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the repayment of any future advances, with interest thereon, made to Borrower by Lender pursuant to Section 24 of this Deed of Trust ("Future Advances"). Borrower covenants that Borrower is lawfully seised ofthe estate conveyed by this Deed of Trust and has the right to grant and convey the property, that with the exception of prior deeds oftrust securing loans in the principal amounts of$201,440 for the purchase of the Property and $60,558, the Property is unencumbered, and that Borrower will warrant and defend generally the title to the Property against all claims and demands, subject to any declarations, easements or restrictions listed in a schedule of exceptions to coverage in any title insurance policy insuring Lender's interest ofthe Property. Borrower and Lender covenant and agree as follows: 1. Payment of Principal and Interest. Borrower shall promptly pay when due the principal and interest evidenced by the Note and the principal of and interest on any Future Advances secured by this Deed of Trust as stated in Section 24. 2. Funds for Taxes and Insurance. Subject to applicable law, a written waiver by Lender, or the requirements of deed oftrust prior to this Deed of Trust, Borrower shall pay to the holder ofthe prior deed of trust in a timely fashion and as required by the holder ofthe prior deed oftrust all yearly taxes and assessments which may attain priority over this Deed ofTrust, plus all yearly premium installments for hazard insurance, general liability insurance, and mortgage insurance, if any, all as reasonably estimated initially and from time to time by Lender on the basis ofassessments and bills and reasonable estimates of these amounts. Any funds so collected in advance of payment by the holder ofthe prior deed shall be held in an institution the deposits or accounts of which are insured or guaranteed by a Federal or State agency. All funds so held shall be used to pay taxes, assessments and insurance premiums. Borrower shall provide to Lender, without charge, a copy of the annual accounting ofthe funds provided by the holder of the prior deed showing credits and debits to the funds and the purpose for which each debit to the funds was made. The funds are pledged as additional security for the sums secured by the prior deed oftrust. If the amount of funds held by the holder ofthe prior deed oftrust becomes insufficient to pay taxes, assessments and insurance premiums as they fall due. Borrower shall pay to the holder of the prior deed oftrust any amount necessary to make up the deficiency within thirty (30)days from the date notice is mailed by such holder to Borrower requesting payment on these amounts. 3. Application of Payments. Unless applicable law provides otherwise, all payments received by Lender under the Note and Sections 1 and 2 hereof shall be applied by Lender in the following order to amounts owed by Borrower: A. First, in payment of interest on any Future Advances made pursuant to Section 24 ofthis Deed of Trust. 2