I. INTRODUCTION
The Farm Homestead Protection Act (codified in §§ 76-1901 to 76-1916) establishes certain rights and protections for borrowers whose loans are secured by a mortgage against agricultural land (A parcel of land larger than 20 acres not located in an incorporated city or village which is owned by an individual and used in farming operations carried on by the owner at any time within the preceding three year period for the production of farm products). The Act requires certain lenders to provide agricultural borrowers with a “notice of right to cure” prior to commencing any action for foreclosure upon agricultural land. The Act also allows agricultural borrowers to make a designation of homestead under a mortgage or trust deed or to defer the right to designate a homestead until a decree of foreclosure is entered upon the mortgage or trust deed in cases where the creditor has neither designated a homestead nor waived or disclaimed the right to make a designation of homestead.
II. NOTICE OF RIGHT TO CURE
In any action for foreclosure of a mortgage upon protected real estate (agricultural land which is encumbered by the lien of a judgment entered or a mortgage executed on or after November 21, 1986, which lien is of a first and paramount priority over any other lien except a tax lien), if the mortgaged premises are used in farming operations carried on by the mortgagor or trustor, the lender shall, prior to commencing such an action, send to the mortgagor written notice of right to cure.
The notice of right to cure must set forth:
A. A statement identifying the mortgage instrument by stating the name of the mortgagor named therein and giving the book and page or computer system reference where the same is recorded, a brief description of the mortgaged premises, and a statement that a breach of an obligation contained in or secured by the mortgage has occurred, setting forth the nature of such breach and of the mortgagee’s election to enforce the mortgage against the mortgaged premises;
B. A statement that the mortgagor, his or her successor in interest in the mortgaged premises or any part thereof, or any other person having a subordinate lien or encumbrance of record thereon may, at any time within two months of the sending of the notice of right to cure, render to the mortgagee or his or her successor in interest full performance and payment of the entire amount then due under the terms of the mortgage and the obligation secured thereby, including costs and expenses actually incurred in enforcing the terms of such obligation and mortgage, including reasonable attorney’s fees not exceeding one-half of one percent of the unpaid principal balance then due, and any reinstatement fee provided for under the terms of the mortgage or the obligation thereby secured, other then such portion of the principal as would not then be due had no default occurred, and thereby cure the default previously existing;
C. A statement of the amount of the entire unpaid principal sum secured by the mortgage, the amount of interest accrued thereon to and including the date of notice, and the dollar amount of the per diem interest accruing from and after such date; and
D. A statement of the amount of the unpaid principal which would not then be due had no default occurred.
The right to cure provided under the Farm Homestead Protection Act expires two months from the date the notice of right to cure is sent to the mortgagor. If the default is cured prior to the expiration of the two month period, any action previously commenced shall be dismissed and the mortgage and the obligation thereby secured shall be reinstated and shall be and remain in force and effect the same as if no default or acceleration had occurred.
III. REAL ESTATE MORTGAGE AND TRUST DEED HOMESTEAD WAIVER AND DISCLAIMER
In any mortgage or trust deed executed on or after November 21, 1986, upon agricultural land, the mortgagor or trustor may make a designation of homestead in the body of such mortgage or trust deed. In any case where the debtor has neither designated a homestead nor waived or disclaimed the right to make a designation of homestead, the Act allows the debtor to defer the right to designate a homestead until a decree of foreclosure is entered upon the mortgage or trust deed.
The Act provides for a disclaimer of right to make a designation of homestead which must be in writing and must contain a statement by the mortgagor or trustor that no part of his or her homestead is presently or in the future will be situated upon the real estate described in the mortgage or trust deed. The Act further provides for a written acknowledgment under which a mortgagor or trustor can waive his or her right to make a designation of homestead. The waiver by written acknowledgment of right to make a designation of homestead must contain a statement that the mortgagor or trustor understands that he or she has the right to make a designation of homestead in the mortgage or trust deed and that the execution of the acknowledgment constitutes the waiver of rights otherwise available for the purpose of affording the mortgagor or trustor the opportunity to retain his or her homestead in the event of a default upon such mortgage or trust deed. Both the written disclaimer and waiver by written acknowledgment must be set forth as a preface to the mortgage or trust deed and must be filed for record as a part of the mortgage or trust deed in the office of the register of deeds. The disclaimer provisions are intended to apply to situations involving land upon which no buildings exist at the time of execution of the mortgage or trust deed. The waiver provisions are intended to apply to land upon which buildings that could serve as the homestead are located, should the mortgagor or trustor so declare.
There are two distinct situations addressed under § 76-1904 of the Farm Homestead Protection Act:
A. Section 76-1904(3)(a) deals with the disclaimer of right to make a designation of homestead on land which at the time of executing the mortgage or deed of trust is unoccupied by the grantor(s) of the mortgage or trust deed;
B. Section 76-1904(3)(b) deal with land upon which a dwelling exists at the time of executing the mortgage or deed of trust which is occupied by the grantor(s) of the mortgage or trust deed.
Situation 1 provides that in the case where a mortgagor or trustor does not occupy the land in question, the mortgagor or trustor pledging agricultural land may disclaim in writing his/her right to make a designation of homestead. The disclaimer must contain a statement by the mortgagor or trustor that “no part of his/her homestead is presently or in the future situated upon the real estate described in the mortgage or trust deed, and that the mortgagor or trustor understands that if he/she establishes a homestead on any part of the real estate during the time the mortgage or trust deed remains unsatisfied and a lien upon the real estate, there shall be no right to make a designation of homestead in the event of a foreclosure or trustee sale upon such mortgage or trust deed.” This disclaimer must be in writing and shall be set forth as a preface to the mortgage or trust deed and shall be filed for the record as part of such mortgage or trust deed.
