Model Fixed Rate Note Form

MODEL FIXED RATE NOTE FORM

(HOME EQUITY CONVERSION)

FHA Case No.

State of ¹

NOTE

___________________________________________________________________________

, 19

[Property Address]

1.DEFINITIONS

"Borrower" means each person signing at the end of this Note.

"Lender" means and its successors and assigns.

"Secretary" means the Secretary of Housing and Urban Development or his or

her authorized representatives.

2.BORROWER'S PROMISE TO PAY; INTEREST

In return for amounts to be advanced by Lender to or for the benefit

of Borrower under the terms of a Home Equity Conversion Loan Agreement

dated , 19 ("Loan Agreement"), Borrower promises to pay to the

order of Lender a principal amount equal to the sum of all Loan Advances

made under the Loan Agreement with interest. Interest will be charged on

unpaid or principal at the rate of per cent ( %) per year until

the full amount of principal has been paid. Accrued interest shall be

added to the principal balance as a Loan Advance at the end of each month.

3.PROMISE TO PAY SECURED

Borrower's promise to pay is secured by a mortgage, deed of trust or

similar security instrument that is dated the same date as this Note and

called the "Security Instrument." That Security Instrument protects the

Lender from losses which might result if Borrower defaults under this Note.

4.MANNER OF PAYMENT

(A)Time

Borrower shall pay all outstanding principal and accrued

interest to Lender upon receipt of a notice by Lender requiring immediate

payment in full, as provided in Paragraph 6 of this Note.

(B)Place

Payment shall be made at or at

such other place as Lender may designate in writing by notice to

Borrower.

(C)Limitation of liability

Borrower shall have no personal liability for payment of this

Note. Lender shall enforce the debt only through sale of the Property

covered by the Security Instrument ("Property"). If the Note is

assigned to the Secretary, the Borrower shall not be liable for any

difference between the mortgage insurance benefits paid to Lender and

the outstanding indebtedness, including accrued interest, owed by

Borrower at the time of the assignment.

5.BORROWER'S RIGHT TO PREPAY

A borrower receiving monthly payments under the Loan Agreement has the

right to pay the debt evidenced by this Note, in whole or in part, without

charge or penalty on the first day of any month. Otherwise, a Borrower has

the right to pay the debt evidenced by this Note, in whole or in part,

without charge or penalty after giving Lender two weeks notice. Any amount

of debt prepaid will first be applied to reduce the principal balance of

the Second Note described in Paragraph 10 of this Note and then to reduce

the principal balance of this Note.

All prepayments of the principal balance shall be applied by Lender as

follows:

First, to that portion of the principal balance representing

aggregate payments for mortgage insurance premiums;

Second, to that portion of the principal balance representing

aggregate payments for servicing fees;

Third, to that portion of the principal balance representing

accrued interest due under the Note; and

Fourth, to the remaining portion of the principal balance.

6.IMMEDIATE PAYMENT IN FULL

(A)Death or Sale

Lender may require immediate payment in full of all outstanding

principal and accrued interest if:

(i) A Borrower dies and the Property is not the principal

residence of at least one surviving Borrower, or

(ii) A Borrower conveys all of his or her title to the

Property and no other Borrower retains title to the Property

in fee simple or on a leasehold interest as set forth in 24

CFR 296.45(a).

(B)Other Grounds

Lender may require immediate payment in full of all

outstanding principal and accrued interest, upon approval by

an authorized representative of the Secretary, if:

(i) The Property ceases to be the principal residence of a

Borrower for reasons other than death and the Property is

not the principal residence of at least one other Borrower;

(ii) For a period of longer than 12 consecutive months, a

Borrower fails to physically occupy the Property because of

physical or mental illness and the Property is not the

principal residence of at least one other Borrower; or

(iii) An obligation of the Borrower under the Security

Instrument is not performed.

(C)Payment of Costs and Expenses

If Lender has required immediate payment in full, as described

above, the debt enforced through sale of the Property may include

costs and expenses including reasonable and customary attorney's fees

for enforcing this Note. Such fees and costs shall bear interest from

the date of disbursement at the same rate as the principal of this

Note.

(D)Trusts

Conveyance of a Borrower's interest in the Property to a trust

which meets the requirements of the Secretary, or conveyances of a

trust's interests in the Property to a Borrower, shall not be

considered a conveyance for purposes of this Paragraph. A trust shall

not be considered an occupant or be considered as having a principal

residence for purposes of this Paragraph.

