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Home > Grants, Loans & Financing > Loan Programs > Beginning Farmer Loan Program > Rules

Basic Farm Loan Program Rules

Permanent Rules (Annotated)

Applicability and Purpose

Subpart 1. Applicability. Establishes the criteria and procedures to be used by the RFA in the administration of the basic beginning farmer loan participation program authorized by Minnesota Statutes, Chapter 41B.

Subpart 2. Purpose. The purpose of the RFA basic beginning farmer participation program and for the issuance of bonds to finance or provide security for the program is to preserve and develop the state's agricultural resources. This is accomplished by extending credit on real estate security through the purchase of participation interests in first priority mortgage farm real estate loans. Loans to persons entering or currently farming and meeting the eligibility criteria set forth in this chapter are eligible for participation.


Subpart 1. Scope. The definitions in this part apply to all parts of these rules.

Subpart 2. Agricultural purposes or Farming. "Agricultural purposes" or "farming" means the cultivation or use of land or land improvements, and personal property for the production of agricultural crops, vegetables, fruit or other horticultural crops, forest products, bees and apiary products, livestock, dairy animals, dairy products, poultry or poultry products, fur-bearing animals, aquaculture, hydroponics, exotic species of plants or animals, or other agriculturally related products. Agricultural purposes and farming includes the use of wetlands, pasture, forest land, wildlife, and homestead and other real property associated with the agricultural use of land. Agricultural purposes also includes the practices and facilities needed to conserve soil and water, protect human and animal health, have a safe and efficient operation, and meet local, state, and federal laws and regulations relating to the operation of a farm.

Subpart 3. Applicant. "Applicant" means a potential borrower who submits an application to the RFA through an eligible lender.

Subpart 4. Application. "Application" means the application for the basic beginning farmer loan participation in the form provided by the RFA.

Subpart 5. Assets. "Assets" mean property, real or personal, tangible or intangible, and all contract rights of value that constitute assets, including cash crops or feed on hand, livestock held for sale, breeding stock, marketable bonds and securities, securities not readily marketable, accounts receivable, notes receivable, cash invested in growing crops, cash value of life insurance, machinery and equipment, cars and trucks, farm and other real estate including life estates and personal residence, and the value of a beneficial interest in trusts.

Subpart 6. Beginning farmer loan. "Beginning farmer loan" means a first mortgage loan made by an eligible lender to an eligible borrower, offered to the RFA for participation, and in which the RFA has purchased a participation.

Subpart 7. Borrower. "Borrower" means the person or persons liable on a first mortgage participation made under this program. A borrower may also be a domestic family farm corporation or a family farm partnership, as defined in Minnesota Statutes, section 500.24.

Subpart 8. Debt to asset ratio. "Debt to asset ratio" means the total outstanding liabilities of an applicant divided by the total outstanding assets of the applicant expressed as a percentage.

Subpart 9. Executive director. "Executive director" means the executive director of the RFA or any other officer authorized to act on behalf of the RFA board or its executive director.

Subpart 10. Liabilities: "Liabilities" means the debts or other obligations for which an applicant is responsible including: accounts payable, notes or other indebtedness, taxes, rent, amount owed on real estate contracts or mortgages, judgments, and accrued interest payable.

Subpart 11. Net Worth. "Net worth" means the total value of an applicant's assets and the assets of the applicant's spouse and dependents, less the liabilities of the same parties.

Subpart 12. Note and Loan Agreement. "Note and loan agreement" means the form provided by the RFA that is signed by a borrower evidencing the terms of the first mortgage loan and the borrower's obligation to repay the loan.

Subpart 13. Participation Agreement. "Participation agreement" means the document entered into between the RFA and an approved lender that establishes the relationship between the parties and the terms and conditions of first mortgage loans to be offered to the RFA for participation under the basic beginning farmer participation program.

Subpart 14. RFA. "RFA" means the Rural Finance Authority established by Minnesota Statutes, section 41B.025.

Subpart 15. RFA beginning farmer program. "RFA beginning farmer program" means the RFA program for the purchase of participation interest in first mortgage real estate loans made to eligible borrowers so that the borrowers may use the real estate for agricultural purposes.

