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200805564 BORROWER COVENANTS that Borrower is lawfully seized 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. ~rower warrants and will defend generally the title to the Property against all claims and demands, subject to any encumbrances of record. TInS SECURITY INSTRUMENT combines Wliform covenants for national use and non-Wliform CQVenants with limited variations by jurisdiction to constitute a uniform security instrument covering real property. Borrower and Lender covenant and agree as follows: UNIFORM COVENANTS. I. Payment of Principal, Interest and Late Charge. Borrower shall pay when due the principal ot; and interest on, the debt evidenced by the Note and late charges due under the Note. 2. Monthly Payment or Taxes, Insurance, 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 charges, a sum for (a) taxes and special assessments levied or to be levied against the Property, (b) leasehold payments or ground rents on the Property, and (c) premiums for insurance required under Paragraph 4. In any year in which the Lender must pay a mortgage insurance premium to the Secretary of Housin(1i and Urban Development ("Secretary"), or in any year in which such premium would have been required If Lender still held the Security Instrument, each monthly payment shall also include either: (i) a sum for 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 Instrument is held by the Secretary, in a reasonable amount to be determined by the Secretary. Except for the monthly charge by the Secretary, these items are called "Escrow Items" and the sums paid to Lender are called "Escrow Funds." Lender may, at any tune, collect and hold amounts for Escrow Items in lID aggregate amount not to exceed the maximwn amount that may be required for Borrower's escrow account under the Real Estate Settlement Procedures Act of 1974, 12 V.S.C. ~ 2601 ~ and implementing regulations, 24 CFR Part 3500, as they may be amended from time to time ("RESPA"),e1Ccept 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 based on 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 account to Borr~ for the excess funds as required by RESPA. If the amounts 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 as permitted by RESP A. The Escrow Funds are pledged as additional security for all sums secured by this Security Instrument. If Borrower tenders to Lender the full payment of aU such sums, Borrower's acoount shall be credited with the balance remaining for all instalhnent items (a), (b), llnd (c) and any mortgage insurance premium installment that Lender has not become obligated to pay to the Secretary, and Lender sliall promptly refund any excess funds to Borro_. Immediately prior to a foreclosure sale of the Propert): or its acquisition by Lender, Borrower's account shall be credited with any balance remaining for alllOstallrnents for items (a), (b), and (c). 3. Application of Payments. All payments under Paragraphs I 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 msurance premium; Second, to any taxes, special assessments, leasehold payments or ground rents, and fire, flood lIDd other huard insurance premiums, B8 required; Third, to interest due under the Note; Fourth, to amortization of the principal of the Note; and 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, asainst any hazards, casualties, and contingencies, including fire, for which Lender requires IDSurance. This insurance shall be maintained in the amount!! 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 re~uired by the Secretary. All insurance shall be carried with companies approved by Lendlll'. The insurance policies ani:l any renewals shall be held by Lendlll' and shall include loss payable clauses in mvor of, and in a form acceptable to, Lender. In the event of lossl Borrower shall give Lender Immediate notice by mail. Lender may make proof of loss if not made prompt y by Borrower. Each insurance company concerned is hereby authorized and directed to make payment for such loss directly to Lender, Instead of to Borrower and to Lender jointly. All or any part of the IDsurllDce proceeds may be applied by Lender, at its option, either (a) to the reduction of the indebtedness under the Note and this Security Instrwnent, first to any delinquent amounts applied in the order in Paragraph 3, lIDd 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 are referred to In Paragraph 2, or change the amount of such payments. Any excess insurance proceeds over an amOlUlt required to pay aU outstanding indebtedness WIder 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 that extinguishes the indebtedness, aU right, title and Interest of Borrower in and to insurance policies in force shall pass to the purchaser. 5. Occupllncy, Preservation1 Maintenance aud Protection of the Property; Borrower's Loan ApJllication; Leaseholds. Borrower snail occupy, establish, and use the Property as Borrower's principal reSIdence within sixty days after the execution of this Security Instrument (or within sixty days of a later sale or transfer of the Property) and shall continue to occupy the Property as Borrower's principal residence for at least one year after the date of occupancy, unless Lender detennines that requirement will cause undue hardship for Borrower, or unless extenuating circumstances exist which are beyond Borrower's control. Borrower shaU notifY Lender of any extenuating circumstances. Borrower shall not commit waste or destroy, damage or substantiallr change the Pr~ or aUow the Property to deteriorate, reasonable wear and tear excepted. Lender may IDspect the Property If the Property is vacant or abandoned or the loan is in defilult. Lender may take reasonable action to protect and preserve such vacant or abandooed Property. Borrower shall also be in default if Borrower, durin& the loan application process, w.'ve materially Carse or inaccurate information or statements to Lender (or fililed to provide Lender With any material information) in connection with the loan evidenced by the Note, including, but not limited to, representations concerning Borrower's occupancy of the Property as a principal residence. If this Security Instrwnent is on a leasehold, 16Z,6.CV (11107) 4200118 l'a/:e2 ofS ~ GOTO(oo0acb4a)