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20�106775 mortgage insurance premium to be paid by Lender to the S�retary, 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 "Fscrow Items" and the sums paid to Lender are called "Escrow Funds." Lender may, at any time, collect and hold amounts for Escrow Items in an aggregate amount not to excee� the maximum amount that may be required for Borrower's escrow account under the Real Fstate Settlement Procedures Act of 1974, 12 U.5.C. Section 2601 et seq. and implementing regulations, 24 CFR Patt 3500, as they may be amended from time to time ("RESPA"), except that the cushion or reserve permitted by RESPA for unanticipated disbursements or disbursements before the Bonower's payments aze 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 excced the amounts permittefl to be held by RESPA, Lender shall account to Borrower for the exc�ss fimds as required by RESPA. If the amounts of funds held by Lender at any time are not sufficient to pay the Fscrow Items when due, Lender may notify the Bonower and require Bonower to make up the shortage as permitted by RESPA. The Escrow Funds are pledged as addirional security for all sums secured by this S�urity Instrument. If Bonower tenders to Lender the full payment of all such sums, Borrower's accc�unt shall be credited with the balance remaining for all installment items (a), (b), and (c) and any mortgage insurance premium installment that Lender has not become obligated to pay to the S�retary, and Lender shall promptly refund any excess funds to Bonower. Immediately prior to a for�losure sale of the Property or its acquisirion by Lender, Borrower's account shall be cre�ited with any balance remaining for all installments for items (a), (b), and (c). 3. Application of Payments. All payments under paragraphs 1 and 2 shall be applied by L.ender 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 insurance premium; Second, to any taxes, sp�ial assessments, leasehold payments or ground rents, and fire, flood and other hazard insurance premiums, as required; Third, to interest due under the Note; Fourkh, to amortization of the principal of the Note; and Fifth, to late charges due under the Note. 4. Fire, Flood and Other Hazard Insurance. Bonower shall insure all improvements on the Property, whether now in existence or subsequently erected, against any hazards, casualties, and contingencies, including fire, for which Lender requires insurance. This insurance shall be maintained in the amounts and for tdie periods that Lender requires. Borrower shall also insure all im�rovements on the Properry, whether now in existence or subsequently erected, against loss by floods to the extent required by the Secretary. All insurance shall be carried with companies a��roved by Lender. The insuran� policies and any renewals shall b� �eld by Lender and shall include loss payable clauses in favor of, and in a form acceptable to, Lender. In 93�e Evem of loss, Bortower shall give L�nder immediate notice by mail. Lender may make proof of loss if not made promptly by Borrower. Each inc�„�n� �mpany concerned is hereby authorized and directed to make payment for such loss dire�tly to Lender, instead of to Bonower and to Lender jointly. All or any part of the insurance proceeds may be applied by Lender, at its option, either (a) to the reducrion of the indebtedness under the Note and this Security Instrument, first to any delinquent amounts applied in the order in paragraph 3, and 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 FHA Dead af TrusriNE 4/96 VMP � VMP4RWE) (1105) Wolters Kluwer Financial Services Page 3 of 10