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200305265 Lender may, at any lime, collect and hold amounts for Escrow Items in an aggregate amount not to exceed the maximum amount that may he required for Borrower's escrow account under the Real Estate Settlement Procedures Act of 1974, 12 U.S.C. § 2601 pf =. and implementing regulations, 24 CFR Pan 3500, as they may be amended from time to time ("RESPA" k except that the cushion or reserve permitted by RESPA for unanticipated disbursements or disbursements before the Borrower's payments are available in the account may not be haled oa amounts due for the mortgage insurance premium. If the amounts held by Lender for Escrow Items exceed the amounts permitted to be held by RESPA, Lender shall deal with the excess funds as required by RESPA. If the mounts 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 Borrower to make up the shortage or deficiency as permitted by RESPA. The Escrow+ Funds we pledged as additional security for all sums secured by this Security Instrument. If Borrower lenders 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 inslulhnenl that Lender has not become obligated to pay to the Secretary, and Lender shall promptly refund any excess funds to Borrower. Immediumly prior to a foreclosure sale of the Property or its acquisition by Lender, Borrower's account shall be credited with any 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; Fourth, to amortization of the principal of The Note; Fifth, to late charges due under the Note. 4. Fire, Flood and Other hazard Insurance. Borrower shall insure all improvements on the Property, whether now in existence or subsequently erected, against any hazards, casualties, cold contingencies, including fire, for which Lender requires insurance. This insurance shall be maintained in the amounts and for the periods that Lender requires. Borrower shall also insure all improvements on the Property, whether now 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 Lender. 'I he 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 pmmpty by Borrower. Each insurance company concerned is hereby authurized and directed to muke payment for such loss directly in Lender, instead of to Borrower chid to Leaderjointly. 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 amounts applied in the order in Paragraph 3, mid then to prepayment of principal, or (b) to the restoration or repair of the damaged Properly. Any application of the proceeds in 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 outstanding indebtedness under the Note and this Security Instrument shall be paid to the entity legally entitled thereto. In the event of foreclosure of this Security Instrument or other transfer of title to the Property thut extinguishes the indebtedness, ull 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. Burrower shall occupy, establish, and use the Property as Borrower's principal residence within sixty days after the execution of this Security Instrument and shall continue to occupy the Property as Borrowers principal residence for at least one year after the date of occupancy, unless the Secretary determines this requirement will cause undue hardship for Borrower, or unless extenuating circumstances exist which are beyond Borrower's coural. Borrower shall notify Lenders of any extenuating circumstances. Borrower shall not commit waste or destroy, damage or substantially change the Property or allow the Property to deteriorate, reasonable wear and tear excepted. Lcndcr may inspect the Property if the Property is ,.cunt or abandoned or the loan is in default Lender may take reasonable action to protect and preserve such vacant or abandoned Property. Burrower shall also be in default if Borrower, during the loan application process, 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 lo, representations concerning Borrower's 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 he merged unless Lender agrees to the merger in writing. 6, Condemnation. The proceeds of any awed or claim for damages, direct or consequential, In connection with any condemnation or other Taking of any part of the Property, or for conveyance in place 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 indebtedness under the Note and this Security Insuument, first to any delinquent amounts applied in the order provided in Paragraph 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 payments, which ate referred to in Paragraph 2, or change the amount of such payments Any excess proceeds over an amount required in pay all outstanding indebtedness under the Note and this Security Instrument shall be paid to the entity legally entitled therein. 7. Charges to Borrower and Protection of Lender's Rights in the Property. Borrower shall pay all governmental or municipal charges, tines and impositions that arc not included in Paragraph 2. Borrower shall pay these obligations 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 famish to Lender receipts evidencing these puyments. If Borrower fails to muke these payments or the payments required by Paragraph 2, or fails to perform any other covenants and agreements contained in this Security Inslrumem, or there is a legal proceeding that may significantly affect Lenders rights in the Property (such as a proceeding in bankruptcy, for condemnation or to enforce laws or regulations), then Lander may do and pay whatever is necessary to protect the value of the Property and Lenders rights in the Property, including payment of taxes, hazard insurance and other items mentioned in Paragraph 2. Page 2 of 5 1101 C (8/01) 1691278 GO I".111seloo