2007 Minnesota Statutes

41.56 PROCEDURE.
    Subdivision 1. Loan application; denial. Any person desiring to acquire farm land
may make application with a lender for a family farm security loan. Upon completion of the
appropriate forms by the applicant and the lender, the applicant shall forward the application
to the commissioner for approval. The commissioner shall prescribe a screening process to
determine eligibility and may arrange for local lenders to perform this function for the state. The
commissioner may approve the application if the criteria of sections 41.55 and 41.57 are satisfied,
and shall notify the applicant and the lender of the decision.
If the application is denied, the commissioner shall provide the applicant with a written
statement of the reasons for the denial. An applicant who later becomes eligible may reapply.
    Subd. 2. Approved loans. On approving a loan application, the commissioner shall notify
the applicant and lender of the decision. The applicant and the lender may then complete the
transaction for the loan.
    Subd. 3. Default, filing claim. Within 90 days of a default on a guaranteed family farm
security loan, the lender shall send notice to the participant stating that the commissioner must be
notified if the default continues for 180 days, and the consequences of that default. The lender
and the participant may agree to take any steps reasonable to assure the fulfillment of the loan
obligation.
If a participant cannot meet scheduled loan payments because of unique or temporary
circumstances and the participant proves sufficiently to the commissioner that the necessary cash
flow can be generated in the future, the commissioner may use money in the special account in
section 41.61, subdivision 1, to meet the participant's loan obligation for up to two consecutive
years. This money must be paid back within eight years with interest at an annual percentage
rate four percent below the prevailing Federal Land Bank rate.
A contract for deed participant may enter into an agreement with the commissioner whereby
the outstanding principal balance of the loan is reduced by a minimum of ten percent, the loan
is reamortized for the years remaining, and the commissioner agrees that the state shall pay the
lender 100 percent of the sum due and payable if a default occurs during the remaining term of
the reamortized loan.
After 180 days from the initial default, if the participant has not made arrangements to meet
the obligation, the lender shall file a claim with the commissioner, identifying the loan and the
nature of the default, and assigning to the state all of the lender's security and interest in the loan
in exchange for payment according to the terms of the family farm security loan guarantee. In
the case of a seller-sponsored loan, the seller may elect to pay the commissioner all sums owed
the commissioner by the participant and retain title to the property in lieu of payment by the
commissioner under the terms of the loan guarantee. If the commissioner determines that the
terms of the family farm security loan guarantee have been met, the commissioner shall authorize
payment of state funds to the lender, and shall notify the defaulting party. The state of Minnesota
shall then succeed to the interest of the mortgagee or the vendor of the contract for deed. Taxes
shall be levied and paid on the land as though the owner were a natural person and not a political
subdivision of the state. The commissioner may, on behalf of the state, commence foreclosure or
termination proceedings in the manner provided by law.
The commissioner may add any unpaid principal and interest payments on special assistance
loans to the interest adjustment obligation balance provided for in section 41.57, subdivision 2.
The commissioner and participant may agree to any other terms of repayment that are mutually
satisfactory.
    Subd. 4. Sale of defaulted property. In the event that title to any property is acquired by
the state, upon conveyance of title to the state and expiration of the period of redemption, the
commissioner shall undertake to sell the property by publishing a notice of the impending sale at
least once each week for four successive weeks in a legal newspaper and also in a newspaper of
general distribution in the county in which the property to be sold is situated. The notice must
describe the lots or tracts to be offered and the terms of sale. Except as further provided, the terms
and method of sale shall be determined by the commissioner.
The commissioner shall first attempt to sell the property to a person who is eligible for a
family farm security loan. If the commissioner is unable to effect a sale to an eligible person,
the commissioner shall attempt to sell the property for cash as provided in subdivision 4a. If the
commissioner is unable to effect a sale to an eligible person or for cash, or if the commissioner
finds that sale to an eligible person or for cash would not best protect the interests of the state, the
commissioner may sell the property on terms which the commissioner finds will best protect the
interests of the state. The commissioner may lease any real property which the commissioner is
unable to sell with reasonable promptness. In any event, any acquired farm property must be sold
within three years after the conveyance of title to the state or after the expiration of the period of
redemption. The commissioner may contract for the services of a licensed real estate agent or
broker to assist in selling any property acquired under this section and may pay for the services
from the proceeds of the sale before proceeds are distributed under subdivision 4b.
In lieu of selling property under this subdivision, the commissioner may utilize participation
under the beginning farmer program under chapter 41B.
