(c) is conveyed to it in satisfaction of 

 debts previously contracted in the course of 

 its business; 



(d) it purchases at sales under 

 judgments, decrees, or mortgages held by the 

 bank. 



(2) Real estate acquired in the manner 

 set forth in subsections (l)(c) and (l)(d) of 

 this section may not be held longer than 5 

 years from the date of acquisition, unless 

 special written permission to do so is granted 

 by the department. The real estate shall be 

 carried on the books of the bank for an amount 

 not greater than its cost to the bank, 

 including costs of foreclosure and other 

 expenses of acquiring title. 



The purpose of the law presumably is to prevent 

 bank speculation in real estate. Hence, the law permits 

 banks to engage in only those real estate transactions 

 that are considered necessary for the bank to carry on 

 its business and to protect itself against loss on loans 

 that have been issued. 



The proposed option would alter current state 

 banking laws to allow banks to retain foreclosed real 

 estate for more than five years. The rationale for this 

 option is twofold. First, it would help maintain real 

 estate values by keeping foreclosed farmland off the 

 depressed real estate market. Second, this option would 

 enable banks to improve the stabilization of their 

 capital because banks would not be forced to sell 

 foreclosed real estate at reduced market values, which 

 would result in a financial loss to the banks. 



Discussion 



There is a serious need addressed by this option. 

 That need is to prevent a further decline in farmland 

 values. Farmland values in Montana have fallen 



31 



