Model Second Mortgage Form

MODEL SECOND MORTGAGE FORM

(HOME EQUITY CONVERSION)

[See Instructions Attached]

FHA Case No.

____________________[Space Above This Line For Recording Data]_____________

SECOND MORTGAGE

THIS MORTGAGE ("Security Instrument" or "Second Security Instrument") is

given on , 19 . The mortgagor is whose

address is ("Borrower"). This Security Instrument

is given to the Secretary of Housing and Urban Development, whose address

is 451 Seventh Street, S.W., Washington, DC 20410 ("Lender" or

"Secretary"). Borrower has agreed to repay to Lender amounts which Lender

is obligated to advance, including future advances, under the terms of a

Home Equity Conversion Loan Agreement dated the same date as this Security

Instrument ("Loan Agreement"). The agreement to repay is evidenced by

Borrower's Note dated the same date as this Security Instrument ("Second

Note"). This Security Instrument secures to Lender: (a) the repayment of

the debt evidenced by the Second Note, with interest, and all renewals,

extensions and modifications of the Note, up to a maximum principal amount

of Dollars (U.S. $ ); (b) the payment of all other sums, with

interest, advanced under paragraph 5 to protect the security of this

Security Instrument or otherwise due under the terms of this Security

Instrument; and (c) the performance of Borrower's covenants and agreements

under this Security Instrument and the Second Note. For this purpose,

Borrower does hereby mortgage, warrant, grant and convey to Lender, with

power of sale, the following described property located in

County, Michigan:

which has the address of ,

[Street] [City]

[State] [Zip Code]

("Property Address");

TOGETHER WITH all the improvements now or hereafter erected on the

property, and all easements, rights, appurtenances, and fixtures now or

hereafter a part of the property. All replacements and additions shall

also be covered by this Security Instrument. All of the foregoing is

referred to in this Security Instrument as the "Property."

BORROWER COVENANTS that Borrower is lawfully seised of the estate

hereby conveyed and has the right to mortgage, grant and convey the

Property and that the Property is only encumbered by a First Security

Instrument given by Borrower and dated the same date as this Security

Instrument ("First Security Instrument"). Borrower warrants and will

defend generally the title to the Property against all claims and demands,

subject to any encumbrances of record.

THIS SECURITY INSTRUMENT combines uniform covenants for national use

and non-uniform covenants with limited variations by jurisdiction to

constitute a uniform security instrument covering real property.

UNIFORM COVENANTS. Borrower and Lender covenant and agree as follows:

1. Payment of Principal and Interest. Borrower shall pay when due

the principal of, and interest on, the debt evidenced by the

Second Note.

2. Payment of Property Charges. Borrower shall pay all property

charges consisting of taxes, ground rents, flood and hazard insurance

premiums, and special assessments in a timely manner, and shall provide

evidence of payment to Lender, unless Lender pays property charges by

withholding funds from monthly payments due to the Borrower or by charging

such payments to a line of credit as provided for in the Loan Agreement.

Lender may require Borrower to pay specified property charges directly to

the party owed payment even though Lender pays other property charges as

provided in this Paragraph.

3. Fire, Flood and Other Hazard Insurance. Borrower shall insure all

improvements on the Property, whether now in existence or subsequently

erected, against any hazards, casualties, and contingencies, including

fire. This insurance shall be maintained in the amounts, to the extent and

for the periods required by Lender. 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 Lender. The

insurance policies and any renewals shall be held by Lender and shall

include loss payable clauses 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 to Lender, instead of to Borrower and Lender jointly.

Insurance proceeds shall be applied to restoration or repair of the damaged

Property, if the restoration or repair is economically feasible and

Lender's security is not lessened. If the restoration or repair is not

economically feasible or Lender's security would be lessened, the insurance

proceeds shall be applied first to the reduction of any indebtedness under

the Second Note and this Security Instrument. Any excess insurance

proceeds over an amount required to pay all outstanding indebtedness under

the Second Note and this Security Instrument shall be paid to the entity

legally entitled thereto.

In the event of foreclosure of this Security Instrument or other

transfer of title to the Property that extinguishes the indebtedness, all

right, title and interest of Borrower in and to insurance policies in force

shall pass to the purchaser.

4. Occupancy, Preservation, Maintenance and Protection of the

Property; Borrower's Loan Application; Leaseholds. Borrower shall occupy,

establish, and use the Property as Borrower's principal residence after the

execution of this Security Instrument and Borrower (or at least one

Borrower, if initially more than one person are Borrowers) and shall

continue to occupy the Property as Borrower's principal residence for the

term of the Security Instrument. "Principal residence" shall have the same

meaning as in the Loan Agreement.

