Minnesota Session Laws - 1987, Regular Session

  

                         Laws of Minnesota 1987 

                          CHAPTER 15-H.F.No. 1 
           An act relating to agriculture; extending and 
          financing the interest rate buy-down program; 
          establishing benefit limits; appropriating money; 
          amending Laws 1986, chapter 398, article 23, section 
          4, by adding a subdivision. 
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 

            FARM OPERATING LOAN INTEREST BUY-DOWN PROGRAM. 
    Section 1.  [DEFINITIONS.] 
    Subdivision 1.  [APPLICABILITY.] The definitions in this 
section apply to sections 1 to 7 and 10.  The definitions in 
this section also apply to sections 8 and 9 unless a different 
definition is provided in section 8. 
    Subd. 2.  [APPROVED ADULT FARM MANAGEMENT PROGRAM.] 
"Approved adult farm management program" means a farm management 
training program designed for persons currently engaged in 
farming that has been approved by the commissioner under section 
4, subdivision 3. 
    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 3.3 percent above 
the current lending rate of the Federal Intermediate Credit Bank 
to production credit associations as certified each month by the 
commissioner. 
    Subd. 5.  [ELIGIBLE BORROWER.] "Eligible borrower" means a 
farmer who applies to a lender for a farm operating loan and 
meets all qualifications established in section 2 and any 
further qualifications that may be established in the guidelines 
adopted by the commissioner under section 4, subdivision 1.  
     An eligible borrower must complete a loan application with 
a participating lender between January 1, 1987, and December 31, 
1987. 
    Subd. 6.  [FARM OPERATING LOAN.] "Farm operating loan" 
means an original, extended, or renegotiated loan or line of 
credit obtained by a farmer from a lender for the purpose of 
financing the operations of a farm.  A farm operating loan 
includes an open line of credit even though the maximum 
principal amount of the line of credit may not be drawn at any 
one time.  A farm operating loan eligible for interest rate 
buy-down must have a maturity date of June 30, 1988, or earlier. 
    Subd. 7.  [FARMER.] "Farmer" means a state resident or a 
domestic family farm corporation as defined in Minnesota 
Statutes, section 500.24, subdivision 2, operating a farm within 
the state. 
    Subd. 8.  [INTEREST RATE BUY-DOWN.] "Interest rate 
buy-down" means a reduction in the effective interest rate on a 
farm operating loan to an eligible borrower due to partial 
payment of interest costs by the commissioner and partial 
reduction of interest costs by the participating lender. 
    Subd. 9.  [LENDER.] "Lender" means a bank, a credit union, 
or a savings and loan association chartered by the state or 
federal government, a unit of the farm credit system, the 
Federal Deposit Insurance Corporation, or another financial 
institution approved by the commissioner. 
    Subd. 10.  [PARTICIPATING LENDER.] "Participating lender" 
means a lender who has been granted participating lender status 
by the commissioner. 
    Sec. 2.  [FARMER ELIGIBILITY.] 
    Subdivision 1.  [DEBT-TO-ASSET RATIO.] Only a farmer with a 
debt-to-asset ratio exceeding 50 percent at the time of 
application for a farm operating loan is an eligible borrower 
for purposes of interest rate buy-down.  The debt-to-asset ratio 
of a farmer must be determined by the lender.  A debt-to-asset 
ratio determined by a lender is deemed to be reasonable and 
accurate without further audit or substantiation. 
    Subd. 2.  [ASSESSMENT OF CONTINUED VIABILITY.] Only a 
farmer determined by the lender to have a reasonable opportunity 
for long-term financial viability in the farmer's current farm 
operation is an eligible borrower.  A determination of financial 
viability by a lender is deemed to be reasonable and accurate 
without further audit or substantiation. 
    Subd. 3.  [ENROLLMENT IN ADULT FARM MANAGEMENT PROGRAM.] To 
be an eligible borrower, a farmer shall agree to enroll in an 
approved adult farm management program if enrollment is required 
by the lender and an approved program is offered not more than 
50 miles from the farmer's residence.  The approved adult farm 
management program must bill the lender for one-half of the 
course tuition.  
    Sec. 3.  [LENDER ELIGIBILITY; OBLIGATIONS.] 
    Subdivision 1.  [ELIGIBLE PARTICIPATING LENDER STATUS.] A 
lender who meets the requirements established by the 
commissioner must be certified as a participating lender. 