In selling property acquired under this section, the commissioner may not sell the property to
a relative within the second degree of kindred according to common law of a person who has
defaulted.
    Subd. 4a. Sale for cash. In selling any farm property for cash, the commissioner shall
follow the procedures provided in this subdivision. The commissioner may sell the property to
the highest bidder by taking sealed bids, by bids at public auction, or through negotiation. The
commissioner may refuse to accept any or all bids. The successful bidder shall submit bid security
in the form of a certified check, money order, or bank draft in the amount of five percent of the bid
price on the day of selection and shall remit the balance of the purchase price within 90 days of the
date of sale. Upon remittance by the purchaser of the balance within 90 days of the date of sale,
the commissioner shall transfer title to the property, including any acquired mineral rights, to the
purchaser by quitclaim deed. In the event that the purchaser fails to remit all of the balance within
90 days of the date of sale, the purchaser forfeits all rights to the property and any money paid for
the property and the commissioner shall recommence the sale process specified in this subdivision.
    Subd. 4b. Proceeds of sale. Proceeds from the sale of a parcel of property obtained by the
state under this section shall be paid into the state family farm program bond account to the extent
that proceeds of bonds issued under section 41.62, have been expended by the commissioner of
agriculture for the purposes specified in section 41.62. The balance of the sale proceeds shall be
paid into the general fund to the extent that funds were disbursed as payment adjustments by the
commissioner and into the special account authorized in section 41.61, subdivision 1, to the
extent that funds from the special account were disbursed according to the terms of the family
farm security loan guarantee and for any insurance premiums or taxes paid on the property.
Proceeds in excess of these amounts shall be paid to the lender to the extent that payment to the
lender pursuant to the loan guarantee was less than the money due and payable to the lender under
the family farm security loan. Proceeds in excess of these amounts shall be paid to cooperating
agencies according to the terms of the family farm memorandum of understanding. Additional
proceeds, if any, shall be paid into the special account authorized in section 41.61, subdivision 1.
    Subd. 5. Guarantee void. The loan guarantee is void only if the guaranteed loan was
obtained or retained by fraud or material misrepresentation of which the original lender or
subsequent holder had actual knowledge.
    Subd. 6. Secondary market guarantees without recourse. In the case of all family farm
loan guarantees, except seller-sponsored loan guarantees, the commissioner is authorized to
extend said guarantees to a bona fide purchaser of the guaranteed portion of the note and mortgage
executed by an original lender and borrower without recourse by the state of Minnesota against
said bona fide purchaser of said guaranteed portion, provided the state of Minnesota is made the
named beneficiary of a title insurance policy insuring marketable title to the farm land in question
and the state of Minnesota is given the written opinion of original lender's counsel that the original
loan transaction was fully closed, that disbursements were made correctly, that lender's security
was properly perfected and constitutes a valid first lien upon the property, that original borrower's
note is a valid and binding obligation, and that all conditions deemed desirable to assure the
validity and legal enforceability of the note and mortgage and all agreements delivered to the
original lender in connection with the original loan have been complied with satisfactorily. In the
event title insurance is, as a practical matter, unavailable or an undue hardship, the commissioner
is authorized to provide said guarantee without recourse by the state of Minnesota against said
bona fide purchaser provided the state of Minnesota is given the written opinion of competent
local counsel concerning marketable title and the written opinion of original lender's counsel
that the original loan transaction was fully closed, that disbursements were made correctly, that
lender's security was properly perfected and constitutes a valid first lien upon the property, that
original borrower's note is a valid and binding obligation, and that all conditions deemed desirable
to assure the validity and legal enforceability of the note and mortgage and all agreements
delivered to the original lender in connection with the original loan have been complied with
satisfactorily. The making of such a guarantee without recourse shall not affect the rights the state
of Minnesota may have with respect to the original lender, mortgagor, or any other party.
    Subd. 7. Insurance. The commissioner may insure the state against loss to farm properties
acquired under this section by fire, lightning, windstorm, tornado, flood, or hail, using any
insurance company licensed to do business in Minnesota. The insurance may be in an amount
the commissioner determines and the commissioner may pay the premiums from the special
account created in section 41.61, subdivision 1.
History: 1976 c 210 s 6; 1977 c 170 s 4,5; 1979 c 236 s 2; 1981 c 261 s 10-13; 1983 c 332 s
6-10; 1985 c 276 s 1-3; 1986 c 444; 1Sp1986 c 2 art 1 s 2; 1987 c 396 art 1 s 1; 1992 c 602 s 5