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Home Equity - Ag Use Valuation Update
Question: In October, you reported that there was a problem with making a home equity loan on property that previously had ag use valuation on it. What is the status of that issue?
Answer: A federal court decision (Marketic v. U.S. Bank N.A.) concluded that a homeowner could designate rural land as ag use at any time and prevent the lender from foreclosing. As a result of this decision, title companies are reluctant to issue title policies if the collateral could be signated as ag use. Until this issue is resolved (either with a new constitutional amendment--which IBAT has drafted--or through the appellate process), it is risky to make a loan on rural land. It is theoretically possible to survey out the home and the surrounding acreage that is excluded from the ag use valuation and take a lien only on that property. However, the cost of the survey must be considered as part of the 3% fee cap. Unfortunately, that usually makes the loan not cost effective. Stay tuned for further developments.
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