Current through Register Vol. 47, No. 13, December 25, 2024
(1)
Program summary. The
loan participation program is intended to assist lenders and beginning farmers
by purchasing a portion of a loan made by a lender to a beginning farmer for
the purchase of agricultural property.
a.
Supplement to beginning farmer's down payment. The LPP loan
can be used to supplement the beginning farmer's down payment so that the
beginning farmer can more readily secure a loan (the "participated loan") from
a lender.
b.
Last-in/last-out collateral position. The program enables
lenders to request a "last-in/last-out" LPP loan from the authority. The
lender, on behalf of the beginning farmer, shall apply for the LPP loan on
application forms provided by the authority.
c.
Lender's certification.
The lender and the beginning farmer shall certify that the information included
in the application and any other documents submitted for consideration is true
and correct to the best of their knowledge.
d.
LPP loan in conjunction with BFLP
loan. The loan participation program may be used in conjunction with
the authority's beginning farmer loan program, provided the beginning farmer
meets the criteria for both programs.
(2)
Underwriting criteria.
Commercial underwriting criteria will be used as determined by the
authority.
(3)
Eligible
projects and activities.
a.
Use of project. LPP loans must be for new purchases or new
construction. Assets purchased or constructed with LPP loan funds must be used
for agricultural purposes.
b.
Agricultural land. The participated loan can be used for the
purchase of agricultural land, which may include small acreages on which
sufficient agricultural improvements are located to conduct a livestock
operation. If a house is located on land for which an LPP loan is requested, an
appraisal of the house will be made. If the appraised value of the house
exceeds 50 percent of the appraised value of the property or total collateral,
then the property will not be eligible for an LPP loan.
c.
Agricultural
improvements. The participated loan can be used for the construction
or purchase of improvements located on agricultural land (which is suitable for
use in farming). Examples of such improvements include, but are not limited to,
the following: confinement systems for swine, cattle, or poultry; barns or
other outbuildings; and grain storage facilities and silos.
d.
Livestock used for breeding
purposes. The participated loan can be used for the purchase of
livestock for which an income tax deduction for depreciation is allowed in
computing state and federal income taxes.
e.
Machinery and equipment.
The participated loan can be used for the purchase of agricultural machinery
and equipment for which an income tax deduction for depreciation is allowed in
computing state and federal income taxes. This machinery and equipment must be
used in the beginning farmer's farming operation.
f.
Interim financing by
lender. Interim financing by the lender is
allowed.
(4)
Ineligible projects and activities. The following program
activities are ineligible:
a.
Refinancing of existing debt. Refinancing of existing debt or new
purchases which have been incurred by the borrower more than 60 days prior to
approval of the LPP loan by the authority.
b.
Financing personal
expenses. Financing personal or living expenses and working capital to
purchase such items as feed, seed, fertilizer, fuel, and feeder
livestock.
c.
Down payment
funds for contract sale. Down payment for a contract sale, or in
connection with a loan from a nonregulated lender.
(5)
Program parameters.
a.
Purchase price impact.
Maximum LPP loan amount and loan terms will be determined by the IAD
board.
b.
LPP interest
rate. The IAD board will set the interest rate on the LPP
loan.
c.
LPP loans
outstanding. Loans under the program may be issued more than once,
provided that the outstanding LPP loan totals do not exceed the maximum amount
set by the IAD board.
(6)
LPP loan application
procedures.
a.
Financial
statement. Lenders may use their own form of financial statement. The
authority may require other forms deemed necessary and appropriate to document
the eligibility of the beginning farmer and the beginning farmer's ability to
make principal and interest payments.
If the beginning farmer or the beginning farmer's spouse is
involved in a business, partnership, limited liability company, or corporation,
either related or unrelated to the beginning farmer's farming operation, a
financial statement from this entity must also be submitted with the
application.
b.
Income statement. A copy of the beginning farmer's prior three years'
federal income tax returns (if available) shall be submitted.
c.
Background letter. The
application will also include a background letter on the beginning farmer,
documenting to the satisfaction of the authority sufficient training,
experience and access to capital.
d.
Credit evaluation. The
lender will evaluate the beginning farmer's net worth and ability to pay
principal and interest and certify the sufficiency of security for the
participated loan. The authority will review the application and make its own
credit evaluation prior to issuance of an LPP loan.
e.
