Illinois Agriculture Lawyer
Ask Illinois agriculture lawyer, Tom Howard, your question right now. He serves farmers and agri-businesses all over downstate Illinois.
Illinois Agriculture Lawyer, Tom Howard presents a webinar on what to know about ag loan documents before the crash hits.
Ag Lawyer Loan Workout Tips
1. Illinois Agriculture lawyer Tom Howard explains that the Trump Tariffs have sliced off about 20% from the price of soybeans year-over-year from 2017 to 2018, and farmers are feeling the pinch – all while facing rising interest rates and inflation of input prices from the hot economy.
2. To protect the Collateral Base, please review your financial institutions’ practices and ag portfolio for the following best practices.
3. Did all the owners of the farm ground sign the loan documents? Case law has found that when a farm is held by two spouses, but only one signs the loan documents, then the bank’s lien only attached to that spouse’s half of the proceeds.
4. Does the Agricultural Security Agreement describe the debt well enough? Consumer goods are not equipment, and future advances clauses, or dragnet clauses, cannot be added after the loan goes bad. Write your loan documents as broad as possible to secure every possible asset to ensure recovery.
5. Is the Uniform Commercial Code financing statement accurate & timely? Many financial institutions have vendors that handle their UCC loans, but remember to use the farmer’s driver’s license for the exact name of the secured debtor, or the name of the company on file with the Secretary of State.
6. Will your collateral wander off? Where is the grain located, and where was it farmed? The Farm Security Act requires notices of grain buyers to specifically cover 5 things in order for the bank’s lien to follow beyond the sale of the grain and into the proceeds. PLEASE DOUBLE CHECK YOUR NOTICE TO GRAIN BUYERS!
7. Did your bank take a two party check from a farmer without his lender’s endorsement!?!?!? Be very careful because banks require two-party check that must be endorsed by both the farmer and his bank in order to be properly cashed, failure to catch the two party endorsements may expose the depository bank to liability to the farmer’s secured lender. So watch out.
8. If you have questions for an Illinois Agriculture Lawyer, contact our office today for help resolving it with our complex commercial loan workout attorneys.
Illinois Farm Loan Workouts & Restructuring
I’m Tom Howard an Illinois Agriculture lawyer with over 40 years of collective experience in representing banks on complex commercial loan workouts and before you start doing that mental math –
I’m referring to the decades of wisdom and experience my dad Tim Howard imparted to me in the commercial banking legal practice. I’m a Super Lawyers Rising star in Banking law & this website is my new home to help defend what matters – the collateral base. Today Ag & the Trump China Tariffs
The Trump trade war with China seems to be on again, off again, but it does one thing very well, depress commodity prices. All this in the face of rising interest rates, which sees the yield curve flattening signaling that the bond market does not believe this 9 year old bull market has more tomorrows than yesterdays. So before the bust, let’s tighten up those ag loans.
If you want my whitepaper that I made this talk from, please call me, or email me – which the collateral base makes super easy.
Content (10-13 mins)
First – Make sure everyone signs the documents that needed to. What if the wife owns rights to half the crops like in .. the case of Illini Bank v. Clark (In re Snyder), 436 B.R. 81 (Bankr.C.D.Ill. 2010), the Bankruptcy court held that the farmer’s spouse owned half of the crop proceeds because she co-owned the farm. (case cites are in the white paper – or just email us your question)
Second – does the ASA describe the collateral – that is the difference between personal property and equipment – that farmer that collects and trades expensive art work as a hobby, are those collateral – for example equipment of his role in the art industry, or are they consumer goods. Beyond the Bank’s lien? Illinois Agriculture Lawyer says that the loan docs are construed against the bank as their drafter – so draft broad enough to cover everything. This came up in the In re Duckworth case where the ASA failed to provide for securing “future advances” – it lacked the dragnet clause – we’ve got standard language often used that provides for it – as well as ensuring that business loans made to farmers operating as sole proprietors
Third – Is the UCC Financing Statement – correct & still timely? Most banks use a service to keep their financing statements continued in a timely fashion – which is the best practice to automate it and ensure that a subsequent lender doesn’t slip in due to an oversight. What if the farmer goes by Buddy, but his actual name is Theodore? The case of State Bank of Arthur v. Miller, – In re Miller – in 2012 held that a driver’s license and social security card is sufficient in describing the name of the debtor – so make sure the borrower’s driver’s license is in the file and his real name is used.
Now, let’s move on to the collateral that suffers the most from slippage, or when the harvest comes in light, or its too wet in the field, or whatever excuse that may or may not be true – the crops. Again, the trump tariffs have not done much except hurt the American farmer, so now Brazil will sell soy to china, then america will sell to brazil – just like businesses do, they avoid taxes as much as possible, but the damage is done.
First, if times are tough and the farmer dishonest – we’ve seen a farmer assuming a name and selling grain to elevators outside of the county he farmed – so make sure your Notice to Farm Buyers are in compliance because they must strictly comply with the Farm Security Act. An Illinois Agriculture Lawyer tells you that you have a big risk because of the next case.
The case of State Bank of Cherry v. CGB Enterprises – CGB pointed out that the notice failed to include the names of the county where the crops were grown or located, which the Illinois supreme court found to render the notices ineffective because strict compliance with the Farm Security Act is required. – what are the things that 7 USC 1631(e) require – 1) within 1 year, 2, name and address of secured party, 3) name and address of debtor, 4) social sec number or other unique Identifier of debtor if not a person – tax id, 5) description of farm product including amount, name of each county products produced or located. Those 5 must haves should be in your FSA notices, but call me for more if you have questions.
Have the checks been made payable to both the farmer & the lender, that’s and – not or, with and both the farmer and the lender must endorse the check. If the farmer endorses the check without the bank’s endorsement, the depository back should return the check, or else they may have to answer to the secured lender.
Next – stop fraud before it starts – police your collateral – does your farmer have grain bins on their land? Are they empty? Have some of the hogs or cattle gone missing.
While your policing that collateral, if the borrower is a rich farmer that has a fancy hobby – collector cars, horse carriages, art collections, something that is valuable – and you think that it is beyond question that you are going to get paid back – well then ask him to grant a lien on not just all equipment, but all consumer goods – that farmer could get one of those expensive divorces, have the crop get slipped somewhere else, and that loan you thought had a risk rating of 2, or 1, suddenly becomes a 6 or 7. Remember – it’s too late to protect your bank after the money’s gone.
Thanks so much for joining me – hope your loans are all secure- and I’m thrilled to have the chance to build automation technologies for your litigation services. It’s why I’m here to flatten fees & automate procedures to standardize quality.
Thomas Howard was on the ball and got things done. Easy to work with, communicates very well, and I would recommend him anytime.
Working with Tom Howard was great. He helped us navigate a real estate contract, and was incredibly knowledgeable and helpful!.
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