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200700008 Loan Number: 421002160 Servicing Number: 002267410~5 Date: 12/13/06 BORROWER COVENANTS that Borrower is lawfully seised of the estate hereby conveyed and has the right to grant and convey the Property and that the Property is unencumbered, except for encumbrances of record. 13orrower warrants and will defend generally the title to the Property against all claims and demands, subject to any encumbrances of record. COVENANTS. Borrower and Lender covenant and agree as follows: I. Payment of Principal and Interest; Prepayment and Late Charges. Borrower shall promptly pay when due the principal of and interest on the debt evidenced by the Note and any prcpayment and late charges due under the Note. 2. Funds for Taxes and Insurance. Subject to applicable law or to a written waiver by I,ender, Borrower shall pay to Lender on the day monthly payments are due under the Note, until the Note is paid in full, a sum ("Funds") for: (a) yearly taxes and assessments which may attain priority over this Security Instrument as a lien on the Property; (b) yearly leasehold payments or ground rents on the Property, if any; (e) yearly ha7.ard or property insurance premiums; (d) yearly nood insurance premiums, if any; (e) yearly mortgage insurance premiums, if any; and (1) any sums payable by I3orrower to Lender, in accordance with the provisions of paragraph R, in lieu of the payment of mortgage insurance premiums. Thesc items are called "Escrow Items." Lender may, at any time, collect and hold Funds in an amount not to exceed thc maximum amount a lender for a federally related mortgage loan may require for Borrower's escrow account under the federal Real Estate Settlement Procedures Act of 1974 as amended from time to time, 12 U.s.C. Section 2601 et seq. ("RESPA"), unless anothcr law that applies to the Funds scts a lesscr amount. If so, Lender may, at any time, collect and hold Funds in an amount not to exceed the lesser amount Lender may estimate the amount of Funds due on the basis of current data and reasonable estimates of expenditures of future Escrow Items or otherwise in accordance with applicable law. The Funds shall be held in an institution whose deposits are insured by a federal agency, instrumentality, or entity (including Lender, if Lender is such an institution) or in any Federal Home Loan Bank. Lender shall apply the Funds to pay the Escrow Items. Lender may not charge Borrower for holding and applying the Funds, annually analyzing the escrow account, or verifying the Escrow Items, unless Lender pays Borrower interest on the Funds and applicable law permits Lender to make such a charge. However, I ,ender may require I3orrower to pay a one-time charge for an independcnt real estate tax reporting service used by Lender in connection with this loan, unless applicable law provides otherwisc. Unless an agreement is made or applicable law requires interest to be paid, Lender shall not be required to pay Borrower any interest or earnings on the Funds. Borrower and Lender may agree in writing, however, that interest shall be paid on the Funds. Lender shall give to Borrower, without charge, an annual accounting of the Funds, showing credits and debits to the Funds and the purpose for which each debit to the Funds was made. The Funds are pledged as additional security for all sums secured by this Security Instrument. If the Funds held by Lender exceed the amounts permitted to be held by applicable law, Lender shall account to Borrower for the exccss Funds in accordance with thc rcquirements of applicable law. If thc amount of the Funds held by Lt:nder at any time is not sulIieient to pay the Escrow Items when due, Lender may so notify Borrower in writing, and, in such case Borrower shall pay to Lendcr thc amount necessary to make up the deficiency. I3orrower shall makc up thc deficiency in no more than twclvc monthly payments, at Lender's sole discretion. Upon payment in hlll of all sums secured by this Security Instrument, Lender shall promptly refund to Borrower any Funds hcld by Lender. If, under paragraph 21, Lender shall acquire or sell the Property, Lender, prior to the acquisition or sale of the Property, shall apply any Funds hcld by Lender at the time of acquisition or sale as a credit against the sums secured by this Security Instrument. 3. Application of Paymt:nts. Unless applicable law provides othcrwise, all payments received by Lender under paragraphs I and 2 shall be applied: first, to any prepayment charges due under the Note; second, to amounts payable under paragraph 2; third, to interest due; fourth, to principal due; and last, to any late charges duc undcr the Note. 4. Charges; Liens. Borrower shall pay all taxes, assessments, charges, fines and impositions attributable to the Property which may attain priority over this Security Instrument, and leasehold payments or ground rents, if any. Borrower shall pay these obligations in the manner provided in paragraph 2, or if not paid in that manner, Borrower shall pay them on time directly to the person owcd payment. I3orrower shall promptly furnish to Lender all notices of amounts to bc paid under this paragraph. If Borrower makes these payments directly, Borrower shall promptly furnish to Lender receipts evidencing the payments. Borrower shall promptly disehargc any lien which has priority over this Sccurity Instrument unless Borrower: (a) agrees in writing to the payment of the obligation secured by the licn in a manner acceptable to Lendt:r; (b) contests in good faith the lien by, or dt:fends against enforcement of the lien in, kgal proccedings which in the Lender's opinion operate to prcvcnt the enforcement of the lit:n; or (c) secures from the holder of the lien an agreement satisfactory to I,ender subordinating the lit:n to this Security Instrument. If Lender determines that any part of the Property is subject to a lien which may attain priority over this Security Instrument, Lendt:r may give Borrowcr a notice identifying the lien. Borrower shall satisfy the lien or take one or more of tht: actions set forth above within 10 days of the giving of notice 5. II82'JIld or Property Insurance. Borrower shall keep the improvemt:nts now existing or hereafter erected on the Property insured against loss by fire, hazards included within tht: term "extended coverage" and any other hazards, including floods or flooding, for which Lender requires insurance. Ihis insurance shall be maintained in the amounts and for thc periods that Lender requires. The insurance carrier providing the insurance shall be chosen by Borrower subject to Lender's approval which shall not be unreasonably withheld. If Borrower fails to maintain coverage described above, Lender may, at Lt:nder' s option, obtain coverage to protect Lendt:r's rights in the Property in accordance with paragraph 7. All insurance policies and renewals shall be acceptable to I,ender and shall include a standard mortgage clause. Lender shall have the right to hold the policies and renewals If Lender requires, I3orrower shall promptly give to Lcnder all receipts of paid prt:miums mId renewal notices. In the event of loss, I3orrower shall give prompt notice to the insurance carrier and Lender. Lender may make proof of loss if not made promptly by Borrower. Unless Lendcr and Borrower otherwise agree in writing, or applicable Law otherwise requires, insurance proceeds shall be applied first to reimburse Lender for costs and cxpenses incurred in connection with obtaining any such insurance procccds, and then, at Lender's option, in such order and proportion as Lender may detennine in its sole and absolute discretion, and regardkss of any impairment of security or lack thereof: (i) to the sums secured by this Security Instrument, whether or not then duc, and to such components thereof as Lender may determine in its sole and absolute discretion; and/or (ii) to Borrower to pay the costs and expenses of necessary repairs or restoration of the Property to a condition satisfactory to Lemkr. If I3orrower abandons the Property, or does not answer within 30 days a notice from Lender that the insurance carrier has offered to settle a claim, Lender may collect the insurance proceeds. Lender may, in its sole and absolute discretion, and regardkss of any impairment of security or lack thereof, use the proceeds to repair or restore tht: Property or to pay the sums secured by this Security Instrument, whether or not then due. The 30-day period will begin when the notice is given. Page 2 of 6 NED 10012 (03/29100)