Non-Recourse Commercial Loans
A non-recourse clause in a commercial mortgage loan is a contractual provision that limits the lender's ability to seek compensation for any losses in the event of a default by the borrower. Specifically, it means that the lender cannot seek recourse against the borrower's personal assets beyond the property that serves as collateral for the loan.
In other words, if the borrower defaults on the loan and the property is not sufficient to cover the outstanding debt, the lender cannot go after the borrower's other assets or income streams to recover the remaining balance. Instead, the lender is limited to seizing the property and liquidating it to recover as much of the outstanding debt as possible.
Non-recourse loans are typically used in commercial real estate transactions where the value of the property serves as the primary collateral for the loan. This type of clause provides a level of protection for the borrower by limiting their personal liability and financial exposure in the event of a default. It also incentivizes lenders to carefully evaluate the property's value and condition before approving a loan, as they cannot rely on the borrower's personal assets to cover any losses.
* Specific loan program availability and requirements may vary. Please get in touch with your mortgage advisor for more information.