Cruisingdad has it right.
Life jacketson and anchor off the bow if possible. If not, you might be able to hove-to on the 25 footer in 35 kt wind.
You probably lost steeing because your angle of heel was too great for the rudder to get a grip on the water. If your boat is heeled 40 degrees, your rudder is also angled similarly in the water.
Also, because you heel sharply and lose much of the wind in the sails on close reach in high winds, you might have also lost enough speed that water running over the rudder was too slow for it to bring you on your desired course.