    Subd. 2.  [PARTIAL PAYMENT FOR ADULT FARM MANAGEMENT 
TRAINING.] A participating lender shall require an eligible 
borrower to enroll in an approved adult farm management program 
and agree to pay one-half of the enrollment and tuition costs of 
the program for an eligible borrower approved by the 
commissioner for interest rate buy-down unless the participating 
lender determines an approved adult farm management program 
would not benefit the borrower.  A participating lender is not 
required to assist with enrollment or tuition costs for a period 
longer than the term of the farm operating loan, and a lender is 
not required to assist with the enrollment and tuition costs for 
more than one individual for each farm operating loan. 
     If a participating lender determines that enrollment in an 
adult farm management program would not benefit the borrower or 
an approved adult farm management program is not located within 
50 miles from the debtor's residence, the lender shall explain 
the reasons to the borrower in writing and indicate the 
determination on the application for Program A or Program B. 
    Subd. 3.  [RECEIPT OF APPLICATIONS FOR INTEREST RATE 
BUY-DOWN.] (a) A participating lender shall receive and evaluate 
loan applications from a farmer: 
    (1) who has transacted farm-related borrowing with a lender 
within the previous three years; 
    (2) who has not previously established farm-related 
borrowing; or 
    (3) whose previous lender is no longer in the business of 
making farm-related loans. 
    (b) In determining whether to make a farm operating loan to 
a farmer, the participating lender may use criteria in addition 
to those in section 2. 
    Subd. 4.  [MAXIMUM INTEREST RATE.] To qualify for interest 
rate buy-down payments, a participating lender shall offer to 
make a farm operating loan to an eligible borrower at a rate of 
interest equivalent to that offered to other farmers having 
similar security and financial status, but the interest rate may 
not exceed the current commissioner's interest index.  The 
commissioner may use appropriate means to verify that the 
operating loan interest rate available to an eligible borrower 
is substantially the same as that available to other borrowers. 
    Sec. 4.  [RESPONSIBILITIES OF THE COMMISSIONER.] 
    Subdivision 1.  [ADOPTION OF PROGRAM GUIDELINES.] Within 30 
days after the effective date of sections 1 to 9, the 
commissioner shall adopt and make available to the public 
guidelines for Programs A and B.  The commissioner shall adopt 
guidelines for Program B, coordinate Program B with the Federal 
Operating Loan Program, and make the benefits of Program B 
additive to the Federal Operating Loan Program.  Adoption of the 
program guidelines is not subject to Minnesota Statutes, chapter 
14.  
    Subd. 2.  [PREPARATION AND DISTRIBUTION OF LENDER 
PARTICIPATION FORMS.] The commissioner shall prepare and 
distribute forms and instructions for Programs A and B to all 
lenders in the state.  
    Subd. 3.  [APPROVAL OF ADULT FARM MANAGEMENT PROGRAMS.] The 
commissioner, in consultation with the commissioner of 
agriculture, shall prepare a list of adult farm management 
training programs approved for eligible borrowers and distribute 
the list to all participating lenders.  
    Subd. 4.  [APPROVAL OF APPLICATIONS FOR BUY-DOWN 
PAYMENT.] (a) The commissioner shall review within five working 
days of submission by a participating lender a properly 
completed application for interest rate buy-down payments on a 
farm operating loan made to a farmer.  If a qualified lender 
does not receive written notice that the commissioner has denied 
interest rate buy-down payments within seven working days, the 
farmer is an eligible borrower and interest rate buy-down 
payments on the farm operating loan are approved by the 
commissioner. 
    (b) The commissioner shall not approve concurrent 
participation of an eligible borrower under both Program A and 
Program B.  
    (c) All applications received by the commissioner after 
appropriated interest rate buy-down program funds for Program A 
or Program B have been encumbered must be returned immediately 
to the lender with an explanation that interest buy-down 
payments are denied due to prior commitment of available program 
funds. 
    (d) For an application for Program B, the commissioner 
shall send the lender a preliminary commitment for the interest 
payment within ten days after receiving the Program B 
application.  The preliminary commitment may be used by the 
lender to qualify for the Federal Operating Loan Program.  A 
preliminary commitment is for the 1987 and 1988 crop years.  The 
commitment for the 1988 crop year is dependent on approval of 
the lender's and borrower's application to the Federal Operating 
Loan Program for at least crop years 1987 and 1988. 
