Which clause would specify that the lender's recourse is limited to the property securing the loan?

Which clause would specify that the lender's recourse is limited to the property securing the loan?

• A. Non-Recourse Clause
• B. Recourse Clause
• C. Exculpatory Clause
• D. Deed of Trust

Answer: (A)

A non-recourse clause defines borrower liability as limited to the collateral securing the loan. When a loan is non-recourse, if the borrower defaults, the lender can foreclose and recover only the property itself; the borrower’s other assets cannot be pursued to satisfy the debt. This contrasts with a recourse loan, where the lender can seek deficiencies or pursue other assets of the borrower. The other options don’t describe this limitation. A recourse clause would allow pursuing additional assets. An exculpatory clause releases liability in certain contexts but isn’t about what the lender can pursue after default. A deed of trust is the security instrument that creates the lien and mechanism for foreclosure, not the limitation on recourse.

A non-recourse clause defines borrower liability as limited to the collateral securing the loan. When a loan is non-recourse, if the borrower defaults, the lender can foreclose and recover only the property itself; the borrower’s other assets cannot be pursued to satisfy the debt. This contrasts with a recourse loan, where the lender can seek deficiencies or pursue other assets of the borrower.

The other options don’t describe this limitation. A recourse clause would allow pursuing additional assets. An exculpatory clause releases liability in certain contexts but isn’t about what the lender can pursue after default. A deed of trust is the security instrument that creates the lien and mechanism for foreclosure, not the limitation on recourse.