Subpart 16. RFA Participation. "RFA participation" means the RFA's undivided interest in the principal of a first mortgage loan, all rights and interests in the loan documents, all payments arising under the loan, the first security real estate mortgage securing the loan, any other collateral pledged to secure the loan.

Borrower Eligibility

Subpart 1. Criteria. To be eligible for assistance under the basic beginning farmer program, an applicant must meet the criteria in subparts two (2) and three (3):

Subpart 2. General Eligibility Criteria. Each applicant must:

  1. Be a resident of Minnesota (evidenced by the applicant's income tax returns - new residents may submit other evidence, if acceptable to the RFA), a domestic family farm corporation, or a family farm partnership.
  2. Certify that the applicant or one of the applicants will be the principal operator of the farm and will make farming that applicant's principal occupation, and that the farm being purchased will be used for agricultural purposes only;
  3. Certify that the applicant is eligible for the program.
  4. Submit the correct fees as determined by the RFA.
  5. Not be a current or previous participant in the RFA Restructure II Program.

Subpart 3. Beginning Farmer Criteria. In addition to the requirements of subpart 2, a beginning farmer applicant must:

  1. Have sufficient education, training, or experience to succeed in the type of farming to be undertaken;
  2. Have a financial need for the loan and the ability to repay the first mortgage loan;
  3. Agree to enroll and continue in a farm business management program approved by the Minnesota commissioner of agriculture for the first three years of the loan, if an approved program is available within 45 miles from the borrower's residence;
  4. Visit the soil and water conservation district office or the natural resources conservation service in the county where the land is located to inquire about the soil and water conservation needs for the identified farm property;
  5. Have a total net worth not to exceed current RFA guidelines as adjusted for inflation (see 41B.03, subd. 3). Call RFA office for current quote.

Lender Eligibility

Subpart 1. Statutory Eligibility. A bank, credit union, or savings association chartered by the state or federal government, a subdivision of the farm credit system (Agri Bank), the Federal Deposit Insurance Corporation, or any insurance company, fund, or other financial institution doing business as an agricultural lender within the state may apply to the RFA for certification as an approved lender.

Subpart 2. Approval. Upon a lender's demonstration of its ability to originate and service agricultural real estate loans, the RFA shall designate it as an approved lender for purposes of RFA programs.

Subpart 3. Participation Agreement. Before offering first mortgage loans to the RFA for participation, each approved lender must enter into an RFA master participation agreement. The agreement must specify the contractual relationship between the parties and the terms and conditions of first mortgage loans to be made by the lender under the basic beginning farmer program and offered to the RFA for participation.

Application Process and Offer of Participation

Subpart 1. Request for a First Mortgage Loan. A lender and an applicant must jointly complete and sign an application and prepare all supporting documents identified in the application.

Subpart 2. Lender Determination. The lender shall review the proposal and determine the creditworthiness of the applicant and the value of the collateral to be used to secure the loan. If the lender agrees to make a first mortgage loan to the applicant, the lender and the applicant shall jointly prepare the application and the required loan documents.

Subpart 3. Offer. The lender, as the originator of the first mortgage loan, shall present the application and loan documents to the RFA. Presentation of the documents constitutes an offer to sell a participation interest in the loan.

RFA Review, Notice, Appeal

Subpart 1. RFA Review. The RFA shall accept or reject the lender's offer to participate in the loan within 30 business days after receipt of the lenders offer (we strive to respond within 10 business days). If the documentation is not sufficient to make a determination, the RFA may request additional information to establish creditworthiness and eligibility of the applicant.

Subpart 2. RFA Acceptance. The RFA shall accept an offer if:

  1. The applicant is eligible.
  2. The applicant demonstrates an ability to repay the first mortgage loan and other obligations based on the financial information submitted.
  3. The sale price of the property is not substantially in excess of its fair market value.
  4. The RFA has sufficient funds available to purchase a participation in the loan.

