21. Subject to any rights of prior incumbrancers in relation thereto, the housing authority may give a good discharge for any money payable under any policy of insurance on the affordable dwelling whether created by it or assigned to it, and—

(a) subject to paragraph (b), so much of such money as exceeds the affordable dwelling equity shall be dealt with by the housing authority as if it were the proceeds of a sale of the affordable dwelling, and

(b) the housing authority may require any money received under such or other insurance of the affordable dwelling to be applied—

(i) by the homeowner in making good loss or damage covered by the insurance, or

(ii) in or towards the redemption of the affordable dwelling equity.