United States v. James D. Ellis

During 1976,1977 and 1978 Ellis obtained direct loans from Farmers Home Administration (“FmHA”) under a program to provide financial assistance to farmers who are unable to obtain credit from private lenders on reasonable terms. 7 U.S.C. § 1922 . Ellis executed two mortgages on the farm property to secure the loans. Each was embodied in a standard form used by the FmHA with a clause purporting to waive the mortgagor’s right to debtor protections under state laws, including the right to redeem following foreclosure sale.

Ellis encountered financial difficulty and was unable to continue repayment of the loans, leaving a balance due of $149,695.75 plus interest.

On April 1, 1981 the FmHA sought foreclosure of the mortgage on the Ellis farm. The district court granted FmHA’s motion for summary judgment and ordered the sale of the property to satisfy the debt. The judgment specifically denied Ellis the right to redeem at any time. The district court held that where a mortgage held by the FmHA includes a provision expressly waiving any rights to redemption, federal law does not adopt state law granting rights of redemption. The district court relied principally on United States v.…