RECOURSE CLAUSE DEFINITION - Real Estate Promissory Note
The "Recourse Clause" is a section of the promissory note that gives the lender the option to file a claim against you and all co-signers on the loan.
That is, if the sale of your property does not generate enough money to satisfy the outstanding loan. This section may or may not be included in your promissory note, which is part of your loan package and establishes your promise to pay off the loan.
In most states however, the lender is granted the option to file a claim against you, the homeowner. In this case, not only you lose your home but you may also be responsible for the payment of this judgement in the future. Even if the lender accepts a "Deed-in-Lieu-of-Foreclosure" or approves a Short-Sale, they can still seek a deficiency judgement against you and all other borrowers on the loan.
This is why it's imperative that you research your home foreclosure options based on the foreclosure laws of your state and on the terms of your Deed of Trust or Mortgage Agreement and consult with your attorney about the best solution for your specific case.
The recourse clause states list:
- Alabama
- Arkansas
- Colorado
- Delaware
- District of Columbia
- Georgia
- Hawaii
- Illinois
- Iowa
- Indiana
- Kansas
- Kentucky
- Louisiana
- Maine
- Maryland
- Massachusetts
- Michigan
- Montana
- Mississippi
- Missouri
- Ohio
- Nebraska
- Nevada
- New Hampshire
- New Jersey
- New Mexico
- New York
- Oklahoma
- Pennsylvania
- Puerto Rico
- Rhode Island
- South Carolina
- Tennessee
- Vermont
- Virginia
- West Virginia
- Wisconsin
- Wyoming
NON-RECOURSE
If your promissory note however, does not have this clause, then you have a Non-Recourse loan which means that the lender cannot file a deficiency judgement claim against you, so long as your property is your principal residence.
The non-recourse states list:
- Alaska
- Arizona
- California
- Connecticut
- Florida
- Idaho
- Minnesota
- North Carolina
- North Dakota
- Oregon
- Texas
- Utah
- Washington
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