    Subd. 5.  [BUY-DOWN PAYMENTS TO PARTICIPATING LENDERS.] The 
commissioner shall pay one-half of the expected interest rate 
buy-down amount when requested by the participating lender, but 
not more than 60 days after the loan was approved by the 
commissioner, and the balance within 30 days after the loan 
matures.  All interest buy-down payments under this act must be 
made by joint-payee checks in the name of the participating 
lender and the eligible borrower. 
    If a participating lender obtains a conditional commitment 
for guarantee or contract for guarantee from the FmHA, the 
commissioner shall make the state Program B interest buy-down 
payment as necessary to accommodate the FmHA commitment or 
contract.  

             PROGRAM A; STATE-LENDER INTEREST RATE BUY-DOWN 
    Sec. 5.  [PROGRAM A; STATE-LENDER INTEREST RATE BUY-DOWN.] 
    Subdivision 1.  [APPLICATION.] To be eligible for state 
interest rate buy-down payments under Program A, a participating 
lender must submit to the commissioner a properly completed 
application form for each eligible farm operating loan.  
    Sec. 6.  [STATE CONTRIBUTION TO INTEREST BUY-DOWN; PROGRAM 
A.] 
    As provided in section 4, subdivision 7, the commissioner 
shall pay under Program A to a participating lender for the 
first $60,000 of an approved farm operating loan made to an 
eligible borrower an amount equal to an annual rate of 2.8 
percent interest on the loan, but the payment may not exceed 
$2,520 per farm operating loan. 
    Sec. 7.  [LENDER CONTRIBUTION TO INTEREST BUY-DOWN; PROGRAM 
A.] 
    A participating lender shall provide a reduction in 
interest rate for the first $60,000 of an approved farm 
operating loan made to an eligible borrower in an amount equal 
to an annual rate of at least 1.7 percent interest on the loan. 

           PROGRAM B; STATE LENDER-FmHA INTEREST RATE BUY-DOWN
    Sec. 8.  [DEFINITIONS.] 
    Subdivision 1.  [APPLICATION.] The definitions in this 
section apply to sections 8 and 9. 
    Subd. 2.  [ELIGIBLE BORROWER.] "Eligible borrower" means a 
farmer who applies to a lender for a farm operating loan between 
the dates January 1, 1987, and December 31, 1988, and who meets 
all qualifications established in section 2 and any further 
qualifications that may be established in the program guidelines 
adopted by the commissioner under section 4, subdivision 1. 
    Subd. 3.  [FARM OPERATING LOAN.] "Farm operating loan" 
means an original, extended, or renegotiated loan or line of 
credit obtained by a farmer from a lender to finance the 
operations of a farm for one operating season.  A farm operating 
loan includes an open line of credit even though the maximum 
principal amount of the line of credit may not be drawn at any 
one time.  A farm operating loan eligible for interest rate 
buy-down must have a maturity date of June 30, 1989, or earlier. 
    Subd. 4.  [FEDERAL OPERATING LOAN PROGRAM.] "Federal 
Operating Loan Program" means the Guaranteed Operating Loan 
Program together with the Interest Rate Buy-Down Program 
administered by the FmHA as described in Code of Federal 
Regulations, title 7, section 1980, subpart B.  
    Subd. 5.  [FmHA.] "FmHA" means the Farmers Home 
Administration of the United States Department of Agriculture. 
    Subd. 6.  [FmHA BUY-DOWN AGREEMENT.] "FmHA Buy-Down 
Agreement" means Form FmHA 1980-58 or a replacement of that 
form, which is an agreement between a lending institution, a 
farmer, and the FmHA under which the FmHA agrees to give the 
lending institution an interest buy-down grant in partial 
reimbursement of a write-down by the lending institution of the 
interest rate on the farmer's operating loan under the Federal 
Operating Loan Program. 
    Sec. 9.  [STATE-LENDER-FmHA INTEREST RATE BUY-DOWN.] 
    Subdivision 1.  [APPLICATION.] To be eligible for Program 
B, a participating lender shall submit an application for 
Program B to the commissioner and an application to FmHA under 
subdivision 2.  The lender may indicate on the application for 
Program B that the lender and borrower will apply to the FmHA 
Federal Operating Loan Program for more than one year and would 
desire a commitment for Program B for more than one crop year, 
ending December 31, 1988. 
    Subd. 2.  [APPLICATION TO FmHA.] (a) The lender and an 
eligible borrower shall apply to FmHA for a guarantee of the 
proposed farm operating loan under the Federal Operating Loan 
Program.  