Borrower shall not commit waste or destroy, damage or substantially

change the Property or allow the Property to deteriorate, reasonable wear

and tear excepted. Borrower shall also be in default if 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 with the loan evidenced by the Note,

including, but not limited to, representations concerning 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 Borrower acquires fee title to the Property, the leasehold

and fee title shall not be merged unless Lender agrees to the merger in

writing.

5. Charges to Borrower and Protection of Lender's Rights in the

Property. Borrower shall pay all governmental or municipal charges, fines

and impositions that are not included in Paragraph 2. Borrower shall pay

these obligations on time directly to the entity which is owed the payment.

If failure to pay would adversely affect Lender's interest in the Property,

upon Lender's request Borrower shall promptly furnish to Lender receipts

evidencing these payments. Borrower shall promptly discharge any lien

which has priority over this Security Instrument in the manner provided in

Paragraph 12(c).

If Borrower fails to make these payments or the property charges

required by Paragraph 2, or fails to perform any other covenants and

agreements contained in this Security Instrument, or there is a legal

proceeding that may significantly affect Lender's rights in the Property

(such as a proceeding in bankruptcy, for condemnation or to enforce laws 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.

To protect Lender's security in the Property, Lender shall advance and

charge to Borrower all amounts due to the Secretary for the Mortgage

Insurance Premium as defined in the Loan Agreement as well as all sums due

to the loan servicer for servicing activities as defined in the Loan

Agreement. Any amounts disbursed by Lender under this Paragraph shall

become an additional debt of Borrower as provided for in the Loan Agreement

and shall be secured by this Security Instrument.

6. Inspection. Lender or its agent may enter on, inspect or make

appraisals of the Property in a reasonable manner and at reasonable times

provided that Lender shall give the Borrower notice prior to any inspection

or appraisal specifying a purpose for the inspection or appraisal which

must be related to Lender's interest in the Property. If 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 without

notice to the Borrower.

7. Condemnation. The proceeds of any award or claim for damages,

direct or consequential, in connection with any condemnation or other

taking of any part of the Property, or for conveyance in place of

condemnation, shall be paid to Lender. The proceeds shall be applied first

to the reduction of any indebtedness under the Second Note and this

Security Instrument. Any excess proceeds over an amount required to pay

all outstanding indebtedness under the Second Note and this Security

Instrument shall be paid to the entity legally entitled thereto.

8. Fees. Lender may collect fees and charges authorized by the

Secretary for the Home Equity Conversion Mortgage Insurance Program.

9.Grounds for Acceleration of Debt.

(a) Due and Payable. Lender may require payment in full of all

sums secured by this Security Instrument if:

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

residence of at least one surviving Borrower; or

(ii) All of a Borrower's title in the Property (or his or

her beneficial interest in a trust owning all or part of the

Property) is sold or otherwise transferred and no other

Borrower retains title to the Property in fee simple or

retains a leasehold under a lease for less than 99 years

which is renewable or a lease having a remaining period of

not less than 50 years beyond the date of the 100th birthday

of the youngest Borrower (or retaining a beneficial interest

in a trust with such an interest in the Property); or

(iii) 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;

or

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

Borrower fails to occupy the Property because of physical or

mental illness and the Property is not the principal

residence of at least one other Borrower; or

(v) An obligation of the Borrower under this Security

Instrument is not performed.

(b) Notice to Lender. Borrower shall notify the Lender whenever

any of the events listed in Paragraph 9(a)(ii)-(v) occur.

(c) Notice to Borrower. Lender shall notify Borrower whenever

the loan becomes due and payable under Paragraph 9(a)(ii)-(v).

Lender shall not have the right to commence foreclosure until

Borrower has had 30 days after notice to either:

(i) Correct the matter which resulted in the Security

Instrument coming due and payable; or

(ii) Pay the balance in full; or

(iii) Sell the Property for the lesser of the balance or

95% of the appraised value and apply the net proceeds of the

sale toward the balance; or

(iv) Provide the Lender with a deed in lieu of foreclosure.

(d) Trusts. Conveyance of a Borrower's interest in the Property

to a trust which meets the requirements of the Secretary, or

conveyance of a trust's interests in the Property to a Borrower,

shall not be considered a conveyance for purposes of this

Paragraph 9. A trust shall not be considered an occupant or be

considered as having a principal residence for purposes of this

Paragraph 9.

10. No Deficiency Judgments. Borrower shall have no personal

liability for payment of the debt secured by this Security Instrument.

