default (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: 'd. Partial Payments for Mortgages in Default (10/01/2025) i.
      Acceptance of Partial Payments Unless subject to the exceptions in the Return
      of Partial Payments for Mortgage in Default section, the Mortgagee must accept
      any Partial Payment and either: • apply the payment to the Borrower’s account;
      or • identify the payment with the Borrower’s account and hold the payment in
      a suspense account. When a full monthly installment due under the Mortgage is
      accumulated, the Mortgagee must apply that amount to the Borrower’s account.
      ii. Application of Partial Payments Totaling a Full Monthly Payment (A) Standard
      When Partial Payments held for disposition total a full monthly Mortgage Payment,
      the Mortgagee must apply Borrower payments, in the following order, to: • MIPs
      due, if any; III. SERVICING AND LOSS MITIGATION A. Title II Insured Housing
      Programs Forward Mortgages 2. Default Servicing Handbook 4000.1 1188 Last Revised:
      11/26/2025 • charges for Ground Rents, taxes, special assessments, including
      any assessments related to a PACE obligation, flood insurance premiums, if required,
      and fire and other hazard insurance premiums; • interest on the Mortgage; •
      amortization of the principal of the Mortgage; and • Late Charges, provided
      that any amounts owed for Late Charges must be handled consistent with Truth
      in Lending Act (TILA) regulations. This application of Partial Payments as a
      full monthly installment advances the date of the oldest unpaid installment,
      but not the initial date of Default. (B) Required Documentation When applying
      Partial Payments totaling a full monthly Mortgage Payment, the Mortgagee must:
      • report the appropriate Status Code in the Single Family Default Monitoring
      System (SFDMS); and • advance the Oldest Unpaid Installment (OUI) date one month.
      iii. Return of Partial Payments for Mortgages in Default (A) Standard If the
      Mortgage is in Default, the Mortgagee may return the Partial Payment to the
      Borrower with a letter of explanation only under the following circumstances:
      • when the payment represents less than half of the full amount due under the
      terms of the Mortgage, including Late Charges, at the time the payment is tendered;
      • when the payment is less than the amount agreed to in a Forbearance or Repayment
      Plan; • when the payment is less than the amount stated in an approved Trial
      Payment Plan (TPP) Agreement; • when the Property is occupied by a rent-paying
      tenant and the rents are not being applied to the Mortgage Payments; • when
      the first legal action to initiate foreclosure has been completed; or • when
      it is 14 Days or more after the Mortgagee has mailed the Borrower a statement
      of the full amount due, including Late Charges, which advises that it intends
      to refuse to accept future Partial Payments (see Application of Subsequent Payment
      to Unpaid Late Charges), and either of the following conditions have occurred:
      o four or more full monthly installments are due but unpaid; or o a delinquency
      of any amount, including Late Charges, has continued for at least six months
      since the account first became Delinquent. III. SERVICING AND LOSS MITIGATION
      A. Title II Insured Housing Programs Forward Mortgages 2. Default Servicing
      Handbook 4000.1 1189 Last Revised: 11/26/2025 (B) Required Documentation The
      Mortgagee must ensure that its Servicing File reflects any Partial Payments
      returned to the Borrower and includes any letters of explanation for the returned
      payments.'
  judgment: false
