HF 2796

as introduced - 81st Legislature (1999 - 2000) Posted on 12/15/2009 12:00am

  1.1                          A bill for an act 
  1.2             relating to agricultural real estate; requiring 
  1.3             certain disclosures to a third party signer of a debt 
  1.4             instrument; defining terms; providing a remedy; 
  1.5             proposing coding for new law in Minnesota Statutes, 
  1.6             chapter 47. 
  1.7   BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.8      Section 1.  [47.22] [REQUIRED DISCLOSURE TO THIRD-PARTY 
  1.9   DEBTORS.] 
  1.10     Subdivision 1.  [WRITTEN DISCLOSURE REQUIRED.] A financial 
  1.11  institution may not obtain the signature of a third party on a 
  1.12  debt instrument relating to farm real estate or a farm operating 
  1.13  loan without first giving the third party a clear written 
  1.14  disclosure of the nature and extent of the obligations that the 
  1.15  third party would be assuming by signing the debt instrument. 
  1.16     Subd. 2.  [REMEDY.] A financial institution or its assignee 
  1.17  or successor may not enforce a debt instrument against a third 
  1.18  party whose signature was obtained in violation of subdivision 1.
  1.19     Subd. 3.  [DEFINITIONS.] (a) The definitions in this 
  1.20  subdivision apply to this section. 
  1.21     (b) "Debt instrument" means a promissory note, mortgage, 
  1.22  security agreement, bond, or guaranty. 
  1.23     (c) "Farm loan" means a loan for the purpose of financing 
  1.24  or refinancing the purchase of a farm or for farm operating 
  1.25  expenses made to a borrower engaged in farming as defined in 
  1.26  section 500.24, subdivision 2, or the raising of poultry, 
  2.1   whether the borrower is a family farm, family farm corporation, 
  2.2   authorized farm corporation, authorized livestock farm 
  2.3   corporation, family farm partnership, or authorized farm 
  2.4   partnership, as those terms are defined in section 500.24, 
  2.5   subdivision 2. 
  2.6      (d) "Financial institution" means a bank, bank and trust, 
  2.7   trust company with banking powers, savings bank, savings 
  2.8   association, or credit union organized under the laws of this 
  2.9   state or the United States; a Minnesota host state branch of an 
  2.10  out-of-state state-chartered bank as provided for in section 
  2.11  49.411; an industrial loan and thrift under chapter 53; a 
  2.12  regulated lender under chapter 56; an insurance company; the 
  2.13  rural finance authority; or a federal farm service agency. 
  2.14     (e) "Nature and extent of obligations" means: 
  2.15     (1) the principal amount of the debt instrument; 
  2.16     (2) the rate of interest and the method by which it is 
  2.17  calculated; 
  2.18     (3) late payment charges, collection costs, and other 
  2.19  charges that may be triggered by default or delinquency; 
  2.20     (4) the liability of the third party for future advances, 
  2.21  set-off rights, renewals, or other related or unrelated debts of 
  2.22  the principal borrower or borrowers; 
  2.23     (5) the rights of the lender to collect the debt from the 
  2.24  third party or from the third party's property upon default 
  2.25  without first attempting to collect from any principal borrower 
  2.26  or attempting to exercise remedies with respect to collateral 
  2.27  securing the debt; 
  2.28     (6) whether and the extent to which the lender is required 
  2.29  to notify the third party of any present or future circumstances 
  2.30  regarding the loan or the principal borrowers that may affect 
  2.31  the third party's potential obligations under the debt 
  2.32  instrument; and 
  2.33     (7) the possible effect of the third party's potential 
  2.34  obligations under the debt instrument upon the third party's 
  2.35  creditworthiness for other purposes.