Hi, can someone please explain the following part in detail for me… unfortunately there is no good german translation for the word “recourse” or “non-recourse” and I don’t get the sense of it:
“The owner of a real estate property who obtains a mortgage with recourse has monetized the asset and retained control of the property. Only a non-recourse loan would allow the owner to default on the loan and walk away from the property without allowing the lender to pursue other means to force the borrower to pay.”
Recourse means you are in trouble if you default, nonrecourse means you are not in trouble. So basically if you have a non-recourse loan then you can just disappear and make it the banks problem if rates get too high and you cant repay your mortgage.
This has nothing to do with concentrated investments in real estate.
Non recourse = limited liability = they only have the property as collateral if you default
recourse = full liability = if you default on the loan and the property is not worth enough to cover the loan, they can force you to sell your kidneys (or worse) to pay for the difference.