Current through Register Vol. 48, No. 12, March 22, 2024
a) General Description of Program. The State
Guarantee Program (SGP) is intended to provide farmers who are experiencing
financial difficulties caused by high interest rates and low commodity prices
with a debt restructuring schedule to consolidate and spread out existing debt
over a longer term at a reduced interest rate so that farmers will be able to
continue existing farming operations. The provisions of this Section are
applicable only to the SGP, and the provisions of Sections
1100.705
and
1100.710
of this Part are inapplicable to the SGP and procedures provided for pursuant
to this Section.
b) Definitions
Words defined in the Illinois Finance Authority Act and in
Section
1100.50 have the same
meaning when used in this Subpart unless a more specific definition is
prescribed in this Section. This Section establishes additional definitions for
use in this Subpart only.
"Applicant" means a farmer whose application for a State
Guarantee has been submitted to the Authority by a lender.
"Asset" includes, but is not limited to, the following: crops
or feed on hand; livestock held for sale; breeding stock; cash; marketable
bonds and securities; securities not readily marketable; accounts receivable;
notes receivable; cash invested in growing crops; net cash value of life
insurance; machinery and equipment; cars and trucks; farm and other real estate
including life estates, personal residence, and value of beneficial interests
in trusts; government payments or grants; capitalized leases; retirement
accounts; and all other property and assets.
"Current Outstanding" means on the date of the application
for any State Guarantee.
"Current Status" means the absence of any arrearages in any
previously incurred debt for which a State Guarantee is sought.
"Debt to Asset Ratio" means the current outstanding
liabilities of the farmer divided by the current outstanding assets of the
farmer. [20 ILCS
3501/830-30 ]
"Farmer" means a resident of Illinois, who is a principal
operator of a farm or land, at least 50% of whose gross annual income is
derived from farming and whose debt to asset ratio shall not be less than 40%,
except in those cases where the applicant has previously used the Guarantee
Program there shall be no debt to asset ratioor incomerestriction.
[20 ILCS
3501/830-30 ]
"Fund" means the Illinois Agricultural Loan Guarantee Fund,
which is the State's fund to cover losses resulting from defaults on State
Guarantee loans. [20 ILCS 3501/830-30]
"Gross Annual Income" means income as defined in Section 61
of the Internal Revenue Code (
26 USC 61
).
"Liability" includes, but is not limited to, the following:
accounts payable; notes or other indebtedness owed to any source; taxes; rent;
amounts owed on real estate contracts or real estate mortgages;
judgments;accruedinterest payable; indebtedness under capitalized leases; and
all other liabilities. [20 ILCS
3501/801-10 ]
"State Guarantee" means a note for which the State of
Illinois shall be liable for 85% of the total principal and interest of the
note as determined by the Authority.
c) Eligible Farmers. To qualify for
participation in the SGP, each farmer must:
1) maintain his principal residence in the
State;
2) be at least 18 years of
age at the time of application;
3)
be the principal operator of the farming business for which the funds
guaranteed by the SGP are contemplated to be used;
4) be able to show, based upon his/her most
recent Federal Income Tax Return and current data, that at least 50% of his/her
annual gross income is derived from farming, unless the loan is a renewal of an
existing guarantee;
5) have a debt
to asset ratio of not less than 40% and not greater than 65%, unless the loan
is a renewal of an existing guarantee;
6) provide sufficient collateral to secure
the State Guarantee and agree to keep the State Guarantee adequately
collateralized in the future;
7)
certify and agree that he/she will only use the State Guarantee to consolidate
and restructure existing farming debts.
d) Limitations
1) No State Guarantee shall exceed
$500,000per farmer or farming operation. [20 ILCS 3501/830-30]
2) Each State Guarantee shall be set up on a
payment schedulenot to exceed 30 years, andshall be no longer than30years in
duration. [20 ILCS 3501/830-30]
3)
Only one State Guarantee shall beoutstanding perfarmerat any one time.
[20 ILCS
3501/830-30 ]
4) Only one State Guarantee shall be
outstanding at any one time for any one farming operation. If applicants file
separate Schedule Fs for their Federal Income Tax Returns, then they will be
considered to operate separate farming operations.
e) Application Procedures and Review
1) Lenders interested in the SGP must
complete a Letter of Interest and return it to the Authority's office. After
the Letter of Interest has been received by the Authority, the lender will be
placed on the mailing list for the SGP.
