N.M. Stat. § 48-7-10
Where there is a mortgage of a single family residence securing a loan and where there are no federal regulations to the contrary, the mortgagor may require the proceeds of any insurance policy, which are payable by reason of damage to or destruction of the mortgaged property and which would otherwise be payable to the mortgagee, to be held jointly by the mortgagor and the mortgagee in an escrow account and to be applied toward the repair or replacement of the damaged property. Provided that it shall first be reasonably established to the satisfaction of the mortgagee that such repair or replacement will restore the mortgaged property to a value at least equal to the balance remaining on the obligation, at the time the damage or destruction occurred, secured by the mortgage.
NMS § 48-7-10