93RD GENERAL ASSEMBLY
State of Illinois
2003 and 2004
HB6958

 

Introduced 02/09/04, by Patricia Reid Lindner - Patricia R. Bellock, Richard P. Myers

 

SYNOPSIS AS INTRODUCED:
 
20 ILCS 3501/830-30
20 ILCS 3501/830-35
20 ILCS 3501/830-45
20 ILCS 3501/830-50

    Amends the Agricultural Assistance Article of the Illinois Finance Authority Act. Provides that to be eligible for certain State guarantees, a farmer must be a principal operator of a farm or land, at least 30% (instead of 50%) of whose annual income is derived from farming and whose debt to asset ratio shall not exceed the maximum limit established by the Illinois Finance Authority (instead of "shall not be less than 40%"). Provides that State guarantees under certain programs shall not exceed $750,000 (instead of $500,000). Provides that the collateral acceptable to the Authority must be at least equal to the gross loan amount (instead of "at least equal to the State's portion of the Guarantee to be provided"). Deletes a provision that to be eligible for State guarantees, a farmer's net worth may not exceed $500,000. Deletes a provision stating that a lender may not withdraw a State guarantee if the loan contract provides for an interest rate that may vary. Changes the name of the "Young Farmer Loan Guarantee Program" to the "Illinois Farmer Loan Guarantee Program". Makes other changes. Effective immediately.


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FISCAL NOTE ACT MAY APPLY

 

 

A BILL FOR

 

HB6958 LRB093 17831 SJM 47320 b

1     AN ACT concerning finance.
 
2     Be it enacted by the People of the State of Illinois,
3 represented in the General Assembly:
 
4     Section 5. The Illinois Finance Authority Act is amended by
5 changing Sections 830-30, 830-35, 830-45, and 830-50 as
6 follows:
 
7     (20 ILCS 3501/830-30)
8     Sec. 830-30. State Guarantees for existing debt.
9     (a) The Authority is authorized to issue State Guarantees
10 for farmers' existing debts held by a lender. For the purposes
11 of this Section, a farmer shall be a resident of Illinois, who
12 is a principal operator of a farm or land, at least 30% 50% of
13 whose annual gross income is derived from farming and whose
14 debt to asset ratio shall not exceed the maximum established by
15 the Authority be less than 40%, except in those cases where the
16 applicant has previously used the guarantee program there shall
17 be no debt to asset ratio or income restriction. For the
18 purposes of this Section, debt to asset ratio shall mean the
19 current outstanding liabilities of the farmer divided by the
20 current outstanding assets of the farmer. The Authority shall
21 establish the maximum permissible debt to asset ratio based on
22 criteria established by the Authority.
23      Lenders shall apply for the State Guarantees on forms
24 provided by the Authority and certify that the application and
25 any other documents submitted are true and correct. The lender
26 or borrower, or both in combination, shall pay an
27 administrative fee as determined by the Authority. The
28 applicant shall be responsible for paying any fees or charges
29 involved in recording mortgages, releases, financing
30 statements, insurance for secondary market issues and any other
31 similar fees or charges as the Authority may require. The
32 application shall at a minimum contain the farmer's name,

 

 

