Definition · Loan Structure

Recourse vs. non-recourse when you sell a note

Recourse means the borrower (or a guarantor) is personally liable beyond the collateral; non-recourse limits the lender to the collateral, subject to standard carve-outs. When a note is sold, the recourse and guarantees travel with it — and they affect the price, because they expand the buyer's recovery path.

Definition

What transfers in a note sale

Selling and assigning a note transfers the loan and its security — including personal guarantees and recourse provisions — to the buyer, who steps into the lender's position. Disclose guarantees, carve-outs (“bad-boy” provisions), and any springing recourse; they are part of the credit a buyer prices.

How recourse affects price

A recourse credit with a creditworthy guarantor gives the buyer a second recovery path beyond the property, which can support a stronger price. A non-recourse credit is priced to the collateral alone. See how buyers price a CRE loan.

Common questions
Do guarantees transfer when I sell a loan?

Yes — assignment of the note and loan documents transfers the guarantees and recourse provisions to the buyer, subject to their terms.

Does recourse increase the price?

It can — a creditworthy guarantor adds a recovery path beyond the collateral, which a buyer values.

Should I disclose carve-outs and springing recourse?

Yes — full disclosure of guarantees and recourse terms lets a buyer price accurately and hold the bid without a re-trade.

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