2) The lenders shall applyfor State
Guarantees on forms approved and provided by the Authority. The application
shall, at a minimum, contain the farmer's name, address, present credit and
financial information, including cash flow statements, financial statements,
balance sheets, and any other information pertinent to the State Guarantee.
[20 ILCS
3501/830-30 ]
3) After approval of the application and
receipt of the documentation necessary prior to closing the loan, the Authority
shall send a State Guarantee Closing Documents package to the lender containing
all the appropriate forms and documents to execute. Upon completion of all such
forms and documents by the applicant, lender and Authority, the State Guarantee
loan will be considered closed.
4)
The lender shall certify that all the information contained on the application
and other submitted documents is correct, and shall be liable to the Authority
for any damages suffered by any incorrect or untrue statement contained in any
certified application.
5) The
application period for the SGP shall commence July 15, 1982 and end when the
Authority has issued State Guarantees equal to $160,000,000 or at any later
time as may be set from time to time by legislative extension.
6) Following submission of the Guarantee
application by the lender, the Authority shall review the application. The
Authority's review shall include, but will not be limited to, whether the
applicant is an eligible farmer and whether the lender has complied with the
requirements of subsection (f) of this Section. The Authority will base its
evaluation on collateral, percentage of loan, debt to asset ratio, cash flow,
etc.
7) When a State Guarantee
application is submitted to the Authority, the Executive Director shall review
the application to determine whether it is complete and whether it meets the
criteria established by the Act and this Part:
A) If the Executive Director determines that
the loan application is incomplete, he or she shall, within 14 days of such
determination, inform the lender and the applicant of such determination, and
detail the information or material that is necessary to complete the
application. For the purposes of subsection (j) of this Section, no application
shall be deemed complete until the lender or applicant has provided the
additional information or material requested by the Executive
Director.
B) When the Executive
Director has completed his or her review of the Guarantee application, he or
she shall present the application, with a statement of recommended action to
the Authority at its next regularly scheduled meeting. The Executive Director
will base the review on collateral, percentage of loan, debt to asset ratio,
cash flow, etc.
8) The
Authority shall review each loan application presented by the Executive
Director in accordance with the provision of the Act and this Part, and the
Authority shall:
A) approve the application
and provide the Guarantee, pursuant to the Act and this Part; or
B) deny the application and serve upon the
lender and applicant a written statement of the grounds of the
denial.
9) Each
applicant shall pay a $300 application fee which will be submitted to the
lender at the time of the application. At the time the loan is made, the
applicant may be required to pay a closing fee not greater than 3/4 of 1% of
the State Guarantee which may be used to pay for administrative expenses
incurred by the lender and the Authority. Of this 3/4 of 1% closing fee, the
Authority shall receive 1/2% to cover administrative and legal expenses and the
lender shall receive 1/4% to cover administrative expenses in completing the
application packet and closing documents. The 3/4 of 1% closing fee may be
included in the State Guarantee Loan amount. The Authority shall credit the
$300 application fee against the closing fee. The lender shall charge no fees
or points in addition to those outlined herein. The applicant shall be
responsible for paying any fees or charges involved in recording mortgages,
releases, financing statements, insurance for secondary market issues and any
similar fees necessary for closing and maintaining the State Guarantee or
selling into the secondary market. [20 ILCS 3501/830-30]
10) If the application is denied, the
applicant and the lender may file a Request for Reconsideration stating reasons
why the Authority should withdraw its denial of the application and approve the
State Guarantee. This Request for Reconsideration must be filed with the
Authority not later than 21 days after such denial. The Request for
Reconsideration should be accompanied by supporting documents and/or
information not previously considered by the Authority. The Authority shall
review the Request for Reconsideration at its next scheduled meeting, and shall
either approve the application or deny the Request for Reconsideration. The
applicant will have the opportunity to present new relevant facts on his
previous denial to the Authority, and if such facts will establish eligibility,
the Request will be granted. A denial of a Request for Reconsideration shall be
final. While a Request for Reconsideration is pending, the application shall be
deemed complete for the purposes of subsection (j) of this Section.
