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201204307 If the a.mounts held by Lender for Escrow Items exceed the amounts permitted to be held by RESPA, Lender shall account to Borrower for the excess funds as required by RESPA. If the amounts of funds held by Lender at any time are not sufficient to pay the Escrow Items when due, Lender may notify the Borrower and require Bonower to make up the shortage as permitted by RESPA. 1'he Escrow Funds are pledged as additional security for all sums secured by this Security Instrument. If Borrower tenders to Lender the full payment of all such sums, Borrower's account shall be credited with the balance remaining for all installment items (a), (b), and (c} and any mortgage insurance premium insta.11ment that Lender has not become obligated to pay to the Secretary, and Lender shall promptly refund any excess funds to Borrower. Immediately prior to a foreclosure sale of the Property or its acquisition by Lender, Borrower's account shall be credited with a.ny balance remaining for all installments for items (a), (b), and (c). 3. Application of Payments. All payments under Paragraphs 1 and 2 shall be applied by Lender as follows: First, to the mortgage insurance premium to be paid by Lender to the Secretary or to the monthly charge by the Secretary instead of the monthly mortgage insurance premium; Second, to any taxes, special assessments, leasehold payments or ground rents, and fire, flood and other hazard insurance premiums, as required; Third. to interest due under the Note; Fou to amortization of the principal of the Note; and Fi to late charges due under the Note. 4. Fire, Flood and Other Hazard Insurance Borrower shall insure all improvemenls on the Property whether now in existence or subsequently erected, a.gainst any hazards, casualties, and contingencies, including fire, for which Lender requires insurance. This insurance shall be maintained in the amounts and for the periods that Lender requires. Bortower sha11 also insure all improvement� on the Property, whether now in existence or subsequen�ly erected, against loss by floods to the extent required by the Secretary. All insurance sha11 be carried with companies approved by Lender. The insurance policies and any renewals shall be held by Lender and shall include loss payable clauses in favor of, and in a form acceptable to, Lender. In the event of loss, Borrower shall give Lender immediate notice by mail. Lender may make proof of loss if not made promptly by Borrower. Each insurance compa.ny concemed is hereby authorized and directed to make payment for such loss directly to Lender, instead of to Borrower and to Lender jointly. All or any part of the insvrance proceeds may be applied by Lender, at its option, either (a) to the reduction of the indebtedness under the Note and tlus Security Inshument, first to any delinquent amounts applied in the order in Paragraph 3, and then to prepayment of principal, or (b) to the restoration or repa.ir of the damaged Property. Any application of the proceeds to the principal shall not extend or postpone the due date of the monthly payments which are referred to in Paragraph 2, or change the amount of such payments. Any excess insurance proceeds over an amount required to pay all outsYanding indebtedness under the Note and tlus Security Inshument sha11 be paid to the entity lega.11y entitled thereto. sY1l� �Lc��- HCF(3-00703 FHA Deed oiTrust-NE Revised 4/96 VMP� Ot112 WoHeis Kluwer Financfal SeMcea 201205294.1.1.233&J20720729Y Page 3 ot 10 1 8'