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201�03�3� BORROWER COVENANTS that Bonower is lawfully seised of the estate hereby conveyed and has the right to grant and convey the Property and that the Properly is unencumbered, except for encumbrances of record. Borrower warrants and will defend generally the title to the Property against all claims and demands, subject to any encumbrances of record. THI5 SECURITY INSTRUMENT combines uniform covenants for national use and non-uniform covenants with limited variations by jurisdiction to constitute a uniform security instrument covering real property. UNIFORM COVENANTS. Bonower and Lender covenant and agree as follows: 1. Payment of Principal, Interest, Escrow Items, Prepayment Charges, and Late Charges. Borrower sha11 pay when due the principal of, and interest on, the debt evidenced by the Note and any prepayment charges and late charges due under the Note. Bonower shall also pay funds for Escrow Items pursuant to Section 3. Payments due under the Note and this Security Instrument sha11 be made in U.S. cunency. However, if any check or other instrument received by Lender as payment under the Note or this Security Instrument is returned to Lender unpaid, Lender may require that any or all subsequent payments due under the Note and this Security Instrument be made in one or more of the following forms, as selected by Lender: (a) cash; (b) money order; (c) certified check, bank check, treasurer's check or cashier's check, provided any such check is drawn upon an institution whose deposits are insured by a federal agency, instrumentality, or entity; or (d) Electronic Funds Transfer. Payments are deemed received by Lender when received at the location designated in the Note or at such other location as may be designated by Lender in accordance with the notice provisions in 5ection 15. Lender may return any payment or partial payments if the payment or partial payments are insuff'icient to bring the Loan current. Lender may accept any payment or partial payment insuff'icient to bring the Loan current, without waiver of any rights hereunder or prejudice to its rights to refuse such payment or partial payments in the future, but Lender is not obligated to apply such payments at the time such payments are accepted. If each Periodic Payment is applied as of its scheduled due date, then Lender need not pay interest on unapplied funds. Lender may hold such unapplied funds until Borrower makes payment to bring the Loan current. If Bonower does not do so within a reasonable period of time, Lender shall either apply such funds or retum them to Borrower. If not applied earlier, such funds will be applied to the outstanding principal balance under the Note immediately prior to foreclosure. No offset or claim which Borrower might have now or in the future against Lender sha11 relieve Bonower from making payments due under the Note and this Security Instrument or performing the covenants and agreements secured by this Security Instrument. 2. Application of Payments or Proceeds. Except as otherwise described in this Section 2, all payments accepted and applied by Lender shall be applied in the following order of priority: (a) interest due under the Note; (b) principal due under the Note; (c) amounts due under Section 3. Such payments sha11 be applied to each Periodic Payment in the order in which it became due. Any remaining amounts shall be applied first to late charges, second to any other NEB�SI� — Single Family — Famte Mae/Freddie Mac IJrTIF01ih1 IP15fRUMENT Form 3028 1/0 GCC - G3028-04 (09/Ol) (Page 4 of 19) ��1��