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Home > Grants, Loans & Financing > Loan Programs > Restructure II Loan Program > Rules

Restructure II Loan Program Rules

Permanent Rules (Annotated) - Revised October 2005 Restructure II Loan Program


Subpart 1. Applicability. Parts 1653.0011 to 1653.0111 establish the criteria and procedures to be used by the RFA in administering the restructure participation program authorized by Minnesota Statutes, section 41B.04.

Subp. 2. Purpose. The purpose of the RFA restructure II program and 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.

1653.0021 DEFINITIONS.

Subpart 1. Scope. The definitions in this part apply to parts 1653.0011 to 1653.0111 and the master participation agreement. 

Subp. 2. Agricultural purposes. "Agricultural purposes" means the cultivation or use of land, 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, and other agriculturally related products. "Agricultural purposes" also 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, rules, and regulations relating to the operation of a farm.

Subp. 3. Amortized loan. "Amortized loan" means a loan that will be fully paid, including all principal and interest, in a specific period of time.

Subp. 4. Annual expenses. "Annual expenses" means the total of all expenses incurred during the year plus an estimate of family living expenses.

Subp. 5. Annual gross income. "Annual gross income" means the total of all income earned on or off the farm for the calendar year.

Subp. 6. Applicant. "Applicant" means a potential borrower who submits an application to the RFA through an eligible lender.

Subp. 7. Application. "Application" means the application for the restructure loan participation in the form provided by the RFA.

Subp. 8. Appraised value. "Appraised value" means the dollar value placed on the farm being offered for collateral for a first mortgage loan.

Subp. 9. Assets. "Assets" means property, real or personal, tangible or intangible, and all valuable contract rights, 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, trucks, farm and other real estate including life estates and personal residence, and the value of a beneficial interest in trusts.

Subp. 10. Borrower. "Borrower" means the person or persons liable on a first mortgage loan participation made under this program.

Subp. 11. 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.

Subp. 11a. First mortgage loan, mortgage loan, or loan. “First mortgage loan,” “mortgage loan,” or “loan” means a loan participation under this program which is secured by a first mortgage on real property.

Subp. 12. Liabilities. "Liabilities" means debts or other obligations for which an applicant is responsible, including accounts payable, notes or other indebtedness owed, taxes, rent, amount owed on real estate contracts or mortgages, judgments, and accrued interest payable.

Subp. 13. 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.

Subp. 14. 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.

Subp. 15. 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 RFA restructure II program.

Subp. 16. Restructure loan. "Restructure 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.

Subp. 17. RFA. "RFA" means the Rural Finance Authority established by Minnesota Statutes, section 41B.025.

Subp. 18. 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, and any other collateral pledged to secure the loan.

Subp. 19. RFA restructure II program. "RFA restructure II program" means the RFA program redefined on or after July 1, 1993, for the purchase of a participation interest in first mortgage real estate loans made to eligible borrowers so that the borrowers may reorganize their agricultural debt.


Subpart 1. Criteria. To be eligible for assistance under the RFA restructure II program, an applicant must meet the criteria in subpart 2.

Subp. 2. General requirements. Each applicant must:

  1. meet the requirements of Minnesota Statutes section 41B.03, subdivision 1 and 2; and
  2. obtain a signature on the program application from the local soil and water conservation service office in the county where the land is located which verifies if a soil and water conservation plan has been submitted, if needed for the identified farm property.


The RFA may participate only in loans that do not exceed 80 percent of the appraised value of the real estate offered for collateral. Additional collateral may be required based on the depreciability and saleability of the collateral and creditworthiness of the applicant.

1653.0051 APPRAISAL.

The appraisal to determine appraised value must be completed by a person with knowledge of agricultural appraising that is approved by both the lender and the RFA. An appraisal must be completed in a manner approved by the appraisal industry and must contain comparable sales information. If comparable sales information is not available, either the cost approach or the income approach must be used.


Subpart 1. Statutory eligibility. Any 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.

Subp. 2. Approval. If a lender demonstrates its ability to originate and service agricultural real estate loans, the RFA shall designate the lender as an approved lender for purposes of RFA programs.

Subp. 3. Participation agreement. Before offering first mortgage loans to the RFA for participation, each approved lender must enter into an RFA master participation agreement specifying the relationship between the parties and the terms and conditions of first mortgage loans to be made by the lender under the restructure participation program and offered to the RFA for 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. Financial statements must be dated within 120 days of the application.

Subp. 2. Lender determination. The lender shall complete the initial review of the applicant's proposal. The lender shall 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.

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


Subpart 1. RFA review. Within 30 days after receipt of a lender's offer the RFA shall accept or reject the lender's offer to participate in the loan. If the documentation is not sufficient to make a determination, the RFA may request additional information to establish the creditworthiness and eligibility of an applicant.

Subp. 2. RFA acceptance. The RFA shall accept applications if:

  1. the applicant meets all eligibility criteria in this chapter and Minnesota Statutes, chapter 41B;
  2. the applicant demonstrates an ability to repay the first mortgage loan and other obligations based on financial information submitted with the application;
  3. collateral offered as security for the first mortgage real estate loan is sufficient to protect the state's interests; and
  4. the RFA has sufficient funds available to purchase a participation in the loan.

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

Subp. 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 RFA program director shall send a written response to the petitioner upholding or reversing the original decision and giving the reasons for the decision.

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


Subpart 1. Closing. Upon receiving notification of RFA acceptance, the lender shall close the first mortgage loan. The lender must record security documents relating to the loan. The lender must notify the RFA that the loan is closed and recorded by completing the lender certification section and returning the original RFA application, a copy of the note and loan agreement, copies of recorded documents, and the final title opinion to the RFA.

Subp. 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.

Subp. 3. Participation certificate. Within five business days after the receipt of finally collected funds, the lender shall complete and return a participation certificate as provided by the RFA witnessing the RFA's undivided pro rata interest in the first mortgage loan.

Subp. 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 first mortgage loans on default and to foreclose or otherwise enforce remedies against the borrower.

Subp. 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.

Subp. 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.


An originating lender is under no obligation to repurchase an RFA participation interest in a restructure first mortgage loan covered by parts 1653.0011 to 1653.0111 except as provided in this part.

A lender may, at its option and upon written approval by the RFA, repurchase an RFA participation interest at any time.

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:

  1. has made misrepresentations or is aware that the applicant has made them or fails to perform its obligations under the participation agreement;
  2. has received written notice from the RFA; and
  3. has not corrected the representation or performance under the notice.

A repurchase under this part must be for the principal balance of the RFA participation plus accrued interest and any penalties or costs incurred by the RFA to secure repurchase.


Subpart 1. Inspection. At any time during the term of a restructure 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 conditions of the loan and the participation agreement. An inspection 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.

Subp. 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