Processing LPP loan
applications. Applications for the program will be taken and processed
by the authority on a first-come, first-served basis. The authority reserves
the right to change the program or terminate the approval of LPP loans under
the program at any time. Grounds for termination/suspension of the program
would include, but not be limited to, reaching the maximum allowable limit for
total outstanding LPP loans as established by the authority or changing the
program by order of the Iowa general assembly or by rules promulgated by the
authority.
f.
Security for
participated loans and use of security documents. The lender shall
take any security, cosignatures, guarantees or sureties that are deemed
necessary for any participated loan. Any guarantee of repayment or pledge of
additional collateral required by the lender to secure the participated loan
shall secure the entire participated loan.
g.
Recording documents and
fees. Any recording or filing fees or transfer taxes associated with
the participated loan will be paid by the beginning farmer or lender and not
the authority. Also, the authority will have no responsibility with respect to
the preparation, execution, or filing of any declaration of value or
groundwater hazard statements.
(7)Loan administration
procedures.
a.
Lender's
responsibilities. The lender is responsible for servicing the
participated loan following accepted standards of loan servicing and for
transferring LPP loan payments to the authority.
(1) At the request of the authority, the
lender shall:
1. On an annual basis, provide
the authority with copies of a current financial statement or a current tax
return, or both.
2. Provide copies
of insurance to the authority with the lender named as loss payee. The lender
will apply payments to the participated loan according to the IADD-approved
amortization schedule(s) or on a pro-rata basis.
(2) The lender shall not, without prior
consent of the authority:
1. Make or consent
to any substantial alterations in the terms of any participated loan
instrument;
2. Make or consent to
releases of security or collateral unless replaced with collateral of equal
value on the participated loan;
3.
Accelerate the maturity of the participated loan;
4. Sue upon any participated loan
instrument;
5. Waive any claim
against any beginning farmer, cosignor, guarantor, obligor, or standby creditor
arising out of any instruments.
b.
Payment due dates.
Payment due dates for the LPP loan will be the same as for the lender's share
of the loan.
c.
Prepayment
penalty. There is no penalty for early repayment of principal or
interest.
d.
Repayment
proceeds and collateral. Without limitation, the repayment of proceeds
and collateral shall include rights of setoff and counterclaim, which the
lender or the authority jointly or severally may at any time recover on any
participated loan.
e.
Subsequent loans. Any loan or advance made by a lender to a beginning
farmer subsequent to the beginning farmer's obtaining an LPP loan under the
program and secured by collateral or security pledged for the participated loan
will be subordinate to the participated loan.
f.
Events of loan default.
(1) Default will occur when the participated
loan payment is 30 days past due. Notice to cure will be sent by the lender to
the beginning farmer with a copy sent to the authority; and the lender will
take appropriate steps to cure the default through mediation, liquidation, or
foreclosure if needed.
(2) After a
participated loan is in default for a period of 30 days, the lender shall file
with the authority monthly reports regarding the status of the participated
loan.
(3) The authority may,
anytime a participated loan is in default, purchase the unpaid portion of the
participated loan from the lender including the note, security agreements,
additional guarantees, and other documents. The authority would become the
servicer of the participated loan in such case.
g.
Applying principal and interest
payments. Lenders shall receive all payments of principal and
interest. All payments made prior to liquidation or foreclosure shall be made
according to the IADD-approved amortization schedule(s) or on a pro-rata basis.
All accrued interest must be paid to zero at least annually on the anniversary
date of the note.
h.
Application of proceeds of loan liquidation. Application of proceeds
of loan liquidation will be determined after a written liquidation plan is
approved by the authority or the authority's loan committee. All amounts
recovered upon liquidation or foreclosure will be applied first to the unpaid
balance of the lender's portion and then to the unpaid portion of the LPP
loan's portion. All funds received from liquidation or foreclosure procedures
shall be applied in the following order of priority:
First Priority: To the payment of the outstanding principal of
and accrued interest on the lender's portion of the participated loan;
Second Priority: To the payment of the outstanding principal of
and accrued interest on the authority's LPP loan;
Third Priority: To the payment on a pro-rata basis of all
reasonable and necessary expenses incurred by the lender or the authority in
connection with such liquidation or foreclosure procedures.
(8)Right to
audit. The authority shall have, at any time, the right to audit
records of the lender and the beginning farmer relating to any participated
loan made under the program.