1

The USDA has reorganized since this loan was issued and the Farmers

Home Administration has now become part of the Rural Housing Service.

2

The Honorable Charles R. Wolle, United States District Judge for the

Southern District of Iowa.

United States Court of Appeals

FOR THE EIGHTH CIRCUIT

No. 02-1582

United States of America, *

*

Appellee, *

* Appeal from the United States

 v. * District Court for the 

* Southern District of Iowa

Kathleen J. Jacobsen, *

* [PUBLISHED]

Appellant. * [Per order entered 2/6/03]

Submitted: October 9, 2002

Filed: November 27, 2002

Before MURPHY, BEAM, and MELLOY, Circuit Judges

PER CURIAM.

The United States Department of Agriculture (USDA) brought a foreclosure

action against Kathleen Jacobsen after she defaulted on a loan issued by the Farmers

Home Administration.1

 The district court2 ordered that Ms. Jacobsen’s mortgage be
-2-

foreclosed. The court also held that under the language of her USDA-issued

mortgage Ms. Jacobsen did not have a right to redemption or to prevent the

government from obtaining a deficiency judgment against her. It is undisputed Ms.

Jacobsen defaulted on the loans at issue and this appeal concerns only whether the

USDA could contractually require Ms. Jacobsen to waive redemption and deficiency

rights. Because we find that 42 U.S.C. §1475(b) does not require the USDA or its

subdivisions to provide borrowers with these substantive state law rights, we affirm.

Ms. Jacobsen claims that 42 U.S.C. §1475(b) compels the USDA to follow

Iowa law regarding redemption and deficiency judgments. This statute provides in

relevant parts that: “[i]n foreclosing on any mortgage held by the Secretary under this

subchapter, the Secretary shall follow the foreclosure procedures of the State in

which the property involved is located, to the extent such procedures are more

favorable to the borrower. . .” (Emphasis added). 

In essence, Ms. Jacobsen claims that 42 U.S.C. §1475(b) makes paragraph 19

of her “Real Estate Mortgage for Iowa” void. This paragraph provides in relevant

parts that the “[b]orrower agrees that the Government will not be bound by any

present or future State laws. . . (b) prohibiting maintenance of an action for a

deficiency judgment . . . [or] (d) allowing any right of redemption or possession

following any foreclosure sale. . . .”

We disagree that paragraph 19 is invalidated by 42 U.S.C. §1475(b). It is clear

that this statute was intended to require the USDA to follow state procedures. 

However, it does not require the USDA to adopt state substantive rules. We agree

with the district court that the right to redemption and protection from deficiency

judgments are substantive rights. Thus, assuming that 42 U.S.C. §1475 prohibited

waivers of procedural rights, we find that the rights at issue in this case do not fall

within its scope.
-3-

We are also not convinced that 42 U.S.C. §1475(b) prevented the USDA from

requiring Ms. Jacobsen to waive certain rights, either procedural or substantive, as

part of her mortgage agreement. On this point, the USDA refers this court to United

States v. Birchem, 100 F.3d 607 (8th 1996). In that case, this court held that the

Farmers Home Administration could require borrowers to waive the right of

redemption in loan agreements, even though South Dakota state law did not allow

such waivers. Id. at 609. We find the reasoning of Birchem equally applicable here.

The other arguments advanced against the validity of this waiver similarly fail

to persuade this court that the district court erred in reaching its decision. Therefore,

we affirm the decision of the district court.

A true copy.

Attest:

 CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.