    (b) If the application is approved, the lender shall submit 
a copy of the FmHA buy-down agreement to the commissioner.  Upon 
receipt of the FmHA buy-down agreement, the commissioner shall 
pay the lender $50 for preparation costs.  If the loan 
preparation was done by a person or entity not otherwise 
compensated by the lender for preparing the loan application, 
the lender shall remit the $50 to the person or entity actually 
preparing the loan application.  If the application is denied, 
the lender shall submit a copy of the denial to the 
commissioner.  If the application is denied, the commissioner 
shall consider the Program B application as an application for 
Program A and make interest buy-down payments to the lender and 
eligible borrower as if the application were originally 
submitted for Program A, unless the lender has indicated that 
the loan is not to be considered under Program A. 
    Subd. 3.  [STATE CONTRIBUTION TO PROGRAM B INTEREST 
BUY-DOWN.] Under Program B, the commissioner shall pay to a 
participating lender interest at a rate of 2.8 percent per year 
for the first $60,000 of a farm operating loan made to an 
eligible borrower during the term of the loan, if the loan is 
approved under the Federal Operating Loan Program.  The payment 
to a participating lender may not exceed $2,520 per eligible 
borrower per calendar year, exclusive of the loan preparation 
fee. 
    Subd. 4.  [LENDER CONTRIBUTION TO PROGRAM B INTEREST 
BUY-DOWN.] A participating lender shall reduce the interest 
charged to an eligible borrower on a farm operating loan so that 
the reduction in interest rate provided by the lender and the 
FmHA together is at least 1.7 percent per year for the first 
$60,000 of the loan. 
    Sec. 10.  [APPROPRIATION.] 
    Subdivision 1.  [APPROPRIATION.] $17,000,000 is 
appropriated from the general fund for fiscal year 1987 to the 
commissioner of commerce for the interest rate buy-down 
program.  The appropriation is available for the fiscal year 
ending June 30 in the years indicated to pay amounts due under 
approved applications received during that calendar year.  Any 
unencumbered balance remaining in a fiscal year must not be 
canceled and remains available to pay amounts due under approved 
applications received during the rest of that calendar year.  
The appropriation for Program B is available until June 30, 
1989, to pay amounts due under approved applications received 
during calendar year 1987 or 1988.  
                                      1987           1988
(a)  Program B, including loan       $1,500,000     $1,500,000
preparation costs under section  
5, subdivision 2
(b) Program A, including up to      $14,000,000
$100,000 for administrative costs 
of the commissioner of commerce for 
Programs A and B 
     Subd. 2.  [PRIORITIES; LIMITATION.] Applications take 
priority in the order they were received by the commissioner.  
The commissioner shall not approve an application for a program 
once the appropriation for that program has been committed.  
    Subd. 3.  [SPILLOVER.] If, at any time more than 180 days 
after the effective date of this act, the appropriation for 
either Program A or Program B for calendar year 1987 is 
insufficient, the appropriation for the other program is 
available for it.  Any unencumbered balance remaining at the end 
of a calendar year must not be canceled but must be added to the 
appropriations for Program B in the next calendar year. 
    Subd. 4.  [OTHER APPROPRIATIONS ADDED.] Any unencumbered 
balance from the interest buy-down program under Laws 1986, 
chapter 398, article 29, section 1, subdivision 3, or from any 
appropriation added to it, remaining on August 1, 1987, must not 
be canceled but must be transferred and added equally to the 
appropriations for Program A and Program B that are available 
for the rest of calendar year 1987. 
    Subd. 5.  [FARM LOAN INTEREST BUY-DOWN.] $14,000,000 is 
appropriated from the general fund for fiscal year 1987 to the 
commissioner of commerce to make payments under the farm loan 
interest buy-down program under Laws 1986, chapter 398, article 
23.  This appropriation is added to the appropriation in Laws 
1986, chapter 398, article 29, section 1, subdivision 3.  
Payment from the commissioner must be made by joint-payee check 
in the name of the participating lender and the borrower.  
    Sec. 11.  Laws 1986, chapter 398, article 23, section 4, is 
amended by adding a subdivision to read: 
    Subd. 7.  [COMMISSIONER'S DISCRETION FOR CERTAIN 
BORROWERS.] Notwithstanding section 1, subdivision 5, the 
commissioner may consider a farmer an eligible borrower if the 
farmer applies to the lender before January 1, 1986, and 
complies with the remaining provisions of this article. 
    Sec. 12.  [EFFECTIVE DATE.] 
    Sections 1 to 11 are effective the day following final 
enactment. 
    Approved April 7, 1987