Situation 2 provides that in the case where a mortgagor or trustor pledges agricultural land which is occupied by the mortgagor or trustor, the mortgagor or trustor may waive by written acknowledgment his/her right to make a designation of homestead. This acknowledgment shall contain a statement that the mortgagor or trustor understands that he/she has the right to make a designation of homestead in the mortgage or trust deed and that the execution of such acknowledgment constitutes the waiver of rights otherwise available for the purpose of affording the mortgagor or trustor the opportunity to retain his/her homestead in the event of a default upon such mortgage or trust deed. This waiver must be in writing and shall be set forth as a preface to the mortgage or trust deed and shall be filed for record as a part of such mortgage or trust deed. It appears that a separate mortgage or trust deed should be used for each type of agricultural land.
Another important facet of this law is contained in Section 76-1903(b) which provides for reasonable attorney fees not exceeding one half of one percent of the unpaid principal balance then due, and any reinstatement fee provided for under the terms of the mortgage.
This means that in the event of an exercise of the right to cure (as described above), that for the bank to collect a “reinstatement fee,” the bank must have made it a part of the contract. NOTE AGAIN THAT THIS MUST BE PART OF THE CONTRACT.
The forms that follow were prepared by the Forms Committee of the Nebraska Bankers Association and the Forms Committee of the Nebraska Bank Attorneys Association. They have been authorized for the use of Nebraska bankers subject to the Disclaimer Notice printed immediately before the Master Table of Contents in Volume I of the NBA Compliance Handbook.
You will note that the forms are designed to apply to land upon which there are no buildings (the disclaimer language) and also to land subject to the written acknowledgment waiver (where buildings presently exist on the land). It is possible to have a tract of real estate where both situations apply at the same time. However, if this is not the case, it is very important that only the portion applying to the specific relationship of the land to the mortgagor or trustor be used.
The law requires that the disclaimer or waiver, or both, will be filed for record as a part of the mortgage or trust deed in the Office of the Register of Deeds, and it therefore may require some careful adoption to fit the language of your particular instrument.
PREFACE TO MORTGAGE OR TRUST DEED UNDER FARM HOMESTEAD PROTECTION ACT WAIVER AND DISCLAIMER
In accordance with the provisions of the Nebraska Farm Homestead Protection Act, the undersigned, _____________________ and ___________________, prior to executing the attached Mortgage or Trust Deed dated ___________________, 20_____ by and between the undersigned and ______________________________(hereinafter referred to as “Mortgage or Trust Deed”) hereby state and acknowledge:
DISCLAIMER
1. That no part of the homestead of the undersigned is presently or in the future will be situated on the following described real estate (hereinafter “Parcel 1”) nor are there any buildings sufficient to be designated as a homestead presently located upon Parcel 1.
2. The undersigned acknowledge that while the Mortgage or Trust Deed remains unsatisfied and a lien on Parcel 1, they shall have no right presently or in the future to make a designation of homestead on Parcel 1, including without limitation, in the event of a foreclosure or trustee’s sale under the Mortgage or Trust Deed.
3. The undersigned acknowledge that if, contrary to this Disclaimer, they establish a homestead on Parcel 1 during the time the Mortgage or Trust Deed remains unsatisfied and a lien upon Parcel 1, they shall have no right to make a designation of homestead in the event of a foreclosure or trustee’s sale under the Mortgage or Trust Deed.
4. The undersigned state that this acknowledgement if their knowing and voluntary act and deed and constitutes a written disclaimer and acknowledgement under the Nebraska Farm Homestead Protection Act and the undersigned do hereby disclaim any right to designate a homestead in the event of default upon such Mortgage or Trust Deed or in the event of a foreclosure or trustee’s sale under the Mortgage or Trust Deed.
5. The undersigned further understand and agree that this acknowledgement and Disclaimer shall be filed as a Preface to and become a part of the Mortgage or Trust Deed.
WAIVER
1. The undersigned states, warrants and represents that their dwelling house and other buildings subject to a homestead are presently located upon the following described real estate (hereinafter referred to as “Parcel 2”.)
2. The undersigned acknowledge that they have a right to make a designation of homestead in the Mortgage or Trust Deed for the purpose of affording the opportunity to retain their homestead in the event of default and foreclosure or trustee’s sale under the Mortgage or Trust Deed.
3. The undersigned acknowledge that the execution of this Waiver constitutes the complete waiver of rights otherwise available for the purpose of affording the opportunity to retain a homestead in the event of a default and any foreclosure or trustee’s sale under the Mortgage or Trust Deed.
4. The undersigned state that this acknowledgement and waiver is their knowing and voluntary act and deed and the undersigned do hereby willingly and voluntarily waive, relinquish and remise any and all right to make a designation of homestead in the Mortgage or Deed of Trust.
5. The undersigned further understand and agree that this acknowledgement and waiver shall be filed as a Preface to and become a part of the Mortgage or Trust Deed.
DATED this ________day of __________________, 20____.
STATE OF NEBRASKA ) ) ss. COUNTY OF )
On this ______day of _______________________, 20_____, before me, the undersigned Notary Public, duly commissioned and qualified in and for said county, personally appeared __________________________ and ______________________, personally known to me to be the identical persons who signed the above and foregoing instrument and each acknowledged the execution of the same to be their voluntary act and deed.
WITNESS my hand and notarial seal the day and year last above written.
Notary Public
My Commission expires: