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Lend.er may, at any time, collect and hold amounts for Escrow Items in an aggregate amount not to exceed the meximum �mount that may be requtred for Borrower's escrow account under the Real Estate Settlement Procedures Act of 1974, 12 U.S.C. � 2601 gt se°• 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 unantic�ated 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 permkted to be held by RESPA, Lender shall account �"' to Borrower for the excess iunds as requi�ed by RESPA. If the amounts of (unds held by Le�der at any time are not sufficient to ry'.,'',1 : pay the Escrow Items when due, Lender may notify the Borrower and requke BoROwer to make up the shortage as permitted by � RESPA. The Escrow Funds are pledged as additional security for all sums secured by this Security Instrument. If Bo►rower tenders Q to Lender the fuil payment of all such sums, Borrower's account shall be credked wRh the balance remaining for all installment Q% items (a), (b), and (c) and any mortgage insurance premium instaiknent that Lender has not become oblipated to pay to the Secretary, and Lender shell promptly refund any excess funds to BoROwer. Immedfately prior to s foreclosure sale of the Property or Rs acquiskion by Lender, Borrower's account shall be credited wlth any balance remaintng for all hstalhnents for Rems (a), (b), and (c). 3. Applicatlon of Payments. All payments under Paragraphs 1 and 2 shall be applied by Lender as tollows: First, to the mortgage insurance premN�m to be paid by Lender to the Secretary or to the monthly charge by the Secretary instead of the monthy mortgage insurence pr�nium; S@C011d, to any taxes, speclal assessments, leasehold payments or ground rents, and fire, �lood end other hazard hsurance premiums, es required; Thi�d, to interest due under the Note; Fourth, to emortization of the principei of the Note; and Fifth, to late charges due under the Note. 4. Fire, Flood and Other Hazard Insurance. Borrower shall Msure all knprovements on the Property, whether now in existence or subsequenty erected, against any hazards, casuaRies, and contingencies, including fire, for wh�h Lender requires insurance. This insurance shall be meintained in the amounts and for the periods that Lender requlres. 8orrower shall also insure all improvements on the Property, whether now In existence or subsequently erected, against loss by tloods to the extent required by the Secretary. All insurance shall be canied wfth companies approved by Lender. The insurance policies and any renewals shall be held by Lender and shall include loss payable clauses in iavor of, and in a form acceptable to, Lender. In the event of loss, Borrower shall gNe Lender immediate not�e by mail. Lender may make proof of loss if not made promptly by Borrower. Each insurance company concemed is hereby authorized and dkected 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, flrst to any delinquent amounts applied in the order in Paragraph 3, and then to prepayment of principal, or (b) to the restoration or repak of the damaged Property. My applfcatton of the proceeds to the princ�al shall not extend or postpone the due date of the monthly payments whfch are referred to in Paragraph 2, or change the amount of such payments. My excess insurance proceeds over an amount required to pay all outstanding �debtedness under the Note and this Security Instrument shali be paid to the entky legally entitled thereto. In the event of foreclosure of this Securfty Instrument or other transfer of title to the Property that exNnguishes the indebtedness, ell ripht, titte and interest of Borrower h and to hsurance polfcies h force shall pass to the purchaser. 5. Occupancy, Preservation, Maintenance and Protection of the Property; Borrower's Loan AppliCetiOn; Le88ehOIdB. eonower shall occupy, establish, and use the Property as BoROwer's principal residence within sbcty days after the execution of this Security Instrument (or wkhin sixty days of a leter sale or transfer oi the Property) and shall continue to occupy the Property as BoROwer's princ�al residence tor at least one year after the date of occupancy, unless Lender determines that requirement will cause undue hardship for Borrower, or unless extenuating ckcumstances exist which are beyond Borcower's control. Borrower shall not'rfy Lender of any extenuating ckcumstances. Borrower shall not commk waste or destroy, damage or substantially change the Property or allow the Property to deteriorate, reasonable wear and tear excepted. Lender may inspect the Property 'rf the Property is vacant or abandoned or the loan is in default. Lender may take reasonable action to protect and preserve such vacant or abandoned Property. Bonower shatl also be in defauft N Borrower, during the loan application process, gave materially false or inaccurate information or statements to Lender (or failed to provide Lender with any material information) in connection wkh the loan evidenced by the Note, including, but not limited to, representations conceming Borrower's occupancy of the Property as a principal residence. If this Security Instrument is on a leasehold, Borrower shall comply with the provisions of the lease. If BoROwer acquires fee titte to the Property, the leasehold and fee title shall not be merged uniess Lender agrees to the merger in wrfting. 6. Condemnation. The proceeds of any award or clakn for damages, dkect or consequential, in connection wkh any condemnatlon or other taking of any part of the Property, or for conveyance in place of condemnation, are hereby assigned and shall be paid to Lender to the extent oi the full amount of the indebtedness that remains unpaid under the Note and this Security Instrument. Lender shall apply such proceeds to the reduction of the indebtedness under the Note and this Securky Instrument, first to any delinquent amounts applied in the order provided in Paragraph 3, and then to prepayment ot principal. Any application of the proceeds to the principal shall not extend or postpone the due date of the monthly payments, which are refeRed to in Paragraph 2, or change the amount of such payments. My excess proceeds over an amount requked to pey all outstandhg indebtedness under the Note and this Securiry Instrument shall be paid to the entky legally entit�ed thereto. 7. Charges to Borrower and Protection of Lender's Rights in the Property. Borrower shall pay ai� govemmental or munfcipal charges, fines and knpositions that are not included in Paragraph 2. Borrower shall pay these obligations on time d�ectly to the entity which is owed the payment. If failure to pay wouid adversely affect Lenders k�terest in the Property, upon Lender's request Borrower shall promptly fumish to Lender rece(pts evidencing these payments. If Borrower fails to make these payments or the payments requFed by Paragraph 2, or (ails to perform any other covenants and agreements contained in thls Security Instrument, or there is a legal proceeding that may signH�antly a}fect Lender's rights in the Property (such as a proceeding in bankruptcy, for condemnation or to enforce Iaws or regulations), then Lender may do and pay whatever is necessary to protect the value of the Property and Lender's rights in the Property, including payment of taxes, hazard insurance and other items mentioned in Paragraph 2. FSEI3.LMO(1/98) Pay� 2 01 b �,� ;