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1 address, present credit and financial information, including
2 cash flow statements, financial statements, balance sheets,
3 and any other information pertinent to the application, and the
4 collateral to be used to secure the State Guarantee. In
5 addition, the lender must agree to bring the farmer's debt to a
6 current status at the time the State Guarantee is provided and
7 must also agree to charge a fixed or adjustable interest rate
8 which the Authority determines to be below the market rate of
9 interest generally available to the borrower. If both the
10 lender and applicant agree, the interest rate on the State
11 Guarantee Loan can be converted to a fixed interest rate at any
12 time during the term of the loan.
13     Any State Guarantees provided under this Section (i) shall
14 not exceed $750,000 $500,000 per farmer, (ii) shall be set up
15 on a payment schedule not to exceed 30 years, and shall be no
16 longer than 30 years in duration, and (iii) shall be subject to
17 an annual review and renewal by the lender and the Authority;
18 provided that only one such State Guarantee shall be
19 outstanding per farmer at any one time. No State Guarantee
20 shall be revoked by the Authority without a 90-day notice, in
21 writing, to all parties. In those cases where the borrower has
22 not previously used the guarantee program, the lender shall not
23 call due any loan during the first 3 years for any reason
24 except for lack of performance or insufficient collateral. The
25 lender can review and withdraw or continue with the State
26 Guarantee on an annual basis after the first 3 years of the
27 loan, provided a 90-day notice, in writing, to all parties has
28 been given.
29     (b) The Authority shall provide or renew a State Guarantee
30 to a lender if:
31         (i) A fee equal to 25 basis points on the loan is paid
32     to the Authority on an annual basis by the lender.
33         (ii) The application provides collateral acceptable to
34     the Authority that is at least equal to the gross loan
35     amount State's portion of the Guarantee to be provided.
36         (iii) The lender assumes all responsibility and costs

 

 

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1     for pursuing legal action on collecting any loan that is
2     delinquent or in default.
3         (iv) The lender is responsible for the first 15% of the
4     outstanding principal of the note for which the State
5     Guarantee has been applied.
6     (c) There is hereby created outside of the State treasury a
7 special fund to be known as the Illinois Agricultural Loan
8 Guarantee Fund. The State Treasurer shall be custodian of this
9 Fund. Any amounts in the Illinois Agricultural Loan Guarantee
10 Fund not currently needed to meet the obligations of the Fund
11 shall be invested as provided by law, and all interest earned
12 from these investments shall be deposited into the Fund until
13 the Fund reaches the maximum amount authorized in this Act;
14 thereafter, interest earned shall be deposited into the General
15 Revenue Fund. After September 1, 1989, annual investment
16 earnings equal to 1.5% of the Fund shall remain in the Fund to
17 be used for the purposes established in Section 830-40 of this
18 Act.
19     The Authority is authorized to transfer to the Fund such
20 amounts as are necessary to satisfy claims during the duration
21 of the State Guarantee program to secure State Guarantees
22 issued under this Section. If for any reason the General
23 Assembly fails to make an appropriation sufficient to meet
24 these obligations, this Act shall constitute an irrevocable and
25 continuing appropriation of an amount necessary to secure
26 guarantees as defaults occur and the irrevocable and continuing
27 authority for, and direction to, the State Treasurer and the
28 Comptroller to make the necessary transfers to the Illinois
29 Agricultural Loan Guarantee Fund, as directed by the Governor,
30 out of the General Revenue Fund.
31     Within 30 days after November 15, 1985, the Authority may
32 transfer up to $7,000,000 from available appropriations into
33 the Illinois Agricultural Loan Guarantee Fund for the purposes
34 of this Act. Thereafter, the Authority may transfer additional
35 amounts into the Illinois Agricultural Loan Guarantee Fund to
36 secure guarantees for defaults as defaults occur.

 

 

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1     In the event of default by the farmer, the lender shall be
2 entitled to, and the Authority shall direct payment on, the
3 State Guarantee after 90 days of delinquency. All payments by
4 the Authority shall be made from the Illinois Agricultural Loan
5 Guarantee Fund to satisfy claims against the State Guarantee.
6 The Illinois Agricultural Loan Guarantee Fund shall guarantee
7 receipt of payment of the 85% of the principal and interest
8 owed on the State Guarantee Loan by the farmer to the guarantee
9 holder.
10     It shall be the responsibility of the lender to proceed
11 with the collecting and disposing of collateral on the State
12 Guarantee within 14 months of the time the State Guarantee is
13 declared delinquent; provided, however, that the lender shall
14 not collect or dispose of collateral on the State Guarantee
15 without the express written prior approval of the Authority. If
16 the lender does not dispose of the collateral within 14 months,
17 the lender shall be liable to repay to the State interest on
18 the State Guarantee equal to the same rate which the lender
19 charges on the State Guarantee; provided, however, that the
20 Authority may extend the 14-month period for a lender in the
21 case of bankruptcy or extenuating circumstances. The Fund shall
22 be reimbursed for any amounts paid under this Section upon
23 liquidation of the collateral. The Authority, by resolution of
24 the Board, may borrow sums from the Fund and provide for
25 repayment as soon as may be practical upon receipt of payments
26 of principal and interest by a farmer. Money may be borrowed
27 from the Fund by the Authority for the sole purpose of paying
28 certain interest costs for farmers associated with selling a
29 loan subject to a State Guarantee in a secondary market as may
30 be deemed reasonable and necessary by the Authority.
31     (d) Notwithstanding the provisions of this Section 830-30
32 with respect to the farmers and lenders who may obtain State
33 Guarantees, the Authority may promulgate rules establishing
34 the eligibility of farmers and lenders to participate in the
35 State guarantee program and the terms, standards, and
36 procedures that will apply, when the Authority finds that

