We have a $400,000 construction loan, interest only payments with a final balloon payment. The borrower was late with the final payment because he had some issues refinancing the loan with another lender. Our note says our late fee will be 5% of the scheduled payment, or $15, whichever is greater. Obviously, we aren't going to charge a late fee of $20,000, which would be 5% of the balloon payment, but we want to charge something. Would we charge the same late fee as we would on one of the regular interest only payments?

What you write into your loan agreements and how you apply those provisions are contract issues that should be discussed with the bank's legal counsel. If you never intend to charge $20,000 late fees, then the language of your notes should be revised for future loans.

The loan has matured and is in default. I highly doubt that State law would allow you assess such a late charge on a matured loan, especially if this was a consumer loan. Like Richard indicated, sitting down with legal counsel is the appropriate course of action prior to assessing this fee.