Non-recourse loans are collateralized by what?

Non-recourse loans are collateralized by what?

• A. the borrower's personal assets
• B. the cash flows
• C. the property
• D. the guarantor's assets

Answer: (C)

Non-recourse financing is secured by the property itself. The lender’s claim in a default typically rests on foreclosure of that asset, so the loan is repaid from the sale or income generated by the property rather than from the borrower’s personal assets. While underwriting considers the property's cash flows to ensure the debt can be serviced, those cash flows themselves aren’t the collateral; they’re the source used to support repayment. Guarantors or the borrower's other assets would be at risk only if a guarantee or carve-out applies, which is not the standard collateral arrangement.

Non-recourse financing is secured by the property itself. The lender’s claim in a default typically rests on foreclosure of that asset, so the loan is repaid from the sale or income generated by the property rather than from the borrower’s personal assets. While underwriting considers the property's cash flows to ensure the debt can be serviced, those cash flows themselves aren’t the collateral; they’re the source used to support repayment. Guarantors or the borrower's other assets would be at risk only if a guarantee or carve-out applies, which is not the standard collateral arrangement.