                         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


      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.
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.

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       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.




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