Recourse Loans and the HUD 221(d)(4) Loan Program
If a loan is recourse, and a borrower fails to repay it, the lender can go after both the collateral as well as the borrower’s assets which were not used as collateral. In comparison, if a loan is non-recourse, a lender is not permitted to seize a borrower’s non-collateral assets. However, most non-recourse loans are subject to “bad boy” carve-outs, which stipulate that a lender can seize a borrower’s non-collateral assets if they commit certain bad acts, like fraud. Fortunately for borrowers, HUD 221(d)(4) loans are non-recourse, though they do typically have “bad boy” carve-outs.
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