Non-Recourse Loans in Relation to FHA 232 Financing
Non-recourse loans are loans for which, if a borrower defaults, they cannot be held personally liable. This means that lenders may not seize their personal property or garnish wages. Instead, lenders must accept a certain amount of loss. These loans are secured by collateral (typically real estate). HUD 232 and HUD 232/223(f) loans are fully non-recourse, though they are typically subject to standard “bad-boy carve-outs,” which stipulate that the loan will become recourse only if the borrower has committed certain bad acts, such as embezzlement, fraud, or ‘intentional’ bankruptcy.