CFA Level I · CFA Level I Exam · Mortgage-Backed Security (MBS) Instrument and Market Features
Compared with a recourse mortgage loan, a non-recourse mortgage loan most likely:
A non-recourse loan gives the lender a claim only against the pledged property. If the borrower defaults and sale proceeds fall short of the balance, the lender cannot pursue the borrower's other assets, whereas under a recourse loan the lender can seek the deficiency.
- Agives the lender a claim only against the property pledged as collateralCorrect
- Ballows the lender to pursue the borrower's other assets after foreclosure
- Crequires the borrower to make a larger share of payments as principal
Explanation
In a non-recourse loan the lender can look only to the collateral property if the borrower defaults. A recourse loan lets the lender also claim the borrower's other assets or income for any shortfall. Payment structure is unrelated to recourse.
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