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w _ 9~+ 104696 1. Payment of Principal, Interest and Late Charge. Borrower shall pay when due the principal of, and interest on, the debt --videnced by the Note and late charges due under the Note. 2. Monthly payments of Taxes, Insm-ance and Other Charges. Borrower shall include in each monthly payment, together with the principal and interest as set forth in the Note and any late chargm an installment of any (a) taxes and special assessments levied or to be lever %ainst the. Property. (b) leasehold payments or ground rents on the Property, and (c) premiums for insurance requi;ed by Paragraph 4. Each monthly installntc for items (a), (b) and (c) shall equal one-twelfth of tlx: winuai amounts, as reasonably estimated by Lcr. ter. w an amount sufficient to maintain an additional balance of not more than one-sixth of the estimated amounts. 'rhe full annual amottn. for each item shall be accumulated by Leader within a period ending one month before an item would become delinquent. Lender shall hold the amounts collected in trust to fray items (a), (b) and (c) before they become delinquent. If at any time the total of the payment.-. held by Lender f9r items (a), (b) and (c), together with the future monthly payments for such items payable to Lender prior to the due dates of such item. exceeds by more man onc•sixth the estimated amount of payments required to pay such items when due. and if payments on the Note are current, then Lender shall either refund the excess over one-sixth of the estimated payments or cnxlit the excess over one-sixth of the estimated payments to subsequent payments by Borrower, at the option of Borrower. If the total of the payments made by Borrower for item (a), (b), or (c) is insufficient to pay the item when due, theft Borrower shall pay to Lender any amount necessary to make up the deficiency on or before the date the item becomes due. As used in this Security Instrument, "Secretary" means the Secretary of Housing and Urban Developinent or his or her designee. In any year in which the Lender must pay a mortgage insurance premium to the Secretary. each monthly payment shall also include either: (i) an Installment of the annual mortgage insurance premium to be paid by Lender to the Secretary, or (ii) a monthly charge instead of a mortgage insurance premium if this Security Instrumew is held by the Secretary. Fach monthly irstallmtent of the mortgage insurance premium slisil be in an amount sufficient to accumulate the full annual mortgage insurance premium with Lender one ninth prior to the date the full L;mual mortgage insurance premium is due to the Secretary: or if this Security Instrument is held by the Secretary, each monthly charge shall be in an amount equal to one-twelfth of one-half percent of the outstanding principal balance due on the Note. jr Borrower tenders to Lender the full payment of all sums secured by this Security Instrument. Borrower's account shall be credited with the balance m-raining for all installments for items (a), (b) and (c) and any mo-tg age insurance premium irstxllment 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, Borrowers ac-l)unt shall be credited with any balance, remaining, for all installments for items (a). (b) and (c). ;i. Application rg(i Payments. All payments under Paragraphs I and 2 shall be applied by Lender as follows: f-IFtST, to the muttgage insurance prennum to be paid by Lender to the Secretary r r to the monthly cNrg, by the Secretary insi:end of the monthly mortgage insurance premium: SS,~N to any taxes. special a m--miens. Icasehold payments or ground rents. and fire. flood and other hazard insurance premiums, as required: 11-JIM). to interest due under the Note: 11)UFtflt, to amortization of the principal of the Note; FIFl'H, to late charges due under the Note. 4, Fire, Flood and Other Hazard Insurance. Borrower shall insure all improvements on the Property, 06hether now in existence or subsequently erected, against any hazards, casualties, and contingencies, including fire. for which Lender requires insurance. This insurance shall be maintrained in the amounts and for the periods that Lender requires. Borrower shall also insure all improvements on the Prop",. whether nt w in existence or subsequently erected, against loss by floods to the extent required by the Secretary. All insurance shall be carried with companies approved by Lendt:r. 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, tender. In the event of loss. Borrower shall givy: Lender immediate notice by mail, Lender may make proof of loss if not made promptly by Borrower. Each insurance company concerned is hereby authorized and directed to make payment for such Ins>3 directly to Lender, instead of to Bcuow--r and to Lender jointly. All or any part of the insurance proceeds may be applied by Lender, at its option, either (a) to the reduction of the indebtedness under the Note and this Security instrument, first to any delinquent -mounts applied in the order in Paragraph 3, and then to prepayment of principal, or (b) to the restoration or repair 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 rue referred to in Paragraph 2, or change the amount of such payments. Any excess insurance proceeds over an amount mquired to pay all outstanding indebtedness under the Note and this Security Instrument shall be paid to the entity legahf entitled thereto. In the event of foreclosure of this Security Instrument or other transfer of title to the Property that extinguishes the indebtedness, all right, title and interest of Borrower in and to insurance policies in force shall pass to the purchaser. 5. Occupancy, Preservation, Maintenance and Protection of the Property; Borrower's Loan Application; Leaseholds. Borrower shall occupy, establish, and use the Property as fkxrowers principal residence within sixty days after the execution of this Security Instrument and shall continue to occupy the Property as Borrower's principal residence for at least one year after the date of occupancy, unless the Secretary determines this requitement will ^_aum undue hardship for Borrower, or unless extenuating circumstances exist which are beyond Borrower's control. Bonuwer shall notify Lenders of any extenuating circumstances Borrower stall not commit waste o: destroy. damage or substantially change the Property or allow the Property to deteriorate, reasonable wear and tear excepted. Lender may inspect the Property if the Property is vacant or abandoned or the :oan is in default. Lender may take reasonable action to protect and preserve such vacua or abandoned Property. Borrower shall also be in default if Borrower, during the loan application pr%-KS, gave materially false or inaccurate information or statements to Lender (or failed to provide Lender with any material information) in connection with the loan evidenced by the Note, including, but not limited to, representations conceming Borrowers occupancy of the Property as a principal residence. If this Security Instrument is on a leasehold, Borrower shall comply with the provisions of the lease. If Borrower acquires fee title to the Property. the leasehold and fee title shall not be merged unless Lender agrees to the merger in writing. 6. Charges to Borrower and Protection of Lender's Rights in the Property. Borrower shall pay all governmental or municipal charges, fines and impositions that are not included in Paragraph 2_ Borrower shall pay these obligaticrs on time directly to the entity which is owed the payment- If failure to pay would adversely affect Lender's interest in the Property, upon Lender's request Borrower shall promptly furnish to Lender receipts evidencing these payments. If Borrower fails to make these payments or the payments required by Paragraph 2, or fails to perform any other covenants and agreements contained in this Security Instrument, or there is a legal proceeding that may significantly affect Lender's rights in the Property (such as a proceeding in bankruptcy, for condemnation or to enforce laws or regulations). then Lender may do and pay whatever is necessary to protect the value of the Property and Lender's rights in the Property, including payment of taxes, hazard insurance and other items mentioned in Paragraph 2. Anv amounts disbursed by Lender under this Paragraph shall become an additional debt of Borrower and be secured by this Security Instrument. These amounts shall bear interest from the date of disbursement, at the Nat rate, and at the option of Lender, shall be immediately due and pavable_ 7. Condemnation. The proceed- of any award or claim for damages. direct or consequential, in connection with any condemnation or other taking of any put of the Property. or for conveyance in pia4-c of condemnation, are hereby assigned and shall be paid to Lender to the extent of the full amount of the indebtedness that remains unpaid under the Note and this Security Instrument. Lender shall apply such proceeds to the reduction of the indcbtednacs unetcr the Note and this Security Insimment, first to any delinquent amounts applied in 'he der provided in E`a aErar+h 3, and then to prepayment of principal. Any application of the proceeds to the principal shall not extend or postpone the due date of the monthly ) (page 2 of 4 pagra) , 4E.