What is a Non-Recourse Loan?

Non-Recourse Loans and the HUD 221(d)(4) Loan Program

If a loan is non-recourse, a lender can take possession of assets used as collateral to secure the loan. However, unlike a recourse loan, if money is still owed after selling the collateral, with a non-recourse loan, the lender cannot go after the borrower’s other assets or garnish wages. The lender must accept the loss. HUD 221(d)(4) loans are fully non-recourse; however, most have “bad boy carve-outs,” which means that the loan will become recourse if the borrower violates certain loan provisions, including committing fraud or significantly misrepresenting their assets.

To learn more about HUD multifamily construction loans like the HUD 221(d)(4) loan, fill out the form below and a HUD lending expert will get in touch.