8th Circuit Case Calls into Question Practices Concerning Nonjudicial Foreclosures Involving Government Liens

The practice of nonjudicial foreclosures in the United States, at least in the 8th Circuit, has been altered to the extent the process involves a junior lien held by the United States after the 8th Circuit Court of Appeals issued an order affirming a Missouri federal court decision. In July 2023, the 8th Circuit Court of Appeals affirmed in Show Me State Premium Homes v. McDonnell the lower court’s determination that when the United States has a subordinate lien (other than a federal tax lien), the holder of the senior interest must foreclose its lien by judicial action to eliminate the subordinate interest of the United States. 2022 WL 970890 (E.D. Mo. Mar. 31, 2022) affirmed 74 F.4th 911 (8th Cir. 2023).

On the other hand, the lender contended that the five-year limitations period began to run in 2017, upon the note’s maturity, rendering the 2021 lawsuit timely. As summarized below, the Kansas Court of Appeals ruled in favor of the lender.

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