The fourth protection for ag borrowers during foreclosure

The fourth protection for ag borrowers:  The borrower is allowed to seek a continuance.
A continuance may allow the mortgagor the chance to refinance or pay the indebtedness and save the farm.
In all actions for the foreclosure of real estate mortgages, when the owner enters an appearance, AND files an answer admitting some indebtedness and breach of the terms of the note, which admissions cannot be withdrawn or denied after a continuance is granted, the owner may apply in writing, before final decree, for a continuance of the foreclosure action, IF the default or inability of the owner to pay or perform is mainly due or brought about by reason of drought, flood, heat, hail, storm, or other climatic conditions, OR by reason of the infestation of pests which affect the land in controversy.
Upon the filing of the application, the court shall set a day for hearing on the application and provide by order for notice to be given to the plaintiff of the time fixed for the hearing.

If the court finds that the application is made in good faith and is supported by competent evidence showing that default in payment or inability to pay is due to drought, flood, heat, hail, storm, or other climatic conditions or due to infestation of pests, the court may continue the foreclosure proceeding as follows:

•    If the default or breach of terms of the note occurs on or before the first day of March of any year, causing the loss and failure of crops on the land involved in the previous year, the continuance shall end on the first day of March of the succeeding year.

•    If the default or breach of terms of the note occurs after the first day of March, but during that crop year, and that year's crop fails by reason of any of the causes set out in this subsection, the continuance shall end on the first day of March of the second succeeding year.

Only one continuance shall be granted, except upon a showing of extraordinary circumstances, in which event the court may grant a second continuance for a further period as the court deems just and equitable, not to exceed one year.

The order shall provide for the appointment of a receiver to take charge of the property and to rent the property. The owner is given preference in the occupancy of the property.  The receiver, who may be the owner, shall collect the rents and income and distribute the proceeds:
•    For the payment of the costs of receivership.
•    For the payment of taxes due or becoming due during the period of receivership.
•    For the payment of insurance on the buildings on the premises.
•    The remaining balance shall be paid to the owner of the written instrument upon which the foreclosure is based, to be credited on the instrument.

Mollie’s next blog in the series addresses the ag lender’s inability to foreclose without redemption.  For specific questions on issues that lenders face in agricultural foreclosures, contact Mollie directly at mpawlosky@dickinsonlaw.com.

This blog is derived from a presentation given by Mollie Pawlosky during the Dickinson Law Firm’s Webinar Series, “Avoiding Aggravation in Ag Lending.”  The webinars advised financial institutions regarding aspects of agricultural lending.  Mollie’s presentation advised clients of special protections for agricultural borrowers during foreclosure.  This blog is the first in a series of five blogs based on Mollie’s presentation.

The material in this blog is not intended, nor should it be construed or relied upon, as legal advice. Please consult with an attorney if specific legal information is needed.