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200703611 security is not lessened. If the restoration or repair is not economically feasible or Lender's security would be lessened, the insurance proceeds shall be applied first to the reduction of any indebtedness under the Second Note and this Security Instrument. Any excess insurancc proceeds over an amount required to pay all outstanding indebtcdncss under the Second Note and this Security Instrument shall bc paid to the entity legally entitled thereto. In the event of foreclosure of this Security Instrument or other transfcr of title to the Property that extinguishes the indebtedness, all right, titlc and intcrcst of Borrower in and to insurance policies in force shall pass to thc purchaser. 4. Occupancy, Preservation, Maintenance and Protection of the Property; Borrower's Loan Application; Leaseholds. Borrowcr shall occupy, establish, and use the Property as Borrower's principal residencc aftcr thc execution of this Security Instrument, and Borrower (or at least one Borrowcr, if initially more than one person are Borrowers) shall continue to occupy the Property as Borrower's principal residence for the term of the Security Instrumcnt. "Principal residence" shall have the same meaning as in the Loan Agreement. Borrower shall not commit waste or destroy, damage or substantially changc the Property or allow the Property to deteriorate, reasonable wcar and tcar exccptcd. Borrower shall also be in default if Borrower, during the loan application process, gave materially false or inaccurate information or statements to Lender (or failcd to provide Lender with any material information) in connection with the loan evidcnced by the Note, including, but not limited to, representations concerning Borrowcr's occupancy of thc Propcrty as a principal residence. If this Sccurity Instrumcnt 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 mcrgcd unlcss Lender agrees to the merger in writing. S. Charges to Borrower and Protection of Lender's Rights in the Property. Borrowcr shall pay all governmental or municipal chargcs, fincs and impositions that arc not included in Paragraph 2. Borrower shall pay thesc 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 furnish to Lender receipts evidencing these payments. Borrowcr shall promptly discharge any lien which has priority over this Security Instrument in the manner provided in Paragraph 12( c). If Borrower fails to make these payments or the property charges 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), thcn Lcndcr may do and pay whatcvcr is nccessary 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. To protect Lender's security in the Property, Lender shall advance and charge to Borrower all amounts due to the Secretary for thc Mortgage Insurancc Prcmium as dcfined in the Loan Agreement as well as all sums due to the loan servicer for servicing activities as defined in the Loan Agreement. Any amounts disbursed by Lender under this Paragraph shall become an additional debt of Borrower as provided for in the Loan Agreement and shall bc secured by this Security Instrumcnt. 6. Inspection. Lender or its agent may enter on, inspect or make appraisals of the Property in a reasonable manner and at reasonable times provided that Lender shall give the Borrower notice prior to any inspection or appraisal specifying a purpose for the inspection or appraisal which must be related to Lender's interest in the Property. If thc property is vacant or abandoned or the loan is in default, Lender may take reasonablc action to protect and preserve such vacant or abandoned Property without notice to the Borrower. 7. Condemnation. The proceeds of any award or claim for damages, dircct or consequential, in connection with any condemnation or other taking of any part of the Property, or for conveyance in place of condemnation shall be paid to Lender. The proceeds shall be applied first to the reduction of any indebtedness under a Second Note and this Security Instrument. Any excess proceeds over an amount required to pay all outstanding indebtedness under the Second Note and this Security Instrument shall be paid to the entity legally entitled thercto. 13XA; 11/96 Jfn1 Page 3 )1(