If a borrower's reserve account for taxes and insurance is found to be short by more than one month's worth of deposits, what can the lender require?

When a borrower's reserve account for taxes and insurance is found to be short by more than one month's worth of required deposits, the lender is permitted to require the borrower to make up this shortage over a specified period of time. This practice allows borrowers to gradually address deficiencies without placing an undue financial burden on them.

The option where the borrower is required to make up the shortage over the next 12 months is correct, as it aligns with standard lending practices that allow for a manageable repayment plan. By allowing a full year to address the shortage, the lender can help ensure that the borrower maintains adequate reserves for future tax and insurance payments while allowing enough flexibility for the borrower's budget.

This approach is designed to support borrowers in keeping their accounts funded appropriately, preventing potential future issues that could arise from insufficient reserves, such as lapses in insurance coverage or unpaid taxes.