What is a Recourse Loan?

Recourse Loan Definition

If a loan is recourse and the borrower defaults (fails to repay the loan), the lender can go after both the collateral and the borrower’s assets which are not used as collateral. Fortunately for borrowers, all HUD multifamily loans are non-recourse, which means the lender cannot go after any non-collateral assets in the case of a loan default. However, most HUD multifamily loans do include “bad boy” carve-outs, which state that if a borrower commits certain bad acts, like fraud or embezzlement, the loan will become recourse.

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