The first protection for ag borrowers during foreclosure
Posted on 03/02/2017 at 09:47 AM by Mollie Pawlosky
The first protection: The lender must give the borrower a notice to cure default.
A creditor shall not initiate an action to foreclose on a mortgage on agricultural land, unless the creditor has given the borrower a notice to cure default. “Agricultural land,” is defined as, “land suitable for use in farming.”
So, the borrower has the right to receive a notice to cure default, UNLESS the lender has already given the notice with regard to TWO prior defaults on the mortgage, OR the lender has given notice once within the past 12 months, OR the borrower has voluntarily surrendered possession of the land in satisfaction of the debt.
The notice of right to cure has to be in writing. The notice is deemed received, if it is sent by certified mail to the borrower. The borrower has 45 days to cure the default after notice is given. The time period for a request for mediation (to be discussed in a later blog) runs concurrently.
The notice to cure has to “conspicuously” state:
• the name, address, and telephone number of the creditor or other person to which payment is to be made,
• a brief identification of the obligation secured by the deed of trust or mortgage and of the borrower's right to cure the default,
• a statement of the nature of the right to cure the default,
• a statement of the nature of the alleged default,
• a statement of the total payment, including an itemization of any delinquency or deferral charges, or other performance necessary to cure the alleged default,
• the exact date by which the amount must be paid or performance tendered,
• and a statement that if the borrower does not cure the alleged default, the creditor or a person acting on behalf of the creditor is entitled to proceed with initiating a foreclosure action or procedure.
The failure of the notice of right to cure to comply with these requirements is not a defense or claim in any action, and the failure to give the notice does not invalidate the foreclosure, UNLESS the person asserting the defense, claim, or invalidity proves that they were somehow “substantially prejudiced” by such failure.
During the 45 days after notice is given, the borrower may cure the default by tendering either: the amount of all unpaid installments due at the time of tender, without acceleration, plus a delinquency charge of the scheduled annual interest rate plus five percent per annum for the period between the giving of the notice of right to cure and the tender, OR the amount stated in the notice of right to cure, whichever is less, OR by tendering any performance necessary to cure a default other than nonpayment of amounts due, which is described in the notice of right to cure. Curing default restores the borrower's rights under the obligation and mortgage.
Mollie’s second blog in the series addresses mediation and receivership preferences. For specific questions on issues that lenders face in agricultural foreclosures, contact Mollie directly at email@example.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.
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