Say No to Recourse Loans

Recourse loans add risk to the borrower. If you get a recourse loan, or a heloc that has a recourse element to it, you could be responsible for the difference between what you sell the house for and how much you still own on your loan.

In recourse states, banks could come after you if you default on the loan. In non recourse states, the banks have a choice whether to come after you or get the house back, but not both. Therefore, recourse states give borrowers a much greater risk for assuming a loan. House prices should be less to reflect that risk, but rarely are.

States that do not have recourse loans have non recourse loans. While getting a mortgage there is risky in these times of volatility, they are less risky than getting a mortgage in Nevada or other recourse states. And of course, pulling equity out of your house in any state could result in a recourse situation.

Auto loans are all recourse loans. Your car gets repossessed and then they sell the car. If the lender gets less than what is owed on the loan, he can go after you for the difference. Having that sort of loan on a house is very risky. You can't screw up. You have a cloud hanging over you if you default even if the lender does not immediately go after you for the difference.

States have judicial and non judicial methods of foreclosure. Here is information about state foreclosure and recourse/non recourse laws from About.com and more information from the same site:


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