Non-Recourse Loans Definition
Non-recourse loans are typically secured by collateral such as real estate. Unlike recourse loans, if a borrower defaults, the lender can’t hold the individual personally liable for the unpaid debts. Because of this, lenders can’t seize personal property or garnish wages. With a non-recourse loan, the lender accepts a certain amount of loss. All HUD multifamily loans, including HUD 221(d)(4) loans, HUD 223(f) loans, HUD 223(a)(7) refinance loans, and HUD 232 healthcare loans are fully non-recourse.
However, most HUD multifamily loans also have “bad boy” carve-outs, a stipulation that the loan will become fully recourse if the borrower engages in certain bad acts, such as embezzlement or serious financial misrepresentation.