Minnesota Session Laws - 1985, Regular Session

  

                         Laws of Minnesota 1985 

                          CHAPTER 4-S.F.No. 54 
           An act relating to agriculture; providing a mechanism 
          to aid restructuring of existing farm loans; providing 
          for payment of interest on loans to farmers; 
          appropriating money. 
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
    Section 1.  [CITATION.] 
    Sections 3 to 10 may be cited as the "Minnesota emergency 
farm operating loans act." 
    Sec. 2.  [LEGISLATIVE FINDINGS, PUBLIC PURPOSE, SCOPE OF 
PROGRAM.] 
    The legislature finds that many farm families face extreme 
financial hardship or possible foreclosure in 1985 because of 
their inability to obtain farm operating loans at affordable 
rates of interest.  In many of these cases excessive interest 
rates reduce projected cash flow to a level where lending 
institutions refuse to renew a line of credit or demand the 
partial or total liquidation of remaining assets. 
    The legislature further finds that with relatively little 
public expense, and with the voluntary cooperation and 
assistance of Minnesota farm lenders, operating loans can be 
made to farm operators at an interest rate that will allow 
continuation of viable farm operations during 1985. 
    The legislature further finds that the use of money in the 
general fund for the purpose of assisting qualified farm 
operators is a public purpose and is necessary to protect the 
health, safety, and general welfare of the people of this state. 
    Sec. 3.  [DEFINITIONS.] 
    Subdivision 1.  [APPLICABILITY.] The definitions in this 
section apply to sections 3 to 9. 
    Subd. 2.  [CLASSIFIED FARM LOAN.] "Classified farm loan" 
means a farm loan that the lender determines to have a 
substantial risk of nonpayment, so that the lender is likely to 
sustain some loss if the borrower's paying capacity, net worth, 
or collateral is not improved.  The loan need not already have 
been classified by a bank examiner. 
    Subd. 3.  [COMMISSIONER.] "Commissioner" means the 
commissioner of commerce. 
    Subd. 4.  [COMMISSIONER'S INTEREST INDEX.] "Commissioner's 
interest index" means an interest rate that is 2.3 percent above 
the current lending rates of the federal intermediate credit 
bank to production credit associations as certified each month 
by the commissioner.  
    Subd. 5.  [FARMER.] "Farmer" means a state resident 
individual, or a domestic family farm corporation defined in 
Minnesota Statutes, section 500.24, engaged in the business of 
farming property in this state. 
    Subd. 6.  [FARMERS HOME ADMINISTRATION.] "Farmers home 
administration" means the farmers home administration of the 
United States Department of Agriculture. 
    Subd. 7.  [FARM LOAN.] "Farm loan" means a loan for 
operating expenses or the purchase of property for a farm 
business. 
    Subd. 8.  [LENDER.] "Lender" means a bank chartered by the 
state or federal government and a farm credit system lender. 
    Sec. 4.  [QUALIFICATION OF LENDERS.] 
    (a) To qualify for an interest payment under sections 4 to 
6, a lender must first sign an agreement with the commissioner 
to follow the guidelines. 
    (b) A lender shall not foreclose on a farm loan of a farmer 
that has received a loan under section 6, or has had a loan 
application submitted to the farmers home administration under 
section 5 until the lender certifies to the commissioner that 
the farmer's loans have been submitted to the farmers home 
administration for debt restructuring and that the loan debt 
restructuring has been approved or denied, or 90 days have 
expired, whichever is earlier. 
    (c) The commissioner shall not make an interest payment to 
a lender for a loan under this act if the lender has foreclosed 
the loan. 
    Sec. 5.  [INTEREST PAYMENT PROGRAM ON EXISTING FARM LOANS.] 
    Subdivision 1.  [COMMISSIONER PAYS INTEREST.] The 
commissioner shall pay the interest attributable to the first 60 
days, of a 120-day period, on the first $25,000 of operating 
farm loans and the first $25,000 of ownership farm loans of each 
borrower submitted by a lender that signs an agreement under 
section 4 to the farmers home administration for loan guarantees 
and debt restructuring except as provided in section 7.  
    Subd. 2.  [INTEREST.] The interest to be paid is the amount 
that becomes attributable to the first 60-day period after the 
lender signs the agreement with the commissioner under section 4.
The amount to be paid is determined by the loan agreement 
between the lender and the borrower. 
    Subd. 3.  [CLASSIFIED FARM LOAN REVIEW.] During the first 
60 days of the 120-day period after the agreement with the 
commissioner in section 4 is signed, the lender must review all 
classified farm loans and determine which farm loans the lender 
will submit to the farmers home administration for loan 
guarantees and debt restructuring.  
    Subd. 4.  [LENDER-BORROWER AGREEMENT.] For each farm loan 
that the lender submits to the farmers home administration for 
loan guarantees and debt restructuring, the lender and the 
borrower of the farm loan must sign an agreement.  The agreement 
must:  
    (1) state that the lender has agreed with the commissioner 
not to foreclose on farm loans submitted as specified in section 
4; 
    (2) state that the commissioner will pay the interest 
attributable to the eligible portion of the farm loan submitted 
to the farmers home administration for the first 60 days of the 
120-day period if the lender qualifies for state interest 
payment; 
    (3) state that the borrower is not liable for interest paid 
by the commissioner; 
    (4) provide that if the lender qualifies for state interest 
payment the lender will assume responsibility for the interest 
attributable to the eligible portion of the farm loan submitted 
and the borrower is not liable for the interest except as 
provided in clause (5); and 
    (5) provide that if the borrower agrees to have the farm 
loan submitted and the farmers home administration guarantees 