Subpart 3. RFA Notice. The RFA shall promptly notify the lender in writing whether or not the offer is accepted. If the offer is not accepted, the notice must state the reasons.

Subpart 4. Administrative Appeal. If an offer is rejected, either the lender or the applicant may petition for RFA reconsideration. The petition must be in writing and must be sent within 30 working days of the date of the RFA notice. The petition must state the grounds for the appeal, and may include additional relevant information. Within 15 working days of receiving the petition, the executive director shall send a written response to the petitioner upholding or reversing the original decision and giving the reasons for the decision.

Subpart 5. Formal Appeal. After administrative appeal, a petitioner may appeal the executive director's decision directly to the RFA board by written notice to the executive director within 15 days of receiving the director's reconsideration decision. The decision of the board is final.

Loan Closing, Purchase of Participation, and Loan Management

Subpart 1. Closing. Upon receiving notification of RFA acceptance, the lender shall close the first mortgage loan. The lender must record and cross-reference all documents relating to the loan including the RFA note and loan agreement. The lender must notify the RFA that the loan is closed and recorded by certifying and submitting the original RFA application and submit a copy of the note and loan agreement, copies of the recorded documents, and the final title opinion to the RFA.

Subpart 2. Payment. Within ten business days of receipt of written notice under subpart 1 that the first mortgage loan is closed and recorded, the RFA shall initiate payment to the lender for the RFA's participation interest in the loan.

Subpart 3. Participation Certificate. Within five working days after the receipt of payment under subpart 2, the lender shall complete and return a participation certificate, as provided by the RFA, witnessing the RFA's undivided pro-rata interest in the basic beginning farmer first mortgage loan.

Subpart 4. Loan Management. The lender shall manage the first mortgage loan, including the RFA participation interest, with the degree of care and diligence usually maintained by agricultural real estate lenders. The lender shall have custody and control of all loan documents except the original application, which must be kept by the RFA. The lender shall manage, administer, and enforce the loan documents in its own name and also on behalf of itself and the RFA, including, without limitation, the right to accelerate a basic beginning farmer first mortgage loan on default and to foreclose or otherwise enforce remedies against the borrower.

Subpart 5. Lender Notification. The lender shall promptly notify the RFA of occurrences that substantially affect the security, collection, or enforcement of any first mortgage loan.

Subpart 6. Prior Written Consent. The lender shall obtain the prior written consent of the borrower and the RFA before:

  1. Making or consenting to a release, substitution, or exchange of collateral that reduces the aggregate value of the collateral;
  2. Waiving a claim against the borrower or a guarantor, surety, or obligor in connection with the indebtedness; or
  3. Modifying or waiving a term of the notes or related instruments evidencing or securing the first mortgage loan.

Participation Repurchase

An originating lender is under no obligation to repurchase any RFA participation interest in a basic beginning farmer first mortgage loan except as provided in this section.

A lender may, at its option and upon written approval by the RFA, repurchase a RFA participation interest at anytime.

A lender must repurchase the RFA participation interest whenever the first mortgage loan is paid in full or refinanced.

A lender must repurchase the RFA participation interest if the lender has made misrepresentations or fails to perform its obligations under the participation agreement, has received written notice from the RFA, and has not corrected the representation or performance under the notice.

Any repurchase shall be for the principal balance of the RFA participation plus accrued interest and any penalties or costs incurred by the RFA to secure repurchase.

Review of Loan and Collateral

Subpart 1. Inspection. At any time during the term of a basic beginning farmer first mortgage loan, the RFA or the state legislative auditor may inspect the books, records, documents, and accounting practices of the lender relative to the loan to determine compliance with the terms and condition of the loan and the participation agreement. Inspections must be during the lender's normal business hours. The lender must allow the RFA to copy any documents relating to the first mortgage loan and the RFA participation.

Subpart 2. Collateral. The lender and the RFA may physically inspect the collateral securing the first mortgage loan upon notice to the borrower. An inspection must be conducted at a reasonable time.


MDA Contact

Ryan Roles, Senior Loan Officer
Ryan.Roles@state.mn.us ~ 651-201-6666
Finance & Budget Division