f) Provision or Renewal of State
Guarantees. The Authority shall provide or renew a State Guarantee to any
lender if, in addition to meeting the other criteria described in the Act and
this Part, the lender:
1) agrees to bring the
farmer's debt to a current status at the time the State Guarantee is provided;
[20 ILCS 3501/830-30]
2) charges a
fixed or adjustable interest rate which is below the market rate of interest
generally available to the borrower. The market rate of interest is that rate
which would be charged by the same lender for the same project without the
State Guarantee. If both the lender and the applicant agree, the interest rate
on the State Guarantee loan can be converted to a fixed interest rate at any
time during the term of the loan; [20 ILCS 3501/830-30]
3) agrees to pay to the Authority an annual
fee equal to 25 basis points on the loan and any other necessary and ordinary
administrative expenses in excess of the 25 basis points as determined from
time to time pursuant to the Act and this Part;
4) agrees to complete and certify that, to
the best of the lender's knowledge, all information is true and correct on the
application, balance sheets, security analysis, cash flow projection and any
other documents that the Authority may request; [20 ILCS 3501/830-30]
5) identifies collateral acceptable to the
Authority in accordance with subsection (h) that is at least equal to the State
Guarantee loan request; [20 ILCS 3501/830-30]
6) assumes all responsibility and costs for
pursuing legal action on collecting any loan that is delinquent or in default
subject to consulting the Authority; [20 ILCS 3501/830-30]
7) is at risk for the first 15% of the
outstanding principal of the note for which the State Guarantee is provided;
[20 ILCS 3501/830-30]
8) assumes
responsibility for proceeding with the collecting and disposing of collateral
on the State Guarantee within 14 months of the date that the loan is declared
delinquent; provided, however, that the lender shall not collect or dispose of
collateral on the State Guarantee without the express written prior approval of
the Authority. [20 ILCS 3501/830-30] Approval shall be granted if the
collateral is disposed of in a reasonably commercial manner, based on the
manner, time and place of the sale, the purchase price and the purchaser. In
the event that the lender fails to dispose of the collateral within 14 months,
the lender shall repay to the State interest on the State Guaranteeequal tothe
same ratewhichthe lender charges on the loan; provided, however, that the
Authority shall extend the 14-month period for a lender in the case of
bankruptcy or extenuating circumstances which prevent the lender from
liquidating the collateral. The lender shall repay this interest to the State
until the collateral for the State Guarantee has been liquidated and the State
has been reimbursed. [20 ILCS 3501/830-30] If the lender fails to repay the
State the interest as outlined in this subsection (f), the Authority shall turn
the matter over to the Attorney General's office for appropriate legal
action;
9) agrees that the
Authority has final approval on the sale of all collateral for the State
Guarantee. After the sale of collateral, the State shall be reimbursed 85% of
the remaining principal amount of the State Guarantee loan. If the funds from
the sale of collateral remain after this payment, the lender shall be
reimbursed 15% of the remaining principal amount of the loan. If excess funds
remain after paying the remaining principal to the State and lender, then the
State and lender shall be repaid interest on a prorated basis; 85% of such
excess funds shall be allocated to the State's portion and 15% shall be
allocated to the lender's portion. If excess funds exist after repaying both
the State and the lender, they shall be paid back to the farmer. [20 ILCS
3501/830-45 ]
g) Annual Review
1) The lender and the Authority shall each,
on an annual basis, review State Guarantees for any purpose including, but not
limited to, present collateral value; timeliness of payments made by the farmer
or any other purposes reasonably calculated to aid in determining the farmer's
present and projected repayment capacity. If the Authority determines that the
existing collateral is insufficient to cover the State's liability, additional
collateral may be required. If the applicant fails to pledge such additional
collateral, the State Guarantee loan may be called.
2) In those cases where the borrower has not
previously used the guarantee program, noState Guarantee shall becalledby the
lender or Authority during the first 3 years of the date on which the
application is closed for any reason except defaults on payments or
insufficient collateral. [20 ILCS 3501/830-30]
3) Except as otherwise provided in the Act or
this Subpart, a State Guarantee may be called by the lender or Authority upon a
90-day written notice to all parties specifying the reasons for such call
(e.g., submission of false documentation, changing loan documents, and change
of state residency).
4) The lender
can review and withdraw or continue with the State Guarantee on an annual basis
after the first three years of the loan provided a 90 day notice, in writing,
to all parties has been given. [20 ILCS 3501/830-30] Such notification must be
provided on or before the date on which payment is due.
