Recourse and Nonrecourse Mortgage Loans

Posted on Jun 28, 2019 in Financial Tips, Home Buying Tips, Newsletter Article

Recourse or non-recourse loans are a topic that may never come up while you’re applying for your mortgage, but it’s nonetheless important to know what they are. They’re not a type of loan like fixed rate or adjustable rate, nor are they conventional or government-guaranteed loans like FHA and VA loans.

Whether a mortgage loan is recourse or non-recourse depends on the lending statutes in the state where you buy your home using a home loan. Nolo.com defines a recourse state as that which allows the lender to pursue a deficiency judgment in court. A deficiency is typically the difference between what is owed to the lender and what the lender can collect through foreclosure. This means that in recourse loan states, the lender is likely to have “recourse” to collect the debt if you default on your mortgage. If the amount you owe on your mortgage is greater than the amount the lender can obtain in a foreclosure, you could be pursued for the deficiency.

Generally speaking, in a non-recourse state, the lender can neither obtain a deficiency judgment nor collect anything beyond what the foreclosure sale of the property may bring. According to Legalmatch.com, there are currently 12 non-recourse states: Alaska, Arizona, California, Connecticut, Hawaii, Idaho, Minnesota, North Carolina, North Dakota, Texas, Utah and Washington.

Keep in mind that each state has different rules about deficiency judgments, so to learn more, contact your lender or your real estate attorney.

From Chuck Barry’s June 2019 Issue of the Berkshire Hathaway HomeServices Monthly Newsletter.

© 2019 BHH Affiliates, LLC. Real Estate Brokerage Services are offered through the network member franchisees of BHH Affiliates, LLC. Most franchisees are independently owned and operated. Berkshire Hathaway HomeServices and the Berkshire Hathaway HomeServices symbol are registered service marks of HomeServices of America, Inc.® Information not verified or guaranteed. If your property is currently listed with a Broker, this is not intended as a solicitation. Equal Housing Opportunity.

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