The success of the protein folding process requires that the peptide chain find a structure that ensures the survival of its intramolecular H-bonds. In this work, we identify and model how water is hindered from invading and destroying the intramolecular H-bonds: a three-body protective association establishes itself when a hydrophobic residue approaches a pair of residues held by an amide-carbonyl H-bond. This proximity disrupts the water structure surrounding the backbone H-bond, driving water molecules away so they cannot solvate the backbone. These three-body contributions often compensate thermodynamically for concurrent two-body hydrophobic-polar mismatches. A previously-developed theoretical method to generate folding pathways is extended to reveal the role of three-residue correlations in stabilizing the collapse-inducing folding nucleus; successful computer runs exhibit their formation and how they protect and scaffold incipient secondary structure.