 

 

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1 emergency conditions in Illinois agriculture have created the
2 need for State Guarantees pursuant to terms, standards, and
3 procedures other than those specified in this Section.
4 (Source: P.A. 93-205, eff. 1-1-04.)
 
5     (20 ILCS 3501/830-35)
6     Sec. 830-35. State Guarantees for loans to farmers and
7 agribusiness; eligibility.
8     (a) The Authority is authorized to issue State Guarantees
9 to lenders for loans to eligible farmers and agribusinesses for
10 purposes set forth in this Section. For purposes of this
11 Section, an eligible farmer shall be a resident of Illinois (i)
12 who is principal operator of a farm or land, at least 30% 50%
13 of whose annual gross income is derived from farming, and (ii)
14 whose annual total sales of agricultural products,
15 commodities, or livestock exceeds $20,000, and (iii) whose net
16 worth does not exceed $500,000. An eligible agribusiness shall
17 be that as defined in Section 801-10 of this Act.
18     The Authority may approve applications by farmers and
19 agribusinesses that promote diversification of the farm
20 economy of this State through the growth and development of new
21 crops or livestock not customarily grown or produced in this
22 State or that emphasize a vertical integration of grain or
23 livestock produced or raised in this State into a finished
24 agricultural product for consumption or use. "New crops or
25 livestock not customarily grown or produced in this State"
26 shall not include corn, soybeans, wheat, swine, or beef or
27 dairy cattle. "Vertical integration of grain or livestock
28 produced or raised in this State" shall include any new or
29 existing grain or livestock grown or produced in this State.
30     Lenders shall apply for the State Guarantees on forms
31 provided by the Authority, certify that the application and any
32 other documents submitted are true and correct, and pay an
33 administrative fee as determined by the Authority. The
34 applicant shall be responsible for paying any fees or charges
35 involved in recording mortgages, releases, financing

 

 

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1 statements, insurance for secondary market issues and any other
2 similar fees or charges as the Authority may require. The
3 application shall at a minimum contain the farmer's or
4 agribusiness' name, address, present credit and financial
5 information, including cash flow statements, financial
6 statements, balance sheets, and any other information
7 pertinent to the application, and the collateral to be used to
8 secure the State Guarantee. In addition, the lender must agree
9 to charge an interest rate, which may vary, on the loan that
10 the Authority determines to be below the market rate of
11 interest generally available to the borrower. If both the
12 lender and applicant agree, the interest rate on the State
13 Guarantee Loan can be converted to a fixed interest rate at any
14 time during the term of the loan.
15     Any State Guarantees provided under this Section (i) shall
16 not exceed $500,000 per farmer or an amount as determined by
17 the Authority on a case-by-case basis for an agribusiness, (ii)
18 shall not exceed a term of 30 15 years, and (iii) shall be
19 subject to an annual review and renewal by the lender and the
20 Authority; provided that only one such State Guarantee shall be
21 made per farmer or agribusiness, except that additional State
22 Guarantees may be made for purposes of expansion of projects
23 financed in part by a previously issued State Guarantee. No
24 State Guarantee shall be revoked by the Authority without a
25 90-day notice, in writing, to all parties. The lender shall not
26 call due any loan for any reason except for lack of
27 performance, insufficient collateral, or maturity. A lender
28 may review and withdraw or continue with a State Guarantee on
29 an annual basis after the first 5 years following closing of
30 the loan application if the loan contract provides for an
31 interest rate that shall not vary. A lender shall not withdraw
32 a State Guarantee if the loan contract provides for an interest
33 rate that may vary, except for reasons set forth herein.
34     (b) The Authority shall provide or renew a State Guarantee
35 to a lender if:
36         (i) A fee equal to 25 basis points on the loan is paid