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

not be permitted to obtain a deficiency judgment against Borrower if the

Security Instrument is foreclosed.

11. Reinstatement. Borrower has a right to be reinstated if Lender

has required immediate payment in full. This right applies even after

foreclosure proceedings are instituted. To reinstate this Security

Instrument, Borrower shall correct the condition which resulted in the

requirement for immediate

payment in full. Foreclosure costs and reasonable and customary attorney's

fees and expenses properly associated with the foreclosure proceeding shall

be added to the principal balance. Upon reinstatement by Borrower, this

Security Instrument and the obligations that it secures shall remain in

effect as if Lender had not required immediate payment in full. However,

Lender is not required to permit reinstatement if: (i) Lender has accepted

reinstatement after the commencement of foreclosure proceedings within two

years immediately preceding the commencement of a current foreclosure

proceeding, (ii) reinstatement will preclude foreclosure on different

grounds in the future, or (iii) reinstatement will adversely affect the

priority of the Security Instrument.

12.Lien Status.

(a)Modification.

Borrower agrees to extend this Security Instrument in

accordance with this Paragraph 12(a). If Lender determines that

the original lien status of the Security Instrument is

jeopardized under state law (including but not limited to

situations where the amount secured by the Security Instrument

equals or exceeds the maximum principal amount stated or the

maximum period under which loan advances retain the same lien

priority initially granted to loan advances has expired) and

state law permits the original lien status to be maintained for

future loan advances through the execution and recordation of one

or more documents, then Lender shall obtain title evidence at

Borrower's expense. If the title evidence indicates that the

property is not encumbered by any liens (except the First

Security Instrument described in Paragraph 13(a), this Second

Security Instrument and any subordinate liens that the Lender

determines will also be subordinate to any future loan advances),

Lender shall request the Borrower to execute any documents

necessary to protect the lien status of future loan advances.

Borrower agrees to execute such documents. If state law does not

permit the original lien status to be extended to future loan

advances, Borrower will be deemed to have failed to have

performed an obligation under this Security Instrument.

(b)Tax Deferral Programs.

Borrower shall not participate in a real estate

tax deferral program, if any liens created by the tax deferral are not

subordinate to this Security Instrument.

(c)Prior Liens.

Borrower shall promptly discharge any lien which has

priority over this Security Instrument unless Borrower: (a)

agrees in writing to the payment of the obligation secured by the

lien in a manner acceptable to Lender; (b) contests in good faith

the lien by, or defends against enforcement of the lien in, legal

proceedings which in the Lender's opinion operate to prevent the

enforcement of the lien or forfeiture of any part of the

Property; or (c) secures from the holder of the lien an agreement

satisfactory to Lender subordinating the lien to all amounts

secured by this Security Instrument. If Lender determines that

any part of the Property is subject to a lien which may attain

priority over this Security Instrument, Lender may give Borrower

a notice identifying the lien. Borrower shall satisfy the lien or

take one or more of the actions set forth above within 10 days of

the giving of notice.

(a) Second Security Instrument. In order to secure payments

which the Secretary may make to or on behalf of Borrower pursuant

to Section 255(i)(1)(A) of the National Housing Act and the Loan

Agreement, the Secretary has required Borrower to execute a

Second Note and this Second Security Instrument. Borrower also

has executed a First Note and First Security Instrument.

(b) Relationship of First and Second Security Instruments.

Payments made by the Secretary shall not be included in the debt

under the First Note unless:

(i) The First Security Instrument is assigned to the

Secretary; or

(ii) The Secretary accepts reimbursement by the holder of

the First Note 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

but excluding late charges paid by the Secretary, shall be

included in the debt under the First Note.

(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 the First Note,

or pay any rents and revenues of the Property under

Paragraph 19 to the holder of the First Note or a receiver

of the Property, until the Secretary has required payment in

full of all outstanding principal and accrued interest under

the Second Note; or

(ii) Be obligated to pay interest or shared appreciation

under the First 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

under the First Note.

(d) No Duty of the Secretary. The Secretary has no duty to the

holder of the First Note to enforce covenants of the Second

Security Instrument or to take actions to preserve the value of

the Property, even though the holder of the First Note may be

unable to collect amounts owed under the First Note because of

restrictions in this Paragraph 13.

(e) Restrictions on Enforcement Notwithstanding anything else in

this Security Instrument, the Borrower shall not be obligated to

comply with the covenants hereof, and Paragraph 19 shall have no

force and effect, whenever there is no outstanding balance under

the Second Note.

14. Forbearance by Lender Not a Waiver. Any forbearance by Lender in

exercising any right or remedy shall not be a waiver of or preclude the

exercise of any right or remedy.

