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201107212 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 histrutnent 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 time, collect and hold amounts for Escrow Items in an aggregate amount not to exceed the maximum amount that may be required for Bornwer's escrow account tinder the Real Estate Settlement Procedures Act of 19 ?4, 12 U. S. C. Section 2601 et seq. and implementing regulations, 24 CFR Part 3500, as they may be amended from time to time ( "RESPA "), except that the cushion or reserve permitted by RESPA for unanticipated disbursements or disbtusements before the Borrower's payments are available in the account may not be based on amount 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 Borrower for the excess funds as requited 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 RESPA. The Escrow Funds are pledged as additional security for all sums secured by tlris Security Instrument. If Borrower tenders to Lender the fall paynttent of all such sums, Borrower's account shall be credited with the balance remaininc for all instalhnent itOrris (a), (b), and (c) and any mortgage insurance premium installment that Lender has not become obligated to pay to the Sacrauu y, and Lender shall promptly refund any excess fluids to Borrower. lmmcdiatuly prior to a foreclosure sale of the Property or its acquisition by Lander, Borrower's account shall be credited 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 bo applied by Lender as follows: First, to the mortgage insuratucc prexrniin to be pnid by Lender to the Secretary or to the monthly charge by die Secretary instead of the monthly mongagu insurance premium; Second, to any taxes, special assessments, leasehold payments or ground rents, and fire, flood and other hazard insurance prom runts, as required; ;Third, to interest due under the Note; Fourth, to amortization of the principal of the Kotc; 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 subsequendy crocted, against any hazards, casualties, and contingencies, including fire, for which Lender requires insurance. 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 required by the Secretary. All insurance shall be carried with companies approved by Lender. The insurance policies and any renewals shall be held by Lender and shall include loss payable clat>ves in favor of, and in a form acceptable to, Lender. In the event of loss, Borrower shall give Lender immediate notice by mail. Lender may make proof of loss if not made promptly 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 insurance proceeds may be applied by Lender, at its option, either (a) to the reduction of the indebtedness under the Note and this Security Instrument, first to any delinquent amounts applied in the order in paragraph 3, and then Co 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 of Trust -NE 0451108083 VMP p 4/96 Wolters Kluw or Financial services VM P4 R(NE) (1105) Page 3 of 10