265—44.5(16) Loan participation program.
	44.5(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.
	44.5(2) Underwriting criteria. Commercial underwriting criteria will be used as determined by the authority.
	44.5(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.
	44.5(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.
	44.5(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.
	44.5(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.
	44.5(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.
	44.5(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.
[ARC 1112C, IAB 10/16/13, effective 9/26/13; ARC 1400C, IAB 4/2/14, effective 5/7/14; ARC 2009C, IAB 5/27/15, effective 7/1/15; ARC 2226C, IAB 10/28/15, effective 12/2/15; ARC 4902C, IAB 2/12/20, effective 3/18/20]