Can a homeowners association recover "collection costs" from delinquent owners?

Yes. Civil Code §1366 permits associations to recover "reasonable costs incurred in collecting the delinquent assessment, including attorney's fees." Associations may also collect late fees and interest subject to the limits contained in the statute and the association's governing documents.

If the association's current collection policy states that the association will charge $10.00 or a 10 percent maximum late fee, does the language in the collection policy change the limitation language in the CC&Rs to allow the association to charge up to Civil Code §1366's 10 percent maximum?

No, an association cannot modify the CC&Rs by adopting a rule or collection policy provision that is inconsistent with the CC&Rs. In Ticor Title Insurance v. Rancho Santa Fe (1986) the court confirmed that a rule cannot be more restrictive or inconsistent with a CC&R provisions. To change the amount in the CC&Rs, an association will need to amend those CC&Rs which will almost certainly require a vote of the members.

What action(s) can an association take in the event of non-payment of association assessments? Is foreclosure an option? Under what circumstances?

The association can record a lien against the property for delinquent assessments, late fees, collection costs, and interest and institute proceedings for judicial or non-judicial foreclosure subject to notice and dispute resolution requirements. Foreclosure of the lien is available once the assessments have been delinquent for more than one year or the assessment principal has reached $1,800. An association may also sue to collect the unpaid assessments and/or suspend membership privileges. (Civil Code §§1366, 1367.1, and 1367.4)