 

 

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1     to the Authority on an annual basis by the lender.
2         (ii) The application provides collateral acceptable to
3     the Authority that is at least equal to the gross loan
4     amount State's portion of the Guarantee to be provided.
5         (iii) The lender assumes all responsibility and costs
6     for pursuing legal action on collecting any loan that is
7     delinquent or in default.
8         (iv) The lender is responsible for the first 15% of the
9     outstanding principal of the note for which the State
10     Guarantee has been applied.
11     (c) There is hereby created outside of the State treasury a
12 special fund to be known as the Illinois Farmer and
13 Agribusiness Loan Guarantee Fund. The State Treasurer shall be
14 custodian of this Fund. Any amounts in the Fund not currently
15 needed to meet the obligations of the Fund shall be invested as
16 provided by law, and all interest earned from these investments
17 shall be deposited into the Fund until the Fund reaches the
18 maximum amounts authorized in this Act; thereafter, interest
19 earned shall be deposited into the General Revenue Fund. After
20 September 1, 1989, annual investment earnings equal to 1.5% of
21 the Fund shall remain in the Fund to be used for the purposes
22 established in Section 830-40 of this Act.
23     The Authority is authorized to transfer such amounts as are
24 necessary to satisfy claims from available appropriations and
25 from fund balances of the Farm Emergency Assistance Fund as of
26 June 30 of each year to the Illinois Farmer and Agribusiness
27 Loan Guarantee Fund to secure State Guarantees issued under
28 this Section and Sections 830-45 and 830-50. If for any reason
29 the General Assembly fails to make an appropriation sufficient
30 to meet these obligations, this Act shall constitute an
31 irrevocable and continuing appropriation of an amount
32 necessary to secure guarantees as defaults occur and the
33 irrevocable and continuing authority for, and direction to, the
34 State Treasurer and the Comptroller to make the necessary
35 transfers to the Illinois Farmer and Agribusiness Loan
36 Guarantee Fund, as directed by the Governor, out of the General

 

 

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1 Revenue Fund.
2     In the event of default by the borrower on State Guarantee
3 Loans under this Section, Section 830-45 or Section 830-50, the
4 lender shall be entitled to, and the Authority shall direct
5 payment on, the State Guarantee after 90 days of delinquency.
6 All payments by the Authority shall be made from the Illinois
7 Farmer and Agribusiness Loan Guarantee Fund to satisfy claims
8 against the State Guarantee.
9     It shall be the responsibility of the lender to proceed
10 with the collecting and disposing of collateral on the State
11 Guarantee under this Section, Section 830-45 or Section 830-50
12 within 14 months of the time the State Guarantee is declared
13 delinquent. If the lender does not dispose of the collateral
14 within 14 months, the lender shall be liable to repay to the
15 State interest on the State Guarantee equal to the same rate
16 that the lender charges on the State Guarantee, provided that
17 the Authority shall have the authority to extend the 14-month
18 period for a lender in the case of bankruptcy or extenuating
19 circumstances. The Fund shall be reimbursed for any amounts
20 paid under this Section, Section 830-45 or Section 830-50 upon
21 liquidation of the collateral.
22     The Authority, by resolution of the Board, may borrow sums
23 from the Fund and provide for repayment as soon as may be
24 practical upon receipt of payments of principal and interest by
25 a borrower on State Guarantee Loans under this Section, Section
26 830-45 or Section 830-50. Money may be borrowed from the Fund
27 by the Authority for the sole purpose of paying certain
28 interest costs for borrowers associated with selling a loan
29 subject to a State Guarantee under this Section, Section 830-45
30 or Section 830-50 in a secondary market as may be deemed
31 reasonable and necessary by the Authority.
32     (d) Notwithstanding the provisions of this Section 830-35
33 with respect to the farmers, agribusinesses, and lenders who
34 may obtain State Guarantees, the Authority may promulgate rules
35 establishing the eligibility of farmers, agribusinesses, and
36 lenders to participate in the State Guarantee program and the

