What is the difference between the two and how do you find out what in fact you have.
Recourse - ability of lender to make claims against borrower personally in addition to the collateral.
There is an “Investing Glossary”, as well as “Investing Abbreviations”, under the “Investor Information” in the right column of the page.
Keith
forgive my ignorance. Do you mean on my lending paperwork?
No…on your loan. If you don’t pay, they will take the collateral (the property), as well as anything else that they can figure out the you have…
Keith
So it doesn’t matter if the two homes we have are not tied together. If we do a short sale or a deed-in-lieu or if they forclose on the first house then they will probably secure any balance to our second house unless we file chapter 13 protection?
Huh?
Your question was “re-course vs. non-recourse: What is the difference between the two and how do you find out what in fact you have.”
If you have non-recourse loans and you default on the payments, they take the collateral (normally, the property that is secured by the mortgage). If you default on both, they’re gonna take both. If you only default on one, they’re gonna take one because that is the only “recourse” that they have.
Forgive me, this has been so hard. We have talked to Save the Dream OHIO. The CCCS pre-forclosure counselor a real estate lawyer and a BK lawyer and I still have more questions than answers and am getting more and more confused by the day.
The BK lawyer says the two loans are not tied together so that makes it a non re-course loan under the definition right?
No, whether or not a loan is recourse or non-recourse is spelled out in the terms of the note and has nothing to do with loans being “tied together”. One could be a recourse and one a non-recourse.
Are these separate properties or a first and a second on the same property, or what?
The RE lawyer AND the BK lawyer should know this. You should not have to be asking it on an investment forum.
Keith
The one lawyer said he could work with loss mitigation for a short sale. The Bk lawyer said the two homes were not tied together and if we couldn’t re-finance the first home we should do a deed-in-lieu of forclosure. If the bank would not do that and take that as pymt in full with no 1099 then we should do a chapter 13. He said nothing about re-course or non-recourse. One of the other people on the forum was talking about it and I had not heard of it and did not know how to tell if that would apply to us. Thank you for your information. It seems like our situation is not the norm.
With very few exceptions, residential mortgages from an institutional lender are with “recourse”. This simply means that if the loan goes into default and the lender’s foreclosure sale does not generate enough to pay off the mortgage loan and all the foreclosure costs, you can be held personally liable for the deficiency. The lender can get the court to issue a deficiency judgement. A deficiency judgement can become a lien against other property you own, or it can be used to attach your bank accounts, or garnish your wages. Somehow or another you will pay off the deficiency judgement because that is the “recourse” you have granted the lender in your loan documents. Nearly all residential mortgage loans from an institutional lender are with recourse.
If the loan is made without recourse (a non-recourse loan) the lender has agreed that the collateral for the loan itself will be the only asset the lender will use to pay off your mortgage loan if they foreclose. If the foreclosure does not generate enough money to satisfy the loan, the lender has no further recourse. There is no forgiven debt, no 1099, no deficiency judgement because you are not personally liable for the deficiency. Commercial loans made to corporate borrowers are often non-recourse loans.
That in a nutshell is the difference between the two.
Thank you!!!