7.WAIVERS

Borrower waives the rights of presentment and notice of dishonor.

"Presentment" means the right to require Lender to demand payment of

amounts due. "Notice of dishonor" means the right to require Lender to

give notice to other persons that amounts due have not been paid.

8.GIVING OF NOTICES

Unless applicable law requires a different method, any notice that

must be given to Borrower under this Note will be given by delivering it or

by mailing it by first class mail to Borrower at the property address above

or at a different address if Borrower has given Lender a notice of

Borrower's different address.

Any notice that must be given to Lender under this Note will be given

by first class mail to Lender at the address stated in Paragraph 4(B) or at

a different address if Borrower is given a notice of that different

address.

9.OBLIGATIONS OF PERSONS UNDER THIS NOTE

If more than one person signs this Note, each person is fully

obligated to keep all of the promises made in this Note. Lender may

enforce its rights under this Note only through sale of the Property.

10.RELATIONSHIP TO SECOND NOTE

(A)Second Note

Because Borrower will be required to repay amounts which the

Secretary may make to or on behalf of Borrower pursuant to Section

255(i)(A) of the National Housing Act and the Loan Agreement, the

Secretary has required Borrower to grant a Second Note to the

Secretary.

(B)Relationship or Secretary Payments to this Note

Payments made by the Secretary shall not be included in the

debt due under this Note unless:

(i)This Note is assigned to the Secretary; or

(ii) The Secretary accepts reimbursement by the Lender for all

payments made by the Secretary.

If the circumstances described in (i) or (ii) occur, then all payments

by the Secretary, including interest on the payments, shall be

included in the debt.

(C)Effect on Borrower

Where there is no assignment or reimbursement as described in

(B)(i) or (ii) and the Secretary makes payments to Borrower, then

Borrower shall not:

(i) Be required to pay amounts owed under this Note until the

Secretary has required payment in full of all outstanding

principal and accrued interest under the Second Note held by

Secretary, notwithstanding anything to the contrary in Paragraph

6 of this Note; or

(ii) Be obligated to pay interest or shared appreciation under

this Note at any time, whether accrued before or after the

payments by the Secretary, and whether or not accrued interest

has been included in the principal balance of this Note,

notwithstanding anything to the contrary in Paragraph 2 of the

Note or any Allonge to this Note.

11.SHARED APPRECIATION /2

If Borrower has executed a Shared Appreciation Allonge, the covenants

of the Allonge shall be incorporated into and supplement the covenants of

this Note as if the Allonge were a part of this Note.

BY SIGNING BELOW, Borrower accepts and agrees to the terms and

covenants contained in this Note. /3, /4

___________________________ (SEAL)

Borrower

___________________________ (SEAL)

Borrower

Footnotes for Model Fixed Rate Note Form

(Home Equity Conversion)

1.Either add the appropriate jurisdiction or substitute "Multistate."

Use "Commonwealth of" or "Territory of" if applicable.

2.The paragraph may be omitted if Lender does not offer a shared

appreciation mortgage.

3.Include any required or customary form of authentication.

4.The model note is a multistate form which requires adaptation for the

following jurisdictions:

a.Alaska. Add the Borrower's Post Office address, if different

from the property address.

b.Kansas. Delete "including reasonable and customary attorney's

fees" from Paragraph 6(C).

c.Kentucky. Paragraph 6(C) should be changed to read:

If Lender has required immediate payment in full, as

described above, the debt enforced through sale of the

property may include $500.00 for costs and expenses for

enforcing this Note. Such costs and expenses shall bear

interest from the date of disbursement at the same rate as

the principal of this Note.

d.Louisiana. Add the following text following the Borrower's

signature lines:

"NE VARIETUR" for identification with a mortgage with a

mortgage given before me on 19___.

_________________________________

Notary qualified in______

Parish, Louisiana

e.Puerto Rico. Mortgages and notes in Puerto Rico, and all riders

and allonges, shall be written in English and interlineated with

Spanish in the same manner as the FNMA/FHLMC forms for Puerto

Rico. Contact the Home Mortgage Division, Office of General

Counsel, at HUD Headquarters for guidance.

f.Virginia. The first sentence of Paragraph 7 should be changed to

read:

"Borrowers under this Note waive the rights of presentment

and notice of dishonor and waive the homestead exemption."

After the Borrower's signature lines, add:

This is to certify that this is the Note described in and secured

by a Deed of Trust dated ________________, 19___ on the Property

located in_____________________, Virginia.

My Commission expires:

_________________________

Notary Public