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2aioo7iss 1. PAYMENTS. The principal of the debt evidenced by the Note shall be due and payable in the event Lender designates a default under the Note. It is a default under the Note if: (a) Borrower (or at least one of the borrowers if more than one borrower) does not continue to occupy the Property as Borrower's principal residence; (b) Borrower transfers the Property to another (other than Senior Lien Holder) without prior notice to Lender; (c) the subsequent owner does not meet AHP income requirements; or (d) the Borrower fails to comply with the regulations of the Federal Housing Finance Agency (or any successor) pertaining to AHP. In the case of a refinancing prior to the end of the term of the Note, an amount equal to a pro rata share of the direct subsidy that financed the purchase, construction, or rehabilitation of the unit, reduced for every year the occupying household has owned the unit, shall be repaid to the Lender, from any net gain realized upon the refinancing, unless the property continues to be subject to a deed restriction or other legally enforceable retention agreement or mechanism. Provided that the Lender does not designate a default under the Note, the amounts due and payable under the Note will be forgiven as follows: The principal amount of the Loan shall be reduced over the first S years by 1/60th of the original principal balance of the Loan for each month the Loan is outstanding. Such monthly reductions shall take effect in arrears on the same day of the month the Loan was originally made. In the event of foreclosure the full amount of the principal remaining due shall be forgiven. 2. DESIGNATION OF DEFAULT AND REMEDIES. Lender shall give notice to Borrower and Senior Lien Holder prior to a designation of a default under the Note. The notice shall specify: (a) the default; (b) the action required to cure the default; (c) a date, not less than 30 days from the date the notice is given to Borrower (and with respect to Senior Lien Holder, 60 days from the date the notice is given to Senior Lien Holder), by which the default must be cured; and (d) that failure to cure the default on or before the date specified in the notice may result in designation of a default under the Note and the sale of the Property. The notice shall further inform Borrower of the right to reinstate after designation of a default and the right to bring a court action to assert the non-existence of a default or any other defense of Borrower to a designation of default and sale. If the default is not cured by Borrower on or before the date specified in the notice, and Senior Lien Holder has not exercised its right to cure the default, then Lender at its option may designate a default and require immediate payment of all sums not forgiven secured by this Mortgage without further demand and may invoke the power of sale and any other remedies permitted by applicable law. Notwithstanding Lender's right to invoke any remedies hereunder, Lender may not commence foreclosure proceedings or accept a deed in lieu of foreclosure, or exercise any other rights or remedies hereafter until it has given Senior Lien Holder at least 60 days prior written notice. Lender shall be entitled to collect all expenses incurred in pursuing the remedies provided in this section 2, including, but not limited to, reasonable attorneys' fees and costs of title evidence. If Lender invokes the power of sale, Lender shall mail copies of a notice of sale in the manner prescribed by applicable law to Borrower, Senior Lien Holder and to the other persons prescribed by applicable law. Lender shall publish the notice of sale by public advertisement for the time and in the manner prescribed by applicable law. Lender, without demand on Borrower, shall sell the Property at public auction to the highest bidder for cash at the time and place and under the teens designated in the notice of sale in one or more parcels and in any order Lender determines. Lender may postpone sale of all or any parcel of the Property to any later time on the same date by public announcement at the time and place of any previously scheduled sale. Lender or its designee may purchase the Property at any sale. Lender shall deliver to the purchaser Lender's deed conveying the Property without any covenant or warranty, expressed or implied. The recitals in Gender's deed shall be prima facie evidence of the truth of the statements made therein. Lender shall apply the proceeds of the sale in the following order: (a) to all expenses of the sale, including, but not limited to, reasonable attorneys' fees; (b) to all sums not forgiven by this Mortgage; and (c) any excess to the person or persons legally entitled to it. 3. SUBORDINATION, This Mortgage is subject and subordinate in all respects to the liens, terms, covenants and conditions of the First Mortgage and to all advances heretofore made or which may hereafter be made pursuant to the First Mortgage, including all sums advanced for the purpose of (a) protecting or further securing the lien of the First Mortgage, curing defaults by Borrower under the First Mortgage or for any other purpose expressly permitted by the First Mortgage; or (b) constructing, renovating, repairing, furnishing, fixturing or equipping the Property. The terms and provisions of the First Mortgage are paramount and controlling, and they supersede any other terms and provisions hereof in conflict therewith. In the event of foreclosure of the First Mortgage, any provisions herein or any provisions in any other collateral agreement restricting the use of the Property or otherwise restricting Borrower's ability to sell the Property shall have no further force or effect on subsequent owners or purchasers of the Property. Any person, including his successors or assigns (other than Borrower or a related entity of Borrower), receiving title to the Property through a foreclosure of the First Mortgage shall receive title to the Property free and clear from such restrictions. 12857.CV (9/10) 904409 2 GGTG(00124a6i)