Why are you not collecting late fees from the borrower?

If the borrower only sent in enough funds to make a PI or PITI payment, the late fee will be assessed and accrue on the loan until the late balance is paid. The late balance will be paid before any additional funds are applied as principal pay down. Payments on security instruments are applied in the following order (unless otherwise specified on the security instrument):
Interest due under the Note, principal due under the Note and amounts for escrow. Any additional funds will be applied first to late charges, second to any other amounts due under the security instrument (such as legal fees, other expenses) and last to principal balance of the Note.

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