If homeownership is the American dream, then mortgage foreclosure is the American nightmare. Homeowners often are victims of predatory lending, and many do not understand the terms of the mortgages into which they enter. As a result, homeowners often accept higher interest rates even if they qualify for lower-cost mortgages. The Truth in Lending Act (TILA) attempts to protect consumers from this predatory behavior and primarily requires lenders to make certain disclosures to borrowers. Lenders’ violations of TILA are often not discovered until after foreclosure is initiated and attorneys bring claims or counterclaims under these statutes. Of these, TILA claims asserting violations in the disclosure process are the most common. Pennsylvania courts, however, do not allow for TILA counterclaims in mortgage foreclosure actions.
This Comment will examine counterclaims in Pennsylvania mortgage foreclosure actions. It will compare the rationale behind barring Truth in Lending Act (TILA) counterclaims with the scope of the Deficiency Judgment Act, which allows lenders to bring actions for deficiency judgments in mortgage foreclosure actions. This Comment will ultimately argue that an inequitable result arises from relying on an in rem distinction to bar a legal remedy for borrowers in residential mortgage foreclosures while sidestepping that same distinction to ensure relief for lenders. This leads to the conclusion that Pennsylvania courts should allow for TILA counterclaims in residential mortgage foreclosure actions.