 

 

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1 terms, standards, and procedures that will apply, when the
2 Authority finds that emergency conditions in Illinois
3 agriculture have created the need for State Guarantees pursuant
4 to terms, standards, and procedures other than those specified
5 in this Section.
6 (Source: P.A. 93-205, eff. 1-1-04.)
 
7     (20 ILCS 3501/830-45)
8     Sec. 830-45. Illinois Young Farmer Loan Guarantee Program.
9     (a) The Authority is authorized to issue State Guarantees
10 to lenders for loans to finance or refinance debts of young
11 farmers. For the purposes of this Section, a young farmer is a
12 resident of Illinois who is at least 18 years of age and who is
13 a principal operator of a farm or land, who derives at least
14 30% 50% of annual gross income from farming, whose net worth is
15 not less than $10,000 and whose debt to asset ratio does not
16 exceed the maximum limit established by the Authority is not
17 less than 40%. For the purposes of this Section, debt to asset
18 ratio means current outstanding liabilities, including any
19 debt to be financed or refinanced under this Section 830-45,
20 divided by current outstanding assets. The Authority shall
21 establish the maximum permissible debt to asset ratio based on
22 criteria established by the Authority.
23     Lenders shall apply for the State Guarantees on forms
24 provided by the Authority and certify that the application and
25 any other documents submitted are true and correct. The lender
26 or borrower, or both in combination, shall pay an
27 administrative fee as determined by the Authority. The
28 applicant shall be responsible for paying any fee or charge
29 involved in recording mortgages, releases, financing
30 statements, insurance for secondary market issues, and any
31 other similar fee or charge that the Authority may require. The
32 application shall at a minimum contain the young farmer's name,
33 address, present credit and financial information, including
34 cash flow statements, financial statements, balance sheets,
35 and any other information pertinent to the application, and the

 

 

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1 collateral to be used to secure the State Guarantee. In
2 addition, the borrower must certify to the Authority that, at
3 the time the State Guarantee is provided, the borrower will not
4 be delinquent in the repayment of any debt. The lender must
5 agree to charge a fixed or adjustable interest rate that the
6 Authority determines to be below the market rate of interest
7 generally available to the borrower. If both the lender and
8 applicant agree, the interest rate on the State guaranteed loan
9 can be converted to a fixed interest rate at any time during
10 the term of the loan.
11     State Guarantees provided under this Section (i) shall not
12 exceed $750,000 $500,000 per young farmer, (ii) shall be set up
13 on a payment schedule not to exceed 30 years, but shall be no
14 longer than 30 15 years in duration, and (iii) shall be subject
15 to an annual review and renewal by the lender and the
16 Authority. A young farmer may use this program more than once
17 provided the aggregate principal amount of State Guarantees
18 under this Section to that young farmer does not exceed
19 $500,000. No State Guarantee shall be revoked by the Authority
20 without a 90-day notice, in writing, to all parties.
21     (b) The Authority shall provide or renew a State Guarantee
22 to a lender if:
23         (i) The lender pays a fee equal to 25 basis points on
24     the loan to the Authority on an annual basis.
25         (ii) The application provides collateral acceptable to
26     the Authority that is at least equal to the gross loan
27     amount State Guarantee.
28         (iii) The lender assumes all responsibility and costs
29     for pursuing legal action on collecting any loan that is
30     delinquent or in default.
31         (iv) The lender is at risk for the first 15% of the
32     outstanding principal of the note for which the State
33     Guarantee is provided.
34     (c) The Illinois Farmer and Agribusiness Loan Guarantee
35 Fund may be used to secure State Guarantees issued under this
36 Section as provided in Section 830-35.