the loan, the lender may add the interest attributable to the 
second 60 days of the period to the principal of the borrower's 
farm loan. 
    Subd. 5.  [PAYMENT APPLICATION.] The lender must apply to 
the commissioner for the 60-day state interest payment on a farm 
loan that is submitted to the farmers home administration.  The 
lender must give the commissioner evidence of the farm loan 
submitted to the farmers home administration guaranteed loan 
program and application for the farmers home administration 
approved lenders program.  A lender that complies with this 
section is qualified to receive payment from the commissioner. 
    Sec. 6.  [INTEREST PAYMENT PROGRAM ON NEW FARM OPERATING 
LOANS.] 
    Subdivision 1.  [APPLICATION; FARMER CRITERIA.] A farmer 
may apply to a lender for a farm operating loan on which the 
state will pay part of the interest.  To be eligible for the 
state payment, the farmer must have a debt to asset ratio 
greater than 50 percent and must not have a positive cash flow 
at the commissioner's interest index rate. 
    Subd. 2.  [LOAN CRITERIA.] (a) To be eligible for the state 
interest payment, the farm operating loan must: 
    (1) be made to a farmer at an interest rate between seven 
and ten percent per year; 
    (2) be due and payable by March 1, 1986, after it is made; 
    (3) be for operating expenses of the farm business; and 
    (4) be made to a farmer that shows a positive cash flow at 
the reduced interest rate, demonstrates a reasonable chance of 
obtaining debt restructuring necessary to achieve a positive 
cash flow, or shows the ability to repay the operating loan. 
    (b) The lender may use additional criteria in determining 
whether to make a farm operating loan to a farmer.  
    (c) The lender must encourage the farmer to participate in 
the vocational adult farm business management program.  The 
lender must agree to offer to pay enrollment fees, less the 
amount of a locally available reduction in or subsidy to fees 
ordinarily paid by the enrollee, for loan recipients who wish to 
enroll and participate in a vocational adult farm business 
management program or equivalent.  A lender is not required to 
pay farm management program enrollment fees for more than one 
farmer per loan. 
    Subd. 3.  [LOAN SUBMISSION.] The lender must submit to the 
commissioner all farm operating loans made by the lender for 
which the lender requests the state to pay part of the interest. 
The lender must certify that the approved farm operating loan 
has been submitted to the farmers home administration for any 
loan guarantee programs that are available.  The commissioner 
must review the loan within five days after receipt.  The 
commissioner may not pay interest on loans submitted after 
December 31, 1985. 
    Subd. 4.  [PAYMENT AMOUNT.] The amount of interest paid by 
the state must be two-thirds of the amount of interest foregone 
by the lender as a result of the lender making the loan at an 
interest rate less than the commissioner's interest index.  The 
interest is payable on the unpaid principal of the first $75,000 
of the loan, except as provided in section 7.  The maximum 
interest payment per farmer may not exceed $3,750.  The 
commissioner shall make payments beginning January 1, 1986, and 
pay all interest due by March 1, 1986. 
    Sec. 7.  [MAXIMUM LOAN AMOUNTS.] 
    Lenders may not receive interest payments on loans under 
sections 5 and 6 to a single farmer for a loan principal amount 
greater than $100,000 and the principal for a loan under section 
6 may not exceed $75,000. 
    Sec. 8.  [FORMS AND GUIDELINES.] 
    (a) Notwithstanding Minnesota Statutes, chapter 14, the 
commissioner shall adopt and provide guidelines to administer 
sections 4 to 6 and the forms to be submitted by a lender under 
sections 5 and 6.  The forms under sections 5 and 6 constitute 
an application form for interest payment. 
    (b) The commissioner shall present a report to the senate 
agriculture and natural resources committee and the house of 
representatives agriculture committee containing the guidelines, 
when adopted.  
    (c) On April 15, 1985, and every third month afterwards 
until January 15, 1986, the commissioner shall report to the 
chairpersons of the agriculture and appropriations committees of 
the house of representatives and the agriculture and natural 
resources and finance committees of the senate on the 
implementation and economic impact of this act.  In the 
quarterly report the commissioner shall describe the current 
economic situation for agricultural lending in the state economy.
    (d) By April 15, 1986, the commissioner must report to the 
governor and the legislature on the overall effectiveness and 
efficiency of this act. 
    Sec. 9.  [PENALTIES.] 
    A lender or farmer that willfully or intentionally 
misrepresents farm operating expenses or other required 
information, or misuses money obtained under this act, is guilty 
of fraud and subject to the penalties for using fraud to obtain 
credit under Minnesota Statutes, section 609.82.  An application 
presented to the commissioner as provided under sections 4 to 6 
may be deemed to be correct and accurate without further audit 
or substantiation. 
    Sec. 10.  [APPROPRIATION.] 
    $25,050,000 is appropriated from the general fund to the 
commissioner of commerce for the following purposes: 
(a) For payment of interest on existing   
farm loans under section 5, to be  
available until June 30, 1986                      $ 9,200,000 
(b) For payment of interest on new  
farm operating loans under section 6, 
to be available until June 30, 1986                 15,800,000 
(c) For administration of sections 
4 to 6, to be available until 
June 30, 1986                                           50,000 
(d) If the appropriation for  
paragraph (b) is insufficient 
the appropriation for paragraph (a) 
is available for it. 
    Sec. 11.  [REPEALER.] 
    Sections 1 to 9 are repealed effective July 1, 1986.  
    Sec. 12.  [EFFECTIVE DATE.] 
    This act is effective the day following final enactment. 
    Approved March 5, 1985