Mortgage Investment Services Corporation • 22316 Midland Drive Shawnee, KS • 66226 • 913-390-1010 NMLS# 194708 • A Kansas licensed mortgage company #MC 0001182 Missouri Residential Mortgage Loan Broker License #10-1912 Oklahoma Mortgage Broker #MB001953 • Colorado License #100044344 Nebraska Licensed Mortgage Company NMLS#194708 Arkansas License #124530 YEARS 25 Let’s Talk Fair Lending! Partnering with Mortgage Investment Services Corporation (MISC) means equal access to credit for housing to all within your community. Here’s why collaborating with us sets you apart: • Fair Lending Protocols, Regulatory Compliance • Tailored Solutions for Diverse Clientele • Government financing options: FHA, VA, & USDA-RD • Rebuilding your community with renovation lending • Expand your customer reach Join forces with MISC to provide every member of your community with the opportunity for homeownership. We get it right the first time! Andrew Holtgraves, Senior Vice President • Cell: 913-558-2555 Email: Andrew@MISCHomeLoans.com • NMLS: #276932 • No Ongoing FMV Testing: Unless a significant modification occurs. • Reasonable Belief: Lenders may rely on initial determinations based on good-faith belief that the loan is secured by qualified rural or agricultural property and borrower certifications. • Loss Of Status: If property ceases qualifying use, §139L treatment ends unless remedied within 90 days. • Loan Proceeds: Use of proceeds does not affect eligibility; determination is made on collateralized property. • Refinancing: Only amounts exceeding the pre-enactment loan’s outstanding balance qualify; significant modifications under §1.1001-3, e.g., changes in yield, maturity, obligor, or collateral, are treated as refinancings and do not qualify. • Residences: Allowed if the property as a whole meets the substantial use requirement; properties with minimal personal agricultural production do not qualify, e.g., personal garden. Significant uncertainty remains around several practical aspects of §139L. Key questions include what activities qualify as producing agricultural products and how to interpret the requirement that property be “substantially used” for production — should this be measured by acreage, value, revenue, or time, and how should seasonal or mixed-use properties be treated? For example, farmland that hosts events or other non-agricultural activities raises questions about whether partial non-agricultural use disqualifies the loan. Operational Considerations for Banks Until proposed regulations are released, banks will need to adopt an approach that reflects their risk tolerance when determining §139L eligibility during loan pricing and tax compliance. Institutions can begin preparing internal systems to track eligible loans and document the criteria used. This may include refining loan-coding procedures, training loan officers and documenting borrowers’ intended use of the property. Because the law is permanent, taking these steps now will better position banks for consistent compliance and future regulations. Conclusion and Future Section 139L potentially offers a meaningful tool for banks serving agricultural communities. Although the 25% exclusion will provide some benefit, the corresponding interest expense disallowance must be factored into any analysis of the net benefit. In the meantime, many bank industry groups are pushing for an expansion of the provision’s benefits. As lenders navigate the new rules, it will be important to document decisions and develop a reasonable approach for addressing the statute’s grey areas until additional guidance is issued. Sam Brandt is a tax director with Forvis Mazars in Kansas City. 37
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