 

 

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1     (d) Notwithstanding the provisions of this Section 830-45
2 with respect to the young farmers and lenders who may obtain
3 State Guarantees, the Authority may promulgate rules
4 establishing the eligibility of young farmers and lenders to
5 participate in the State Guarantee program and the terms,
6 standards, and procedures that will apply, when the Authority
7 finds that emergency conditions in Illinois agriculture have
8 created the need for State Guarantees pursuant to terms,
9 standards, and procedures other than those specified in this
10 Section.
11 (Source: P.A. 93-205, eff. 1-1-04.)
 
12     (20 ILCS 3501/830-50)
13     Sec. 830-50. Specialized Livestock Guarantee Program.
14     (a) The Authority is authorized to issue State Guarantees
15 to lenders for loans to finance or refinance debts for
16 specialized livestock operations that are or will be located in
17 Illinois. For purposes of this Section, a "specialized
18 livestock operation" includes, but is not limited to, dairy,
19 beef, and swine enterprises.
20     (b) Lenders shall apply for the State Guarantees on forms
21 provided by the Authority and certify that the application and
22 any other documents submitted are true and correct. The lender
23 or borrower, or both in combination, shall pay an
24 administrative fee as determined by the Authority. The
25 applicant shall be responsible for paying any fee or charge
26 involved in recording mortgages, releases, financing
27 statements, insurance for secondary market issues, and any
28 other similar fee or charge that the Authority may require. The
29 application shall, at a minimum, contain the farmer's name,
30 address, present credit and financial information, including
31 cash flow statements, financial statements, balance sheets,
32 and any other information pertinent to the application, and the
33 collateral to be used to secure the State Guarantee. In
34 addition, the borrower must certify to the Authority that, at
35 the time the State Guarantee is provided, the borrower will not

 

 

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1 be delinquent in the repayment of any debt. The lender must
2 agree to charge a fixed or adjustable interest rate that the
3 Authority determines to be below the market rate of interest
4 generally available to the borrower. If both the lender and
5 applicant agree, the interest rate on the State guaranteed loan
6 can be converted to a fixed interest rate at any time during
7 the term of the loan.
8     (c) State Guarantees provided under this Section (i) shall
9 not exceed $1,000,000 per applicant, (ii) shall be no longer
10 than 30 15 years in duration, and (iii) shall be subject to an
11 annual review and renewal by the lender and the Authority. An
12 applicant may use this program more than once, provided that
13 the aggregate principal amount of State Guarantees under this
14 Section to that applicant does not exceed $1,000,000. A State
15 Guarantee shall not be revoked by the Authority without a
16 90-day notice, in writing, to all parties.
17     (d) The Authority shall provide or renew a State Guarantee
18 to a lender if:
19         (i) The lender pays a fee equal to 25 basis points on
20     the loan to the Authority on an annual basis.
21         (ii) The application provides collateral acceptable to
22     the Authority that is at least equal to the gross loan
23     amount State Guarantee.
24         (iii) The lender assumes all responsibility and costs
25     for pursuing legal action on collecting any loan that is
26     delinquent or in default.
27         (iv) The lender is at risk for the first 15% of the
28     outstanding principal of the note for which the State
29     Guarantee is provided.
30     (e) The Illinois Farmer and Agribusiness Loan Guarantee
31 Fund may be used to secure State Guarantees issued under this
32 Section as provided in Section 830-35.
33     (f) Notwithstanding the provisions of this Section 830-50
34 with respect to the specialized livestock operations and
35 lenders who may obtain State Guarantees, the Authority may
36 promulgate rules establishing the eligibility of specialized

 

 

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1 livestock operations and lenders to participate in the State
2 Guarantee program and the terms, standards, and procedures that
3 will apply, when the Authority finds that emergency conditions
4 in Illinois agriculture have created the need for State
5 Guarantees pursuant to terms, standards, and procedures other
6 than those specified in this Section.
7 (Source: P.A. 93-205, eff. 1-1-04.)
 
8     Section 99. Effective date. This Act takes effect upon
9 becoming law.