Looney v. Farmers Home Administration
United States Court of Appeals for the Seventh Circuit
794 F.2d 310 (1986)
The McCords (defendants) bought property from the Looneys (plaintiffs) under a conditional land sales contract, financing part of the purchase through a mortgage from the Farmers Home Administration (defendant); after paying the Looneys $123,280 in interest-inclusive payments (but leaving $249,360 owed on the $250,000 base price), the McCords defaulted, and the district court, counting only principal reduction, calculated their equity at just $640 (0.26 percent) and awarded forfeiture, extinguishing the administration's mortgage despite the land having appreciated to $455,000. The administration appealed, arguing foreclosure was the proper remedy.
Whether payments toward interest must be considered in determining whether a buyer has paid only a minimal amount on the contract price at the time of default, such that forfeiture would be an appropriate remedy for the seller.