Mortgage Late Fees in Massachusetts

Massachusetts law limits mortgage late fees in residential first mortgages in two important ways.

Charging Late Fee More Than Once

If you are late once on a first mortgage payment and get assessed a late charge, you cannot be assessed another fee if you are on time with your payment the next month, even if you are still generally behind on your mortgage.  The law states:

A late payment penalty or late charge may not be charged more than once with respect to a single late payment..... If a late payment fee has been once imposed with respect to a particular late payment, a fee shall not be imposed with respect to any future payment which would have been timely and sufficient, but for the previous default.

See M.G.L. c. 183, § 59.

Mortgage Late Fee Cannot Be More Than 3 Percent of the Amount Overdue

The same section of the law makes it illegal to assess a late fee in excess of 3 per cent of the amount of principal and interest overdue. So, for example, if you missed a mortgage payment and the amount past due was $2,000, the maximum fee that you could be assessed would be $60. Any tax escrow amount included in the mortgage payment is not included in calculating the amount you are behind.

Often the way that a mortgage servicer will violate this law is by charging a late fee on an entire mortgage payment even though it is holding so-called "unapplied funds," in the form of a partial mortgage payment.  When that is the case, you are not really behind an entire mortgage payment, only part of one, and so you should not be charged 3 percent on an entire mortgage payment.

Non-Bank Servicers and Credit Unions Sometimes Violate These Laws

We are especially interested in any mortgage late fee violations by Ocwen, Nationstar, GreenTree, and other non-banks.  Give us a call at 617-338-9400 and mention this article if you have been subject to these late fee violations in Massachusetts.