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Originally, the Defendants had challenged Deutsche standing to foreclose, but they subsequently withdrew that
challenge. See Brief in support of Cross–Motion, 11; Debtors' Supplemental Brief, 3. Here they offer no evidence
that disputes any of the foregoing. Instead, they question the affiant's competence to testify. They explain that she is
his authority.’ ”) But more to the point, Defendants have already admitted in their Answer the crucial facts upon
which the affiant would testify: i.e., that, indeed, they have not made a mortgage payment since March 1, 2007. See
Answer, ¶ 5. As for evidence of their own, the Defendants offer only the Affidavit of their counsel, Mr. Eyre. That
affidavit does no more than recite the basis for their affirmative defense, infra, that Deutsche cannot claim to be a
holder in due course. It is to that defense to which the Court now turns.
gage foreclosure action can only raise counterclaims which arise from the same transaction or occurrence from
which the plaintiff's action arose. See Pa.R.C.P. 1148. That rule, however governs only counterclaims in mortgage
foreclosure action and does not apply to new matter. See First Wisconsin Trust Co. v. Strausser, 653 A.2d 688, 692–
693,439 Pa.Super. 192, 200–201 (Pa.Super.1995).
The FTC Holder Rule
[6] As a threshold matter, the Defendants assert that Deutsche is precluded from raising defenses under applica-
ble federal regulations. They refer here to the FTC Holder Rule:
In connection with any sale or lease of goods or services to consumers, in or affecting commerce as “commerce”
FENSES WHICH THE DEBTOR COULD ASSERT AGAINST THE SELLER OF GOODS OR SERVICES
OBTAINED PURSUANT HERETO OR WITH THE PROCEEDS HEREOF. RECOVERY HEREUNDER BY
THE DEBTOR SHALL NOT EXCEED AMOUNTS PAID BY THE DEBTOR HEREUNDER.
© 2012 Thomson Reuters. No Claim to Orig. US Gov. Works.
or,
b. Accept, as full or partial payment for such sale or lease, the proceeds of any purchase money loan (as purchase
money loan is defined herein), unless any consumer credit contract made in connection with such purchase money
loan contains the following provision in at least ten point, bold face, type:
[same as above].
16 C.F.R. § 433.2 (2005). However, the FTC Holder Rule, by its terms, does not apply to mortgage loans for the
purchase of real estate, as in this case. See 41 F.R. 20024 (Friday, May 14, 1976) (excluding purchases of real estate
from affected transaction); see also In re Woodsbey, 375 B.R. 145, 149–150 (Bankr.W.D.Pa.2007) citing Kaliner v.
MERS (In re Reagoso), 2007 WL 1655376 at *6 (Bankr.E.D.Pa., June 6, 2007) citing Johnson v. Long Beach Mortg.
Loan Trust 2001–4, 451 F.Supp.2d 16, 55 (D.D.C.2006). Therefore, Defendants may not rely on that rule in attempt-
ing to assert set-offs or recoupment as against Deutsche Bank for the claims they have against the original lender. It
nation of whether Deutsche has established such status follows.
Mortgage Loan as Negotiable Instrument
[8][9] The threshold requirement for holder in due course (HDC) status is that the party asserting that defense
be a holder of a negotiable instrument. Thus, the first element for the present analysis is whether what Deutsche
in addition to the payment of money, but the promise or order may contain:
(i) an undertaking or power to give, maintain or protect collateral to secure payment;
(ii) an authorization or power to the holder to confess judgment or realize on or dispose of collateral; or
(iii) a waiver of the benefit of any law intended for the advantage or protection of an obligor.
13 Pa.C.S.A. § 3104(a). Defendants say that a mortgage cannot be a negotiable instrument. Defendants' Brief, 7.
© 2012 Thomson Reuters. No Claim to Orig. US Gov. Works.
or,
b. Accept, as full or partial payment for such sale or lease, the proceeds of any purchase money loan (as purchase
money loan is defined herein), unless any consumer credit contract made in connection with such purchase money
loan contains the following provision in at least ten point, bold face, type:
[same as above].
16 C.F.R. § 433.2 (2005). However, the FTC Holder Rule, by its terms, does not apply to mortgage loans for the
purchase of real estate, as in this case. See 41 F.R. 20024 (Friday, May 14, 1976) (excluding purchases of real estate
from affected transaction); see also In re Woodsbey, 375 B.R. 145, 149–150 (Bankr.W.D.Pa.2007) citing Kaliner v.
MERS (In re Reagoso), 2007 WL 1655376 at *6 (Bankr.E.D.Pa., June 6, 2007) citing Johnson v. Long Beach Mortg.
Loan Trust 2001–4, 451 F.Supp.2d 16, 55 (D.D.C.2006). Therefore, Defendants may not rely on that rule in attempt-
ing to assert set-offs or recoupment as against Deutsche Bank for the claims they have against the original lender. It
nation of whether Deutsche has established such status follows.
Mortgage Loan as Negotiable Instrument
[8][9] The threshold requirement for holder in due course (HDC) status is that the party asserting that defense
be a holder of a negotiable instrument. Thus, the first element for the present analysis is whether what Deutsche
in addition to the payment of money, but the promise or order may contain:
(i) an undertaking or power to give, maintain or protect collateral to secure payment;
(ii) an authorization or power to the holder to confess judgment or realize on or dispose of collateral; or
(iii) a waiver of the benefit of any law intended for the advantage or protection of an obligor.
13 Pa.C.S.A. § 3104(a). Defendants say that a mortgage cannot be a negotiable instrument. Defendants' Brief, 7.
