Sec. 79.12. Special provisions regarding payment of real estate taxes and insurance

(a) Mortgagor shall have the right to choose a property insurer(s) subject to the mortgagee’s consent which shall not be unreasonably withheld. If the mortgagor fails to choose a property insurer(s) in a timely manner or if the insurer(s) is not acceptable to the mortgagee, then the mortgagee may insure the property with a carrier(s) of its choice in accordance with 11 NYCRR Part 227.

(b) Notwithstanding applicable State or Federal rule or law, the mortgagee may advance the funds necessary to pay property insurance premiums or real estate taxes under the following circumstances:

(1) the borrower's payment of such property charges is already more than 30 days overdue;

(2) the reverse mortgage loan has already been called due and payable; or

(3) a set aside account has been established and the taxing jurisdiction offers a discount for disbursements on a lump sum annual basis or imposes an additional charge or fee for installment disbursements and the mortgagee has chosen to take advantage of the discount for the borrower or avoid the additional charge or fee for installments.

If a set aside account has been established, then, to the extent possible, the mortgagee must reimburse itself from such fund before choosing option (2) or (3) (paragraph [2] or [3] of this subdivision).

(c) Notwithstanding applicable State or Federal rule or law, a mortgagee that chooses to advance funds in accordance with subsection (b) of this section may then reimburse itself in any of following individual or combined ways:

(1) by deducting necessary amounts from a line of credit;

(2) by withholding from one or more monthly payments otherwise due to the mortgagor no more than 25 percent of each such monthly payment, until such time as the amount paid is realized; or

(3) by adding the amount to the loan principal.

(d) If a line of credit payment method, distinct from the mortgagor’s set aside account, is established in conjunction with a reverse mortgage loan, to pay the mortgagor’s real estate taxes or insurance (hazard or flood, as necessary) on the real property securing the reverse mortgage loan, the mortgagee is to notify the mortgagor, in writing, of the amount of each deduction from and the amount remaining in the line of credit. Such notice must be given at least 90 calendar days prior to the due date of any payment for which insufficient funds are available.