precipitously in recent years. According to the U.S. 

 Department of Agriculture, the average value of farm 

 real estate per acre in Montana dropped 38% between 1982 

 and 1987. This decrease followed a 73% increase in farm 

 real estate value that occurred from 1977 to 1982. ^^ 



Maintenance of values for farm and ranch land is 

 important because the value of real estate is used as 

 collateral for agricultural loans. Allowing banks to 

 hold foreclosed real estate for a longer period could 

 help stabilize farm real estate values and could be of 

 benefit to agriculture in Montana. Furthermore, this 

 option might improve the capital of banks, although real 

 estate is not a favored capital asset in banking. 



Nevertheless, this option could defeat the original 

 purpose of the law, which was to prevent speculation in 

 real estate by banks. To avoid this problem, 

 consideration might be given to a moderate extension of 

 the period in which banks may retain foreclosed real 

 estate. 



Similar Policies and Programs 



The Colorado Legislature recently changed its 

 banking laws to extend the length of time in which a 

 bank may hold foreclosed real estate. Previously, 

 Colorado required banks to sell real estate within five 

 years following its acquisition to satisfy indebtedness. 

 Amendments to the law enacted in 1986 allow state banks 

 to retain foreclosed land for 15 years or such longer 

 period as the state banking commissioner may allow. ^ 



The State of Iowa also has enacted legislation to 

 permit banks to hold foreclosed land for a longer period 



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