The coming banking crisis, and suggestions of an incoming bust in commercial real estate, has given rise to some questions about recourse versus non-recourse debt and what impact the differences in those types of debt may have on these areas of the economy. The bottom line is that it probably will not make much difference, if indeed any, to the banking crisis, but it may have some probably slight consequences for the commercial real estate market.
Let’s first start with the basic differences between recourse and non-recourse debt. We will start with recourse debt, because then it will be easy to distinguish and contrast non-recourse debt. All the debt (also known as loans or financing) is secured debt, meaning that the lender takes a security lien on the property being purchased with the loan proceeds.
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