15. Successors and Assigns Bound; Joint and Several Liability.

Borrower may not assign any rights or obligations under this Security

Instrument or the Second Note, except to a trust that meets the

requirements of the Secretary. Borrower's covenants and agreements shall

be joint and several.

16. Notices. Any notice to Borrower provided for in this Security

Instrument shall be given by delivering it or by mailing it by first class

mail unless applicable law requires use of another method. The notice

shall be directed to the Property Address or any other address all

Borrowers jointly designate. Any notice to the Secretary shall be given by

first class mail to the HUD Field Office with jurisdiction over the

Property or any other address designated by the Secretary. Any notice

provided for in this Security Instrument shall be deemed to have been given

to Borrower or Lender when given as provided in this Paragraph 16.

17. Governing Law; Severability. This Security Instrument shall be

governed by Federal law and the law of the jurisdiction in which the

Property is located. In the event that any provision or clause of this

Security Instrument or the Second Note conflicts with applicable law, such

conflict shall not affect other provisions of this Security Instrument or

the Second Note which can be given effect without the conflicting

provision. To this end the provisions of this Security Instrument and the

Second Note are declared to be severable.

18. Borrower's Copy. Borrower shall be given one conformed copy of

the Note and this Security Instrument.

NON-UNIFORM COVENANTS. Borrower and Lender further covenant and agree

as follows:

19. Assignment of Rents. [Use this language unless prohibited by

state law.] Borrower unconditionally assigns and transfers to Lender all

the rents and revenues of the Property. Borrower authorizes Lender or

Lender's agents to collect the rents and revenues and hereby directs each

tenant of the Property to pay the rents to Lender or Lender's agents.

However, prior to Lender's notice to Borrower of Borrower's breach of any

covenant or agreement in the Security Instrument, Borrower shall collect

and receive all rents and revenues of the Property as trustee for the

benefit of Lender and Borrower. This assignment of rents constitutes an

absolute assignment and not an assignment for additional security only.

If Lender gives notice of breach to Borrower: (a) all rents received

by Borrower shall be held by Borrower as trustee for benefit of Lender

only, to be applied to the sums secured by this Security Instrument; (b)

Lender shall be entitled to collect and receive all of the rents of the

Property; and (c) each tenant of the Property shall pay all rents due and

unpaid to Lender or Lender's agent on Lender's written demand to the

tenant.

Borrower has not executed any prior assignment of the rents and has

not and will not perform any act that would prevent Lender from exercising

its rights under this Paragraph 19, except as provided in the First

Security Instrument.

Lender shall not be required to enter upon, take control of or

maintain the Property before or after giving notice of breach to Borrower.

However, Lender or a judicially appointed receiver may do so at any time

there is a breach. Any application of rents shall not cure or waive any

default or invalidate any other right or remedy of Lender. This assignment

of rents of the Property shall terminate when the debt secured by this

Security Instrument is paid in full.

20. Foreclosure Procedure. [For illustration only. Needs state

adaptation as provided in the instructions attached.] If Lender requires

immediate payment in full under Paragraph 9, Lender may invoke the power of

sale and any other remedies provided in this Paragraph 20, including, but

not limited to, reasonable attorney's fees and costs of title evidence.

If Lender invokes the power of sale, Lender shall give notice of sale

to Borrower in the manner provided in Paragraph 16. Lender shall publish

and post the notice of sale, and the Property shall be sold in the manner

prescribed by applicable law. Lender or its designee may purchase the

Property at any sale. The proceeds of the sale shall be applied in the

following order: (a) to all expenses of the sale, including, but not

limited to, reasonable attorney's fees; (b) to all sums secured by this

Security Instrument; and (c) any excess to the person or persons legally

entitled to it.

[Add any state-specific provisions in accordance with the instructions

attached and HUD Handbook 4165.1 REV-1, Chapter 4.]

[Number as final paragraph.] Riders to this Security Instrument. If

one or more riders are executed by Borrower and recorded together with this

Security Instrument, the covenants of each such rider shall be incorporated

into and shall amend and supplement the covenants and agreements of this

Security Instrument as if the rider(s) were a part of this Security

Instrument. [Check applicable box(es).]

[ ] Condominium Rider [ ] Planned Unit Development

[ ] Shared Appreciation Rider [ ] Other [Specify]

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

in this Security Instrument and in any rider(s) executed by Borrower and

recorded with it.

