In response to the ongoing foreclosure crisis in this country, many states, like Minnesota, have implemented mediation programs to assist borrowers in finding ways to avoid foreclosure. Minnesota law specifically provides for mediation in the case of agricultural properties. Read on to learn about the availability of mediation in Minnesota for agricultural properties, how the Farmer-Lender Mediation Program works, and how to participate in mediation.
If you own a non-agricultural property (such as your home) and you are facing foreclosure, you might be eligible for foreclosure prevention counseling. To learn more, see Minnesota's Foreclosure Prevention Counseling Program.)
(To learn about other options for dealing with foreclosure, visit Nolo's Foreclosure section.)
What is Foreclosure Mediation?
Foreclosure mediation is a process that is used to help borrowers avoid foreclosure by coming up with an alternate solution that benefits both the borrowers and the lender. Mediation consists of a meeting between:
- the borrower,
- the lender, and
- an impartial third-party (the mediator).
At the meeting, the parties discuss the borrower's financial situation and try to negotiate a way for the borrower to keep or give up the property without going through a foreclosure. By working together, the parties are often able to reach an agreement.
Potential outcomes of mediation include:
- loan modification
- restructuring the debt and security
- rescheduling loan payments
- forbearance agreement
- short sale, or
- deed in lieu of foreclosure.
(To get information about each of these options, see our Alternatives to Foreclosure area.)
In Minnesota, foreclosures may be nonjudicial or judicial, though most are nonjudicial. This means the lender does not have to go through state court to get a foreclosure. (To learn more about the difference between judicial and nonjudicial foreclosure, and the procedures for each, see Will Your Foreclosure Take Place In or Out of Court?)
(To learn about the specific foreclosure laws in Minnesota, see our Summary of Minnesota’s Foreclosure Laws.)
Minnesota’s Farmer-Lender Mediation Program
Minnesota’s Farmer-Lender Mediation Act requires that the borrower be given the option to participate in mediation before an agricultural property can be foreclosed either judicially or nonjudicially. (Minn. Stat.§ 583.20, et seq.)
Mediation is available for agricultural properties that have more than $5,000 of debt (Minn. Stat. § 550.365). However, the Farmer-Lender Mediation Act does not apply to a debtor who owns and leases less than 60 acres if the debtor had less than $20,000 in gross sales of agricultural products the preceding year (Minn. Stat. § 583.24).
Also, if the borrower has included the debt in a bankruptcy or has taken part in a previous farmer-lender mediation session, the debt is not subject to the statute and the lender can proceed with foreclosure without first offering mediation.
Notification of Availability of Mediation
The lender must send notice to the borrower prior to the foreclosure.
To participate in mediation, the borrower must complete a Request for Mandatory Mediation Form. (In this context, “mandatory” means that mediation is mandatory for the lender if the borrower chooses to participate. It does not mean that mediation is mandatory for the borrower.)
The mediation request form must be filed with the director of the Minnesota Extension Service or the director's designee within 14 days after receiving the mediation notice. (The University of Minnesota Extension administers the Farmer-Lender Mediation Program.) If the borrower does not file a timely request for mediation, the right to mediation under the Farmer-Lender Mediation Act is waived.
Suspension of Foreclosure With Mediation
If the borrower chooses to participate in mediation, the foreclosure can be suspended for a period of up to 90 days pending completion of the mediation. The Farmer-Lender Mediation Act prohibits the creditor from beginning or continuing a proceeding to collect on the debt during the 90-day period, unless otherwise allowed by the director of the program.
The Mediation Process
If you choose to participate in the process, here's what will happen.
Meeting With a Financial Analyst
Within three business days after receiving a mediation request, the director of the Farmer-Lender Mediation Program will assign a financial analyst to meet with the borrower. The financial analyst will assist the borrower in preparing the proper financial information for the initial mediation meeting.
An orientation session will be held at least five days before the first mediation meeting. The parties who will attend the session are:
- the debtor
- the financial analyst, and
- a mediator.
The financial analyst will review the borrower's financial and inventory records to determine if they are adequate for the mediation and point out any problems. The mediator will explain the requirements of the mediation process to the borrower.
Documents the Lender Must Provide
Prior to the initial mediation meeting, the lender must the borrower with:
- copies of the note and contract
- a statement of interest rates on the debt, delinquent payments, unpaid principal, and interest balances
- what the lender believes the value of the property is, and
- a list of the debt restructuring programs available from the lender.
Within ten days of the filing of the request for mediation, the program director will send the borrower notification of the time and place of the initial mediation session. At the mediation session, the mediator’s job is to:
- listen to the borrower and the lender
- attempt to mediate between the borrower and lender
- advise the borrower regarding assistance programs available
- attempt to arrive at an agreement to fairly adjust, refinance, or pay the debts, and
- advise, counsel, and assist the borrower and lender in reaching an agreement.
If an agreement is reached between the borrower and lender, the mediator will witness and sign a written mediation agreement, which is also signed by the borrower and lender. If applicable, the mediator will submit the agreement to the Minnesota Rural Finance Authority for approval of debt restructuring.
Should You Participate in the Farmer-Lender Mediation Program?
Even though participating in Minnesota’s Farmer-Lender Mediation Program does not guarantee that you can avoid foreclosure, it doesn't hurt to go through the process. The lender may be more likely to agree to a nonforeclosure solution at a mediation than if you had approached it outside of the program. Or you might qualify for a loss mitigation option that you hadn’t previously considered.
For more information on Minnesota’s Farmer-Lender Mediation Program, go to www.extension.umn.edu and click on “Farmer-Lender Mediation” located at the bottom of the web page.