Any amounts demanded above that is strictly at the discretion of the lender: they may have an internal policy of 30% down or it may be based upon the risk you present as a mortgagor.  

Have you considered obtaining a solid insurance policy instead?

At one time DHCS had the power to file liens but law and policy changed around 1993 which now requires the agency to have the DOJ file suit and obtain a judgment.

Typically a private lender like yourself will get a first lien on the property and  have it recorded, get added as a loss payee on homeowners insurance policy, and receive a promissory note from borrower.

The lender can call a title/escrow company of their choice to have them do a refi escrow, and have them issue a lender't title policy.  

When acting as a principal to a transaction, you may use any contract form you wish subject only to a sponsoring broker's policies, if any.   

Also take out an insurance policy on the property and list her as the 1st beneficiary.

Fire and dwelling is much cheaper than a commercial policy at least it seems that way in my area.I have had this discussion before in that insurance companies say it doesn't matter what you bought it for or what you think the market value is.

Escrow people use the words illegal when they mean "not our policy" all day long.

I'm from MA, so it may be different, but I was under the impression if you did that, you needed a workmens comp policy on each person doing the work like that.