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<br />BORROWER COVENANTS that Borrower is lawfully seized of the estate hereby conveyed and has the right to
<br />mortgage, grant and convey the Property and that the Property is unencumbered, except for encumbrances of record. Borrower
<br />warrants and will defend generally the title to the Property against all claims and demands, subject to any encumbrances of
<br />record.
<br />1. Payment of Principal, Interest and Late Charge. Borrower shall pay when due the principal of, and interest on, the
<br />debt evidenced by the Note and late charges due under the Note. 2. Monthly Payments of Taxes, Insurance and Other
<br />Charges. Borrower shall include in each monthly payment, wgcthcr with the principal and interest as set forth in the Note and
<br />any late charges, an installment of any (a) taxes and special assessments levied or to be levied against the Property, (b)
<br />leasehold payments or ground rents nn the Property, and (c) premiums for insurance required by paragraph 4.
<br />Each monthly installment for items (a), (b), and (c) shall equal one - twelfth of the annual amounts, as reasonably estimated
<br />by Lender, plus an amount sufficient to maintain an additional balance of not more than one -sixth of the estimated amounts.
<br />The full annual amount for each item shall be accumulated by Lender within a period ending one month before an item would
<br />become delinquent. Lender shall hold the amounts collected in trust to pay items (a), (b), and (c) before they become
<br />delinquent.
<br />if at any time the total of the payments held by Lender for items (a), (b), and (c), together with the future monthly
<br />payments for such items payable to Lender prior to the due dales of such items, exceeds by more than one -sixth the estimated
<br />amount of payment% required to pay such items when due, and if payments on the Note arc current, then Lender shall either
<br />refund the excess over one -sixth of the estimated payments or credit the excess over one -sixth of the estimated payments to
<br />subsequent payments by Borrower, at the option of Borrower. If the total of the payments made by Borrower for item (a), (b),
<br />or (c) is insufficient to pay the item when due, then Borrower shall pay to Lender any amount necessary to make up the
<br />deficiency on or before the date the item becomes due.
<br />As used in this Security Instrument, "Secretary" mounts the Secretary of Housing and Urban Development or his or her
<br />designee. In any year in which the Lender must pay a mortgage insurance premium to the Secretary, each monthly payment
<br />shall also include either: (i) an installment of the annual mortgage insurance premium to be paid by Lender to the Secretary, or
<br />(it) a monthly charge instead of a mortgage insurance premium if this Security Instrument is held by the Secretary. Each
<br />monthly installment of the mortgage insurance premium shall be in an amount sufficient to accumulate the full annual
<br />mortgage insurance premium with Lender one month prior to the date the full annual mortgage insurmce premium is due to
<br />the Secretary, or if this Security Instrument is held by the Secretary, each monthly charge shall be in an amount equal to ono-
<br />twelfth of one -Imlf percent of the outstanding principal balance due on the Note.
<br />if Borrower tenders to Lender the full payment of all sums secured by this Security Instrument, Borrower's account shall
<br />be credited with the balance remaining for all installments for items (a), (b) and (c) and any mortgage insurance premium
<br />installment that Leader has not become obligated to pay to the Secretary, and Lcndcr shall promptly refund any excess funds to
<br />Borrower. Immediately prior to a foreclosure sale of the Property or its acquisition by Lender, Bomrwer's account shall be
<br />credited with any balance remaining for all installments for items (a), (b), and (c).
<br />3. Application of Payments. All payments under paragraphs I and 2 shall be applied by Lender as follows:
<br />First, to the mortgage insurance premium to be paid by Lender to the Secretary or to the monthly charge by the Secretary
<br />instead of the monthly mortgage insurance premium;
<br />Second, to any taxes, special assessments, leasehold payments or ground rents, and fire, flood and other hazard insurance
<br />premiums, as required;
<br />Third, to interest due under the Note;
<br />Fourth, to amortization of the principal of the Note;
<br />Fifth, to late charges due under the Note.
<br />4. Fire, Flood and Other Hazard Insurance. Borrower shall beano all improvements on the Property, whether now in
<br />existence or subsequently erected, against any hazards, casualties, and contingencies, including free, for which Lender requires
<br />insurance. 'Ibis insurance shall be maintained in the amounts and for the periods that Lender requires. Burrower shall also
<br />insure all improvements on the Property, whether now in existence or subsequently erected, against loss by floods to the extent
<br />required by the Secretary. All insurance shall be carried with companies approved by Lender. The insurance policies and any
<br />renewals shall be held by Lender and shall include loss payable clauses in favor of, and in a form acceptable to Lender.
<br />In the event of loss, Borrower shall give Lender immediate notice by mail. Lender may make proof of loss if not made
<br />promptly by Borrower. Each insurance company concerned is hereby authorized and directed to make payment for such loss
<br />directly to Lender, instead of to Borrower mid to Lender jointly. All or any part of the insurance proceeds may be applied by
<br />Lender, at its option, either (a) to the reduction of the indebtedness wider the Note and this Security InsWmenl, first In any
<br />delinquent amounts applied in the order in paragraph 3, and then to prepayment of principal, or (b) to the restoration or repair
<br />of the damaged Property. Any application of die proceeds to the principal shall not extend or postpone the due date of the
<br />monthly payments which me referred to in paragraph 2, mr change the amount of such payments. Any excess insurance
<br />proceeds over an amount required to pay all outstanding indebtedness under the Note and ibis Security Instrument shall be paid
<br />to the entity legally entitled thereto.
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