We have a customer who lives in Montana half the year and is a resident of Montana for tax purposes and then live here in Wisconsin for the other half. He is wanting an ag/business purpose loan using his land here as collateral. Besides the Federal rules and regulations do we follow the state laws of Wisconsin or Montana on this loan?

With respect to the real estate mortgage and its terms, you follow the rules where the land is located.

Like John mentioned.
There are two parts - the rules governing the loan and the rules governing the collateral. The loan would be subject to the rules of the state where the bank is in. The rules for the collateral would be subject to the state where the collateral is located.

??? Rocky, what do you mean the 'rules for the loan' ?

Restated TR - you're right - poor choice of words

I meant the note would be (usually) subject to the laws of the state where the bank is in.
The mortgage/DOT would be subject to the laws of the state where the property is located.

In some cases, even the note will be controlled by the location of the property (esp. residential real estate, where state law may govern late fees, and other contractual provisions).