Witnesses:

__________________________ ___________________________ (SEAL)

Borrower

__________________________ ___________________________ (SEAL)

Borrower

__________________[Space Below This Line For Acknowledgement]______________

Instructions for Model Second Mortgage Form (Home Equity Conversion)

HUD requires that a security instrument follow the form and content of the

approved FNMA/FHLMC security instrument for the jurisdiction, except where

HUD has determined that differences are needed to reflect HUD policy and

practice. The following explains those differences. Additional

instructions are found at Chapter 4, HUD Handbook 4165.1 and Chapter 6, HUD

Handbook 4235.1.

Language Preceding Uniform Covenants

Use FNMA/FHLMC language but:

a.Add a box for the FHA Case No. as shown on the Model Form.

b. For a Mortgage, delete the language beginning with "THIS MORTGAGE"

or "THIS DEED OF TRUST" through "covenants and agreements under this

Security Instrument and Note." Substitute the language shown on the

Model Form. The phrase "up to a maximum principal amount of Dollars

(U.S. $ )" should be omitted in jurisdictions where there is no

legal need to state the maximum principal amount in a mortgage or deed

of trust. If the phrase is used, the blank should be completed with

an amount equal to or greater than 150% of the maximum claim amount.

c. For a Deed of Trust, follow the instructions in "b" above, except

that the first three sentences of the Model Form must be further

revised to read as follows:

This DEED OF TRUST ("Security Instrument" or "Second Security

Instrument") is made on , 19 . The grantor [or

trustor] is ("Borrower"). The trustee is [the

HUD Field Office Manager or his designee] ("Trustee"). The

beneficiary is the Secretary of Housing and Urban Development,

whose address is 451 Seventh Street, S.W., Washington, D.C.

20410 ("Lender" or "Secretary").

d. For Colorado deeds of trust, Georgia security deeds, and Louisiana

mortgages the FNMA/FHLMC forms should be consulted for guidance

regarding the initial language of the Security Instrument, including

language describing a note for Louisiana.

e. For Maine and New York in which FNMA and FHLMC use "plain English"

forms, the format and language should be based on FNMA/FHLMC forms for

other states provided that the language is in conformity with

applicable law.

The Model Form uses the FNMA/FHLMC language for Michigan as an example.

The form may include variations to the standard language that have been

approved by FNMA and/or FHLMC.

Uniform Covenants

The form should designate the paragraphs preceding Paragraph 20 on

foreclosure procedures as "Uniform Covenants". The text of these

paragraphs must be used as presented in the Model Form without any change.

FNMA/FHLMC language may not be substituted. If change is needed to meet

requirements of state or local law or practice, written approval from HUD

is needed before the change is made.

Non-Uniform Covenants

The form should designate the paragraphs beginning with Paragraph 19 on

assignments of rents as "Non-Uniform Covenants."

a. The FNMA/FHLMC paragraph on foreclosure procedures will need

adaptation to reflect HUD policy. The Model Form contains an

adaptation of the FNMA/FHLMC language for Michigan as an example.

Following the phrase "If Lender requires immediate payment in full

under Paragraph 9" as shown in Paragraph 20 of the Model Form, the

mortgage should use the foreclosure procedures paragraph of the

current approved FNMA/FHLMC form (including language regarding payment

of costs such as attorney's fees) as a guide with any necessary

adaptation to conform to these instructions. Language in the

FNMA/FHLMC paragraph regarding notice and acceleration should be

omitted. For Maine and New York, Lenders should use foreclosure

language based on these instructions and other FNMA/FHLMC forts that

are not "plain English" forms provided that the language will

authorize foreclosure in conformity with applicable law. The mortgage

must include the Lender's right to a public sale of the Property,

including a power of sale if legally permissible in the jurisdiction

in which the property is located even if mortgages are usually

foreclosed through a judicial proceeding.

b. The paragraphs following Paragraph 20 should contain provisions

required to adapt the mortgage to the laws and practices of the

particular jurisdiction in which the Property is located. The text of

these paragraphs should be the same as the FNMA/FHLMC non-uniform

covenants for the jurisdiction in which the Property is located.

Changes to the FNMA/FHLMC paragraphs and additional material may be

included if needed to conform to requirements of state law or

practice. The paragraph entitled "Riders to this Security Instrument"

should be used as shown in the Model Form instead of as shown in the

FNMA/FHLMC forms.

c. Any special language or notices required by applicable law should

appear following the non-uniform covenants using the FNMA/FHLMC form

as a guide.

Signatures, etc.

Use the FNMA/FHLMC format at the end of the mortgage except that:

a. Witness lines may be omitted if state and local law does not

require witnesses for mortgages.

b. HUD does not require the Borrower's social security number to

appear on the mortgage.