5) The applicant must make all payments on
the State Guarantee within 90 days of the stated payment date. Failure to make
payments on or before their due date shall render the loan delinquent. Notice
of this delinquency shall immediately be sent to all parties. If the loan
remains delinquent for a period of 90 days, the total outstanding principal and
interest shall become due and payable immediately on the entire State Guarantee
Loan. The State Guarantee cannot be reinstated after the 90-day delinquency
period.
h) Valuation of
Collateral. All collateral shall be evaluated by IFA staff or appraised by a
qualified appraiser. A qualified appraiser is one who is qualified by virtue of
membership in the Illinois Society of Farm Managers and Appraisers, or one
whose qualifications have been reviewed by the Authority. The Authority shall
have final authority to determine whether the collateral is sufficient to cover
the State's liability and may appoint an independent appraiser to aid in its
determination on the sufficiency of collateral. The Authority will view real
estate as the primary collateral on SGP loans, with machinery and equipment and
breeding livestock to be used as secondary collateral, except where no real
estate is available. Collateral value may be reviewed each year by the lender
or an independent appraiser appointed by the Authority. The Authority may,
among other things, take a mortgage or lien on land or other assets to cover
the State's liability. Collateral may be transferred only upon written approval
by the Authority and the lender.
i)
Fund. To implement and carry out the objectives of the SGPAI, the Fund has been
created as a special Fund outside of the State Treasury.
1) The Authorityis authorized
totransfernomore than $45,000,000 to the Fund during theduration of the State
Guarantee program, to secure State Guarantees issued pursuant to this
Section.Anyamountstransferred from theIllinois Agricultural Loan GuaranteeFund
to the General Revenue Fund under powers granted to the Governor by Public Act
87-14 shall not be considered in determining if the maximum of $45,000,000 has
been transferred into theIllinois Agricultural Loan GuaranteeFund. [20 ILCS
3501/830-30]
2) The State shall
notbe liable for more than $45,000,000 to secure State Guarantees issued
pursuant to this Section. [20 ILCS 3501/830-30]
3) In the event of default by the farmer, the
lender shall be entitled to, and the Authority shall direct payment on, the
State Guarantee after 90 days of delinquency. All payments by the Authority
shall be made from the Illinois Agricultural Loan Guarantee Fund to satisfy
claims against the State Guarantee. The Illinois Agricultural Loan Guarantee
Fund shall guarantee receipt of payment of the 85% of the principal and
interest owed on the State Guarantee loan by the farmer to the guarantee
holder. [20 ILCS 3501/830-30] In no event shall the interest amount guaranteed
by the Authority include interest accruing beyond 120 days from the date of
default.
4) The Fund shall be
reimbursed for any amount paid under this subsection (i) upon liquidation of
collateral which the lender shall seize and convert to cash in a reasonably
commercial manner. [20 ILCS 3501/830-30]
j) Priority of Applications. Applications
shall be processed by the Authority on a first-come, first-served basis, based
upon the receipt of all completed documents by the Authority.
k) Guarantors and Additional Collateral. An
applicant for a State Guarantee Loan may have a guarantor co-sign the note
and/or pledge additional collateral for the State Guarantee Loan if the lender
and Authority determine that the applicant alone cannot provide sufficient
collateral for the State Guarantee.
l) The State Guarantee. In the event of
default, the Authority shall make payment on the State Guarantee of 85% of the
outstanding principal and interest owed on the State Guarantee Loan to the
holder of the State Guarantee. The payment shall be made by the Authority to
the holder of the State Guarantee within 30 days after an appropriate request
by a lender certifying that the 90-day delinquency period has elapsed. The
payment shall include 85% of past due interest and 85% of the remaining
principal.
m) Prepayment of Loans.
Each loan shall be paid at least on an annual basis with one payment due each
year on the date on which the loan was closed for a period of ten years or
until the loan is repaid, whichever occurs first. The State Guarantee Loan may
be prepaid in full or in part at any time the loan is outstanding without
penalty.
n) Assumption of Loans. No
State Guarantee loan may be assumed by any entity unless specifically
authorized by the Authority. Such authorization will be granted only in
extraordinary cases (e.g., death or serious illness of the applicant with
assumption by an immediate family member).
o) Total Obligations through the SGP. The
Authority shall have outstanding guarantees in an aggregate principal amount up
to $160,000,000 through the SGP. The Illinois Agriculture Loan Guarantee Fund
shall be funded with $45,000,000 to cover any losses.