Heir Property Restitution Program Represents Substantial Investment in Addressing Heir Property Issues | Baker Donelson
To help farmers who own or operate real estate, Congress has provided assistance in the form of competitive loans to distribute under the new Heir Property Restitution (HPRP) program created by Section 5104 of the Farm Bill. of 2018. According to the final rule of August 9, 2021, HPRP loans will help heirs “with undivided ownership interests to resolve ownership and inheritance issues on holdings that are jointly owned by several heirs … [and] can be used by a final beneficiary to purchase and consolidate fractional interests held by other heirs in condominiums, to pay costs and fees associated with developing and implementing an estate plan, and to pay the costs associated with the redemption of fractional interests held in co-ownership by other heirs of the co-ownership to clear title (e.g. closing costs, appraisals, title searches, appraisals, preparation of documents, mediation and legal services) .2
The program is implemented in two phases: first, the Farm Services Agency (FSA) will select the intermediary lenders, and then the heirs can apply directly to these selected intermediary lenders for loans and assistance.
Phase I: FSA selects intermediary lenders
Phase I of HPRP implementation is the opening of the application period for qualified intermediary lenders to submit their applications to the FSA.
Who is eligible to be an intermediary lender?
Cooperatives, credit unions and non-profit organizations can apply to be intermediary lenders under the PRPH provided that the institution:
(1) is certified as a community development finance institution, and
(2) has the experience and ability to grant and manage agricultural and commercial loans of a similar nature.
What loan terms are available for intermediary lenders?
Under the program, eligible intermediary lenders can apply for loans of up to $ 5 million at an interest rate of 1%. The intermediary lenders selected by the FSA will determine the rates, terms and payment structure of the loans to the end beneficiaries. The interest rates set by intermediary lenders should be the lowest rate necessary for them to cover their loan costs.
How do eligible intermediary lenders apply?
Eligible intermediary lenders can apply as of August 30, 2021. The intermediary lender can apply by:
(1) by completing form FSA-2637;
(2) attaching the proposed on-lending plan describing how the applicant intends to distribute the funds from the HRP to the final beneficiaries; and
(3) attaching the last three years of audited financial statements or income tax records, including a balance sheet. The application can be submitted to the FSA. The application period ends on October 30, 2021.
Phase II: The heirs must apply directly to the intermediary lenders
Once the intermediary lenders have been selected by the FSA, the end beneficiaries can then directly apply to the intermediary lenders to receive loans.
Who is eligible to receive HPRP loans as a final beneficiary?
Intermediary lenders will grant loans to heirs who:
(1) are natural or legal persons empowered to contract debt and settle the ownership and inheritance of an agricultural holding owned by several owners;
(2) are a family member or heir related by blood or marriage to the former owner of the property; and
(3) agree to complete a succession plan.
The intention of the program is to help families resolve title issues over the property of heirs. Accordingly, the FSA requires that the final beneficiary be a family member or an heir related by blood or marriage to the previous owner of the property.
How can the HPRP loan funds be used by the end recipient?
The final beneficiary can use the loan funds to resolve title issues by financing the purchase or consolidation of real estate interests and the financing costs associated with an estate plan. This encompasses the costs of redeeming fractional interest from other heirs to clear title, including closing costs, appraisals, title searches, investigations, document preparation, mediation, and legal services. Loan funds may not be used for land improvement, development, acquisition or repair of buildings, acquisition of personal property, payment of operating expenses, payment of fees. research or similar fees.
1 Agricultural Services Agency, Advice for operators of estate of heirs participating in agricultural service agency (FSA) programs, United States Department of Agriculture (July 2020), https://www.fsa.usda.gov/Assets/USDA-FSA-Public/usdafiles/FactSheets/guidance_heirs_property_operators_participating_in_fsa_programs-factsheet.pdf.
2 Heirs’ Property Relending Program (HPRP), Improving Agricultural Loan Program Delivery and Streamlining Supervisory Activities, 86 Fed. Reg. 43,381 (August 9, 2021).